You are here: Home / Data and maps / Indicators / Fuel prices / Fuel prices (TERM 021) - Assessment published Jan 2011

Fuel prices (TERM 021) - Assessment published Jan 2011

Indicator Assessment Created 16 Nov 2010 Published 12 Jan 2011 Last modified 11 Nov 2013, 02:08 PM
Topics: ,

Key messages

Since 1980 the real price of transport fuel (all transport fuels, expressed as the equivalent consumption in unleaded petrol, corrected for inflation to 2005 prices) has fluctuated between 0.75 and 1.25 Euros per litre, with an average of 0.94 Euros. Real prices per litre peaked in summer 2008 at around 1.25 Euros, but then fell by around a third later that year, largely due to a significant drop in the price of crude oil.. Since then, in 2009 and early 2010, real prices have recovered to just over one Euro per litre.  The average real price in June 2010 was 1.04 Euros per litre, just 5% higher than the price in 1980, 0.99 Euros. As the price of fuel is an important determinant of the demand for transport and the efficiency with which fuel is used, it is clear that price is not currently countering the impact of growth on transport demand.

Are fuel prices sending the appropriate signals?

Road transport fuel prices (including taxes) in EU Member States

Note: Road transport fuel prices (including taxes) in EU Member States. Definitions: * ‘All petrol’ is a consumption-weighted average price of both leaded and unleaded fuel, corrected using energy-content to the equivalent amount of unleaded petrol. * ‘All fuel, unleaded petrol equivalent’ is a consumption-weighted average price of unleaded, leaded petrol and diesel, corrected using energy content to the equivalent amount of unleaded petrol. * ‘Nominal’ is the price with no adjustment for inflation. * ‘Real’ is the price corrected for inflation, using 2005 as the baseline year. * ‘Average, all fuel, unleaded petrol equivalent (real, weighted by consumption)’ is the consumption-weighted average of the ‘All fuel, unleaded petrol equivalent (real)’ line across the full time series.

Data source:

Fuel price source 1980 - 1993. Quarterly values taken from original spreadsheet. http://ims.eionet.europa.eu/IMS/ISpecs/ISpecification20070821110939/full_spec
Fuel price source 1994 - 2005, Weekly values taken from Oil Bulletin. http://ec.europa.eu/energy/observatory/oil/bulletin_en.htm, http://ec.europa.eu/energy/observatory/oil/doc/time_series/time_series_country.zip 
Fuel price source 2006 onwards Weekly values taken from Oil Bulletin: http://ec.europa.eu/energy/observatory/oil/bulletin_en.htm, http://ec.europa.eu/energy/reports/Oil_Bulletin_Prices_History.xls 

Downloads and more info

While nominal prices of transport fuels have increased considerably, the real average price of road fuel in the EU (inflation corrected with HICP, reference year 2005) has increased by a lower degree during the last decade, apart from short periods of price increases influenced strongly by political instabilities. The price in June 2010 was 5% higher than at the start of the data series in 1980, but remains within around 30% of the average price of 0.94 Euros throughout the period.

In mid-2004, shortly after the accession states joined the European Union, average total tax levied on fuel in the EU-15 was around 40% higher than in the EU-12. In the third quarter of 2010, this gap had narrowed to just over 25%. Converging fuel tax rates within the European Union may impact upon road freight by reducing the advantage of cross-border refuelling although there is still significant variation between individual member states.

Currently (August 2010), the overall rate of tax on diesel is less than on petrol in all EU Member States; this has lead to diesel being cheaper than petrol for consumers in all Member States but the UK and Romania. This taxation strategy is followed despite evidence to suggest that the external costs of diesel vehicles are on average higher than those of petrol vehicles (see TERM25 ‘External Costs of Transport’). This has contributed to a shift from petrol to diesel vehicles in recent decades.  In 1980, petrol accounted for about two-thirds and diesel for a third of fuel sales. More recently in August 2010, the share has reversed, with diesel accounting for just over two-thirds of fuel consumption. This trend can be explained by both a growth in road freight transport (relative to transport by passenger car), and a higher proportion of diesel passenger cars in the European fleet. 

