Petrol at two euros a litre could become a reality

STATEC has published updated forecasts linking energy prices in Luxembourg to the geopolitical situation in the Middle East. Analysts have identified two key scenarios that will determine consumers’ well-being in the coming years.

According to a pessimistic scenario, which assumes an escalation and protracted nature of military hostilities, the transport sector faces a sharp rise in the cost of fuel. With the Strait of Hormuz blocked and stock markets volatile, the price of diesel and petrol could breach the psychological threshold of €2 per litre as early as July this year. At present, prices at the country’s petrol stations are very close to this threshold: a litre of diesel costs €1.875, and Super 95 petrol €1.824.

In contrast, STATEC is considering an optimistic ‘short conflict’ scenario. In this case, experts expect the market to stabilise gradually, although a return to the pre-crisis level of €1.50 per litre is not forecast until at least January 2027. It is noteworthy that, against a backdrop of fuel instability, gas and electricity prices are expected to remain under control, according to experts.

The energy situation has a direct impact on the country’s macroeconomic indicators. In a report submitted to the government in preparation for the June tripartite meetings, STATEC warns of the risk of a recession. High inflation could trigger the automatic wage indexation mechanism three times between now and September 2027. The next increase in payments is expected as early as June, as the indexation threshold is likely to be crossed in May. Nevertheless, experts view frequent indexation during an economic downturn as an indicator of a deep crisis in purchasing power rather than a factor in the real growth of citizens’ well-being.