An analysis from 2026 reveals that direct taxes on fuels account for an average of 52.1% of the final petrol price in the European Union, surpassing the combined costs of raw materials, refining, and logistics.
Drivers in the Community of Madrid and the rest of Europe pay more in taxes than for the fuel itself. An analysis from 2026 shows that direct taxes on Euro-super 95 petrol account for an average of 52.1% of the final price in the European Union, with several countries exceeding 55%. This means that taxation surpasses the combined costs of raw materials, refining, and logistics.
However, this percentage falls short. The total public impact on fuels is not limited to the excise tax and VAT. There is a battery of taxes, fees, tolls, regulatory costs, and environmental burdens throughout the value chain, from exploration and importation to storage, refining, distribution, and marketing.
When this set of costs is included, the fiscal and quasi-fiscal pressure far exceeds what the consumer identifies at a glance when paying for refuelling. The problem is not only that fuels are heavily taxed, but that they are taxed in a chained manner: tax upon tax, cost upon cost.
This reality explains a widespread perception among consumers and businesses. Petrol could cost nearly one euro per litre when oil was at historical highs in nominal and real terms. Today it can be around 1.8 euros with a significantly lower barrel price.
The economic intuition is correct. When the tax and regulatory component weighs more than before, decreases in crude oil prices are less and less reflected at the pump, while increases are quickly passed on. The result is a system where the final price depends less on oil and more on a cumulative public structure that acts as a rigid floor on the final cost.
Reducing this debate to the visible taxation at the service station would be an analytical mistake. In the exploration and production phase, there are fees, royalties, profit taxes, environmental requirements, and compliance costs that raise the profitability threshold of any hydrocarbon-related project. After that, intermediate transport, storage, and associated infrastructures bear tolls, fees, energy costs, and regulatory obligations that are incorporated into the cost per litre even before the product reaches the refinery.
Refining is a particularly important point. It is a capital, energy, and regulatory compliance-intensive activity. In this link, ordinary corporate taxation, emissions costs, internal energy costs, investments mandated by environmental goals, and administrative expenses arising from increasingly complex regulation converge. All of this increases the cost of transforming crude oil into petrol, diesel, and other derivatives.
Wholesale and retail distribution adds yet another layer: terminals, logistics networks, facilities, operators, and marketers pay general taxes, local fees, labour contributions, financial costs, and regulatory requirements that ultimately integrate into the final price, even if they do not appear as “fuel tax.”
Therefore, taxation should no longer be understood as a secondary factor that adds to the energy price, but as a structural element of the final price. The consumer does not just pay for the fuel: they pay a chain of visible and invisible burdens that traverse the entire European regulatory architecture.
Europe loses refining capacity
This fiscal pressure is compounded by a second key factor: the loss of refining capacity in Europe. Over the last two decades, the continent has significantly reduced its refining apparatus, both in the number of facilities and in total capacity. Capacity data by country shows that Europe has decreased from over 18.3 million barrels per day to 15.1 million, a decline of nearly 17.6% from the previous peak. Other industry sources indicate that since 2009, the mainstream system of the EU-27, the United Kingdom, Norway, and Switzerland has lost 154.8 million tonnes of annual primary capacity, standing at 638 million tonnes in 2024.
This reduction is not anecdotal. Fuelseurope documents the closure or transformation of 28 significant European refineries since the late 2000s, some of which have been converted into biorefineries, reducing the capacity available for conventional crude refining. Additionally, various analyses indicate that in just the last decade, the European Union has lost around 10% of capacity, with countries like Italy and Germany cutting approximately 20%.
Europe now has a smaller, tighter, and less flexible refining system. Domestic capacity has been reduced while simultaneously raising fiscal, regulatory, and environmental burdens on internal production, making the system more dependent on imports of refined products and more vulnerable to logistical or geopolitical disruptions. Any supply tension, unforeseen maintenance, or demand spike translates more easily into sharp increases in petrol and diesel prices.
This is where European energy policy comes into play. Programs like REPowerEU aim to reduce dependence on fossil fuels, accelerate renewables, electrification, and efficiency, and gradually shift demand away from petroleum products. However, until that transition is complete, consumers in Madrid and the rest of the EU will continue to pay a bill increasingly conditioned by taxation and reduced refining capacity.
For drivers in the Community of Madrid, the reality is that the price at the pump increasingly depends on political and regulatory decisions rather than the international crude price. With petrol around 1.8 euros per litre, and a barrel of oil lower than in previous years, the room for prices to decrease seems limited while the fiscal and regulatory cost structure remains in place.
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