Why gasoline is likely to stay above $4 a gallon and around €2 a litre

The oil shock has become a refining shock. Brent is back near $97/barrel, but the bigger problem is what happens after crude reaches the refinery. European gasoline refining margins have surged above $62/barrel, essentially matching the 2022 record, while diesel margins are around $77-79/barrel. In other words, even if crude stops rising, gasoline and diesel can remain expensive because the world lacks enough functioning refining capacity.

Hormuz Strait no longer needs to be completely closed to keep prices high. Shipping through the Strait has adapted through escorts, alternative pipelines and unconventional trade routes, which explains why the global economy has survived months of disruption. Yet, the traffic remains fragile. Only 6 vessels crossed on this week versus a recent average of roughly 13. The market has learned how to operate with Hormuz impaired. It has not replaced Hormuz. That difference creates a persistent geopolitical premium in every barrel.

Russia is removing refined products from the global market at exactly the wrong moment. Ukrainian attacks pushed Russian gasoline production to roughly 70% of domestic demand in late August. Moscow has responded by restricting gasoline and diesel exports to preserve domestic supply. At the same time, European gasoline inventories in the Amsterdam-Rotterdam-Antwerp hub have fallen to their lowest level since 2021. Add autumn refinery maintenance and the bottleneck could become worse before it becomes better.

$4 gasoline in America and €2 petrol in Europe are becoming economically sticky levels. The US national average is already around $4.14/gallon. In Europe, €2/litre is not yet a universal EU average, but it has already been crossed in higher-tax markets. French government data, for example, shows SP95-E10 above €2.16/litre at some stations today. European taxes also mean that consumers capture less of the benefit when crude prices fall than American drivers do.

The investment implication extends far beyond oil companies. Persistent fuel prices mean higher cash generation for well-positioned refiners and integrated energy companies, but higher costs for airlines, logistics, chemicals and consumer businesses. More importantly, energy is again becoming monetary policy. Eurozone inflation reached 3.3% in August, largely because of energy, and economists now expect another ECB hike. High gasoline therefore feeds into higher inflation expectations, higher bond yields and ultimately a higher cost of capital. The biggest risk to this thesis is straightforward: a durable settlement with Iran that normalizes Hormuz combined with a rapid restoration of Russian and Middle Eastern refining capacity. Neither looks imminent today.