Why is fuel cheaper in Luxembourg and how much it costs today

Luxembourg petrol prices vs. other EU countries

If you are in a hurry and all you want is the current price of fuel in Luxembourg, let's get straight to the point. In September 2024, the price of oil in Luxembourg was 1.559 for Super 98, 1. for Super 95 and 1.426 for Diesel.

Prices rose during the year until April, when they fell again. They are currently almost at the same level as at the beginning of the year. They are also lower than in mid-2012, after the conflict between Russia and Ukraine, although they are much higher than the pre-Covid prices in 2019.

Source: petrol.lu

It is also important to compare fuel prices in Luxembourg with neighboring countries and the rest of Europe. Below is a comparative graph with prices as of the end of September in 2024. We can see what we mentioned at the beginning, fuel prices in Luxembourg are much lower than in the rest of Europe, although they are not the winners, there are countries with even cheaper prices such as Lithuania, Malta and Bulgaria located at the bottom of the list. On the other hand, heading the list with the highest prices are Greece, the Netherlands and Denmark at the top.

Source: European Commission

Fuel tourists in Luxembourg

Besides being lower than the European average, prices for fuel in Luxembourg are much lower than in neighboring countries: France, Belgium, Germany. This attracts drivers from these countries who live in the cities near the border to engage in what is known as 'petrol tourism', a practice that consists of going on a “trip” to Luxembourg just to fill up the tank. With the size of the country and developed cross-border exchange it is easy to imagine this.

This practice is mainly carried out by cross-border workers who take advantage of the fact that they must go to Luxembourg to work and fill up their tank in the Grand Duchy. 

However, it is also common among the inhabitants of towns near the border. The closer you are to the border the more common the practice is, depending on the location it can take between 1h or as little as 10 minutes to get to Luxembourg to fill up the tank.

This is such a common practice that the Grand Duchy has the largest service station in the world, the Shell Berchem station, located on the A3 freeway linking France to the Luxembourg capital. This station serves up to 25,000 vehicles on busy days, for which it has a tank capable of storing up to 1 million liters of fuel and in summer there can be up to 25 tankers a day that come to feed the station. In total, this station sells around 260 million liters of fuel per year. 

But why is fuel cheaper in Luxembourg? Further we will take a closer look at the roots of the reasons for such a fenomena.

Why is Luxembourg fuel cheaper?

To answer this question, we must look into the composition fuel price. The Ministry of Economy has explained that “The price of diesel and gasoline is made up of the following elements: base price (production and distribution costs), special taxes and VAT”.

This means that the price is determined by multiple factors such as the price of crude oil on world markets, the dollar/euro exchange rate and the market situation, which includes factors such as refinery margins, the level of inventories in the region or the production capacity, among other factors.

Okay, all these factors influence the price, but how is the price finally established? Well, in Luxembourg there is a maximum price system that sets a maximum price for oil products, this represents the highest amount at which a product can be sold on the market and is established based on three criteria:

• Purchasing costs of gasoline and diesel on international markets
• Distribution costs
• Taxes (excise duties and VAT)

The last factor is one of the key elements to understand this phenomenon: taxes in Luxembourg contribute to a significant extent to the fact that in the end, the maximum price in the Grand Duchy is generally lower than in its neighboring countries.

Gas fuel price comparison and trends in Luxembourg

We have already seen how gas prices in Luxembourg compare with its neighbors, but how have fuel prices in Luxembourg and other countries evolved over time? The following two graphs allow us to see more clearly.

In these graphs, it is possible to see how the difference in fuel prices between Luxembourg and its neighboring countries is not something new but a trend that has been going on for many years. It also allows us to see how macroeconomic factors and inflation influence fuel prices. On the one hand, inflation increases gasoline prices by increasing the costs of production, transport and distribution. On the other hand, macroeconomic factors such as COVID-19 or the conflict between Russia and Ukraine generate fluctuations in supply and demand. 

World crises affect prices by causing fluctuations in demand: first, a drop and then a rapid increase as economies recover, resulting in higher prices due to problems in supply chains. Sanctions and energy supply disruptions have created uncertainty and limited supply, driving prices even higher.