Fuel prices can be used to assess and explain developments in transport demand, as they are closely linked through price elasticities of demand. Changes in the price of fuels can lead to a change in the demand for transport and also has a significant impact in the longer term on the efficiency of vehicles bought by the user.  Given that real fuel prices have, apart from short term fluctuations, remained relatively constant over a period during which there was considerable economic growth, it is clear that the price of fuel is not currently sending a strong, consistent message in favour of demand reduction and fuel efficiency.

Indicator specification and metadata

Indicator definition

The price of fuel in the EU, including the cost price, excise duty and VAT. Prices are in Euros per litre.

Definitions:

  • ‘All petrol’ is a consumption-weighted average price of both leaded and unleaded fuel, corrected using energy-content to the equivalent amount of unleaded petrol.
  • ‘All fuel, unleaded petrol equivalent’ is a consumption-weighted average price of unleaded, leaded petrol and diesel, corrected using energy content to the equivalent amount of unleaded petrol.
  • ‘Nominal’ is the price with no adjustment for inflation.
  • ‘Real’ is the price corrected for inflation, using 2005 as the baseline year.
  • ‘Average, all fuel, unleaded petrol equivalent (real, weighted by consumption)’ is the consumption-weighted average of the ‘All fuel, unleaded petrol equivalent (real)’ line across the full time series.

Units

Fuel prices used include the cost price, excise duty and VAT. The units used are Euros per litre.


Policy context and targets

Context description

Fair and efficient transport pricing is a crucial precondition for sustainable transport. It implies that users pay for the full (environmental and social) costs of transport. Therefore price and tax level of fuel are important for three key reasons:

  • Fuel taxation is an instrument that serves different policy objectives; one possible use could be to internalise external costs. If prices and duties of transport (including fuel taxes) covered all social costs, the demand for transport would be economically optimal for the welfare of society as a whole, since prices would reflect all health, environmental and infrastructure costs. However, fuel taxes are not the only way towards fair pricing (see TERM22 Progress in Charge Levels for more fair pricing tools e.g. kilometre charging or vehicle regulation);
  • Higher fuel prices act as incentives to reduce fuel consumption, e.g. through purchase and use of more fuel efficient vehicles, a shift to non-motorised or public transport modes, fewer trips, and less motorised transport-orientated patterns of settlements; and
  • Differentiated fuel taxes can stimulate a shift towards cleaner fuels, for example from leaded towards unleaded petrol, to low-sulphur fuels or to biofuels. However, there can be unwanted side effects, e.g. the lower fuel tax on diesel, once introduced to support shippers, also fostered a shift from petrol to diesel passenger cars.

Fuel taxes are the subject of a variety of EU initiatives. The European transport White Paper (EC, 2001) proposed to "harmonise excise duty on diesel for commercial uses, which in practice would be higher than the current average tax on diesel". The aim of this harmonisation is to achieve better internalisation of external costs. Harmonisation also aims to improve the internal market by establishing level playing field for shippers from different EU Member States and create more stable prices in road transport. However, a 2002 Commission proposal to do so was rejected by the Council. The proposal resulted in decreases in excise duty incomes for several countries, up to 50 % in the UK. Also transport organisations argued against fuel tax revision. More recently in the European transport White Paper of 2011 (EC, 2011), the Commission has proposed to “revise motor fuel taxation with clear identification of the energy and CO2 component” by 2016.

EU minimum levels for road fuel taxes are set out in Council Directive 2003/96/EC on the taxation of energy products. As a result the minimum excise duty for unleaded petrol increased from 287 EUR per 1000 litres to 359 EUR per 1000 litres. For diesel fuel, the minimum rate increased from 245 EUR per 1000 litres to 302 EUR per 1000 litres. These rates are due to change in 2013. The Proposal for a Council Directive COM (2011) 169 sets out proposed taxes which are split into a component based on CO2 content and another based on energy content. A single minimum rate for CO2 emissions of 20 EUR per tonne CO2 is proposed for all sectors not covered by the EU ETS. The other component of the minimum taxation rate is based on energy content, set at 9.6 EUR per GJ for motor fuels. The revisions are timed to coincide with the goals for 2020 set out in the Climate and Energy Package, and to complement the third phase of the EU ETS (2013-2020). The objective is to remove artificial barriers to energy transition such as fuel subsidies and the fact that some Member States obtain significant revenue from taxation on fossil fuels.

