UniCredit Bank Austria Analysis
Refinery bottlenecks keep fuel prices and inflationary pressure high
- The supply bottleneck has shifted from crude oil to refining capacity
- Crack spreads, a measure of the refining sector’s profitability, continue to signal significant market tightness and higher margins
- Fuel prices in Austria fell significantly less than crude oil prices
- The geopolitical situation in the Middle East remains a major risk factor for crude oil price volatility
- Limited refining capacity could keep energy inflation at elevated levels for longer, even if crude oil prices fall more sharply
- Monetary policy challenges for the ECB are mounting: an ECB interest rate hike in September is expected
Although international crude oil prices have fallen to just over 70 euros per barrel despite ongoing geopolitical tensions, global fuel markets remain tight. This is now due less to supply risks for crude oil than to limited refining capacity.
“The markets are signaling sufficient crude oil availability, while processing capacities are lagging behind demand. As a result, prices for refined products remain high, even though crude oil prices have fallen significantly”, says UniCredit Bank Austria Chief Economist Stefan Bruckbauer, adding: “Energy-driven inflationary pressure is thus persisting and complicating the European Central Bank’s monetary policy decisions.”
Bottleneck Shifts Along the Value Chain
This trend is clearly evident in the so-called crack spreads, a widely used measure of the refining sector’s profitability that tracks the difference between the value of refined products and the price of crude oil. Normally, crude oil and fuel prices move largely in tandem, keeping refining margins relatively stable. In recent weeks, however, margins have widened significantly, reaching their highest level since the 2022 energy crisis.
This is due to production outages and capacity constraints at key refining locations. Several facilities in the Middle East are currently operating below their technical capacity, and Russian refining capacity has been significantly impacted as a result of the war in Ukraine.
Falling crude oil prices have only a limited impact on consumers
The shift in the bottleneck from crude oil production to refining means that lower crude oil prices are only having a limited impact at the gas pump.
“In Austria, too, there is a growing decoupling between crude oil and fuel prices. While the price of crude oil has fallen by more than 20 percent since its peak in early May 2026 - from around 95 to just over 70 euros per barrel - diesel and gasoline prices have declined much less”, says Walter Pudschedl, economist at UniCredit Bank Austria.
In the first half of August, diesel cost an average of 2.01 euros per liter at Austrian gas stations, while premium gasoline cost 1.78 euros. After deducting value added tax, mineral oil tax, and CO₂ pricing, the net prices come to around 1.15 euros for diesel and 0.88 euros for gasoline. Compared to their peak levels, these have fallen thus only by around 5 percent.
Energy prices remain a major driver of inflation
Although energy products account for only about 8.2 percent of the Austrian consumer basket, they have been responsible for about one-fifth of total inflation since the start of the Iran conflict.
After inflation fell to about 2 percent at the start of 2026, rising fuel prices beginning in March caused a reversal in the trend. Between March and July, inflation averaged 3.2 percent. Energy prices contributed more than 0.6 percentage points to overall inflation. The contribution from fuels was particularly significant: diesel accounted for about 13 percent and gasoline for just under 6 percent of total inflation. Additional price pressure came from higher prices for natural gas and heating oil. By contrast, year-over-year declines in electricity prices had a dampening effect.
Relief from lower crude oil prices remained limited
“Although inflation has eased at the start of the second half of the year, partly due to lower energy price pressures, the decline should have been more pronounced given the lower crude oil prices”, Pudschedl emphasizes.
According to preliminary estimates, the inflation rate fell to 2.7 percent in July, dropping below the 3 percent mark for the first time since the outbreak of the Iran conflict. At the same time, energy prices rose by 5.7 percent year-over-year. Compared to the previous month, they increased by 1.2 percent, even though the average crude oil price was slightly below the June level.
If refinery margins had remained unchanged, the average crude oil price of 72.5 euros per barrel in July would have allowed for fuel prices that were about 10 cents per liter lower. As a result, overall inflation would have been more than 0.2 percentage points lower.
In addition, the gradual phasing out of the government’s relief measures intensified inflationary pressure. The
5-cent-per-liter subsidy introduced in April was gradually reduced and currently stands at only 0.8 cents per liter.
ECB likely to take further action in September
High energy prices affect not only current inflation but also inflation expectations. Higher transportation and production costs, along with rising wage demands, create the risk that price pressures will spread to other sectors of the economy.
“We expect average inflation of 3.2 percent for Austria in 2026. In the eurozone as well, the inflation rate is likely to remain above the ECB’s target at 2.9 percent”, says Pudschedl.
The situation remains challenging for the European Central Bank: While crude oil markets have stabilized, high refining margins and capacity constraints are preventing a sharper decline in energy costs.
“Geopolitical risks in the Middle East, uncertainty in the energy markets, and the robust performance of the labor markets suggest that the ECB has not yet completed its tightening cycle. We therefore continue to expect a 25-basis-point increase in key interest rates at the September meeting”, says Bruckbauer.
Assuming there is no further escalation in the energy and commodity markets, this rate hike is likely to mark the end of the current tightening cycle. The deposit rate would thus reach its peak of 2.50 percent.
At the same time, risks remain elevated. Persistent refinery bottlenecks, an escalation of geopolitical tensions, or further increases in food prices could delay the decline in inflation and necessitate a prolonged period of restrictive monetary policy.
For further information, see our analysis: Decoupling of crude oil and fuel prices increases inflation risks, UniCredit Bank Austria, August 2026.
Enquiries:
UniCredit Bank Austria Economics & Market Analysis Austria
Walter Pudschedl, Tel.: +43 (0) 5 05 05-41957;
Email: walter.pudschedl@unicreditgroup.at