Europe's Fuel Prices Are Outrunning Crude as Refining Margins Widen

That shift matters because it changes where inflation pressure is concentrated. When crude rallies, a larger share of the increase now shows up in fuel prices rather than being spread across electricity and gas bills. Goldman attributes the change partly to elevated product spreads, meaning the premium refiners earn on turning crude into diesel, gasoline and other fuels has grown relative to the raw input. For the euro area, energy inflation is expected to peak at 18% year over year and headline inflation at 3.8% year over year in the fourth quarter of 2026.

The bank has also changed how it forecasts fuel inflation itself. Rather than relying on timely pump data alone, Goldman updated its models to incorporate product spreads directly and to treat fuel taxes as a separate input. That adjustment produces a faster expected normalization of fuel price pressures in 2027, which in turn creates a larger negative base effect further out. As a result, Goldman now forecasts euro area headline inflation of 2.7% in 2027, down from its previous 3.0% estimate, and 1.9% year over year in 2028. The mechanism is arithmetic: as fuel inflation cools faster, the comparison against those elevated 2026 levels drags the annual rate down more sharply.

For investors, the practical implication is that the fuel component of European inflation may prove stickier in the near term than a simple crude-oil tracking model would suggest, even as the medium-term path improves. Because refining margins are driving the wedge, monitoring crude prices alone may understate headline inflation risk through the end of 2026. Conversely, the sharper 2027 disinflation Goldman projects depends on those product spreads narrowing as expected; if they stay wide, the forecasted base effect would be smaller and headline inflation would likely land above the 2.7% estimate.