The EC’s ‘Europe 2020’ strategy (EC, 2010) includes a positive approach to energy taxes and greening transport: “where taxes may have to rise, this should, where possible, be done in conjunction with making the tax systems more ‘growth-friendly’. For example, raising taxes on labour, as has occurred in the past at great costs to jobs, should be avoided. Rather Member States should seek to shift the tax burden from labour to energy and environmental taxes as part of ‘greening’ of taxation systems”.

Targets

The 2011 Transport White Paper suggests that EU motor fuel taxation should be restructured, to clearly identify the energy and CO2 components. In 2011, a proposal (COM/2011/169) for a revised Energy Taxation Directive called for the introduction of a CO2 element into energy taxation, to bring energy taxation in line with the EU’s climate change commitments, and for linking the level of the tax to the energy content of fuels (including those used in aviation), so as to create an incentive across all sectors for increased energy. This is a particular issue for diesel, where freight vehicles travel further to buy fuel in countries where the fuel tax is lowest (fuel tourism). This proposal is still under discussion.

Related policy documents

  • COM (2001) 370 final. European transport policy for 2010.
    WHITE PAPER European transport policy for 2010: time to decideCOM (2001) 370 final
  • COM(2006) 314
    'Keep Europe Moving – Sustainable mobility for our continent'. Mid-term review of the Transport White Paper, published in 2001 by the European Commission: Communication from the Commission to the Council and the European Parliament of 22 June 2006. COM (2006) 314 final
  • COM(2007) 52
    ‘Proposal for a council directive amending Directive 2003/96/EC as regards to the adjustment of special tax arrangements for gas oil used as motor fuel for commercial purposes and the coordination of taxation of unleaded petrol and gas oil used as motor fuel
  • COM(2010) 2020 final, Europe 2020: A strategy for smart, sustainable and inclusive growth
    European Commission, 2010. Europe 2020: A strategy for smart, sustainable and inclusive growth. COM(2010) 2020 final. 
  • Council Directive 2003/96/EC
    Restructuring the Community framework for the taxation of energy products and electricity. EU, 2003.
  • Transport White paper 2011
    Roadmap to a Single European Transport Area - Towards a competitive and resource efficient transport system

Methodology

Methodology for indicator calculation

Fuel prices and taxes are presented weekly in a DG TREN Oil Bulletin (prior to 2006, data was also presented in a monthly format). Information is available for each of the EU Member States (including EU10 from mid-2004 and for Bulgaria and Romania as of January 2008). Fuel prices are corrected for inflation using the Harmonised Indices of Consumer Prices for each MS. Prices are then weighted by fuel consumption to calculate an EU-25 average. 

As leaded petrol was replaced by unleaded petrol during the period studied, an unleaded equivalent price has been calculated, which is a consumption weighted average, corrected for the slightly different energy content of the two fuels.

Methodology for gap filling

No methodology for gap filling has been specified.

Methodology references

No methodology references available.

Uncertainties

Methodology uncertainty

There is little uncertainty in the methodology used. However, information on annual fuel consumption is not currently available. 

Prior to 2006, quarterly data were used, i.e. 15/01, 15/04, 15/07, and 15/10. After 2006, weekly data are published. HICP is only available in monthly data, so the same HICP is used for every fuel price data point in each month. Consumption data are available in yearly resolution, so calculations for the weighted average price by consumption uses the same consumption data for every week in a given year.

Data sets uncertainty

The fuel prices and taxes information is considered to be a reliable data set.

Rationale uncertainty

No uncertainty has been specified

Data sources

  • Oil bulletin
    provided by Directorate-General Energy (DG-ENER)

Generic metadata

Topics:

Transport Transport (Primary topic)

Tags:
fuels | petrol | transport indicators | diesel | prices | roads | transport
DPSIR: Driving force
Typology: Descriptive indicator (Type A - What is happening to the environment and to humans?)
Indicator codes
  • TERM 021
Dynamic
Temporal coverage:
1980-2010
Geographic coverage:
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom

Contacts and ownership

EEA Contact Info

Cinzia Pastorello

Ownership

EEA Management Plan

2010 2.9.2 (note: EEA internal system)

Dates

Frequency of updates

Updates are scheduled once per year
European Environment Agency (EEA)
Kongens Nytorv 6
1050 Copenhagen K
Denmark
Phone: +45 3336 7100