Oil hit Greece: diesel, food, fuel oil prices rise to €1.80

Brent oil exceeded $102 per barreland for fuel-imported Greece this means the threat of a new round of price increases – from diesel and agricultural products to air tickets, goods delivery and home heating.

Table of contents

• Why Brent exceeded $102 again
• Is there a real oil shortage?
• Can Greece replace supplies with Russian oil?
• Why Greece is particularly vulnerable
• Impact on agriculture
• How will products and services become more expensive?
• Heating fuel at €1.80
• Three possible scenarios

Why Brent exceeded $102 again

The price of international benchmark Brent on September 10 reached approximately $102.15–102.30 per barrel. This is the first sustained exit above $100 since July.

According to ReutersSince the beginning of August, oil prices have risen by almost 30%. The reason was renewed strikes by the United States and Iran, attacks on tankers and energy facilities, as well as a lack of confidence in the speedy restoration of normal supplies through the Persian Gulf.

US President Donald Trump admitted that a significant reduction in fuel prices should not be expected before the November midterm elections. This became a signal for markets: the conflict could drag on, and the geopolitical premium on oil prices would remain.

Back on September 2, when Brent was around $96, Athens News warned that prices could begin to rise along with gasoline. products and services. Now oil has passed the next psychological boundary.

Is there a real oil shortage?

It is wrong to say that the world is running out of oil. Saudi Arabia, Iraq, UAE, Kazakhstan, USA, Libya, Nigeria and other manufacturers continue supplies.

The problem is that much of the Middle East’s oil cannot physically reach the market through conventional routes. Before the crisis, approximately a quarter of global seaborne oil trade passed through the Strait of Hormuz, as well as more than 20% of global trade in liquefied natural gas.

According to information Reutersnavigation through the strait remains severely limited. On one of the last days, only six cargo ships passed through it, whereas before the crisis there were approximately 125 commercial ships per day.

Some raw materials can be exported through alternative pipelines, ship-to-ship reloading and bypass routes. However, their capacity is not enough to completely replace the Strait of Hormuz.

At the same time, freight costs, ship insurance, and war risk premiums are rising. Therefore, even oil that physically reaches the Mediterranean Sea becomes more expensive even before it reaches the refinery.

Previously, we discussed in detail Is it possible to replace the Strait of Hormuz with overland pipelines?. It is impossible to make it “useless” in the short term.

Can Greece replace supplies with Russian oil?

Before the introduction of sanctions, Russia was one of the suppliers of crude oil and petroleum products to the European market. However, direct sea imports of Russian oil into the EU were prohibited, and then restrictions extended to Russian oil products.

The European Commission indicates that the embargo covers about 90% of the EU’s previous oil imports from Russia. The current restrictions are described in more detail at official page of the European Commission.

This means that Greek refiners cannot simply revert to direct purchases of Russian seaborne oil to compensate for the Middle East shortage.

Russian raw materials continue to go mainly to China, India, Turkey and other countries. Some of the petroleum products produced from it can be returned to the world market through refining and blending, although the EU is tightening control over such schemes.

But even possible access to additional quantities does not guarantee a low price. Oil is sold on the global market: if Brent costs more than $100, the alternative supplier also focuses on this cost, and does not offer raw materials to Greece at pre-crisis prices.

Why Greece is particularly vulnerable

Greece has large oil refineries and exports significant volumes of finished petroleum products. However, the country does not have its own significant crude oil production, so the factories depend on imported raw materials.

According to EurostatThe European Union as a whole covers about 57% of its energy needs with imports. In Greece, the dependence is noticeably higher and approaches four-fifths of the energy balance.

This does not mean that the country will necessarily experience a physical shortage of fuel. Greek refineries are capable of handling raw materials of different origins, and supplies can be redirected.

But replacing the source does not mean avoiding price increases. Greece will pay more for the raw materials themselves, transportation, insurance and procurement financing. The longer Brent stays above $100, the more expensive shipments are processed and the stronger the growth appears at gas stations.

The average price of gasoline in the country has already settled around €2.10 per liter. We calculated how much it now costs to fully refuel a car in separate material.

The first serious blow is to agriculture

For Greek farmers, diesel is more than just fuel for driving. It is used by tractors, combines, agricultural machinery, pumps, generators and vehicles that transport crops from field to warehouse.

The rise in fuel prices is especially painful for farms that require intensive irrigation. If the pumps run on diesel or use electricity produced from expensive fuel and gas, the cost of water for irrigation also increases.

Additional costs arise for greenhouse farms, vegetable producers, livestock farmers and cold storage enterprises. They need not only to produce goods, but also to maintain the required temperature, transport feed, milk, meat, fish, fruits and vegetables.

The return of the special tax on agricultural diesel fuel partially alleviates the burden, but does not cancel the price increase itself. The farmer first faces a more expensive gas station, and the compensation covers only a certain tax portion and depends on the established limits.

If oil remains above $100 for several months, producers will be faced with a choice: operate with even lower profits, cut production or raise selling prices.

How oil translates into food prices

The rise in oil prices rarely remains only at gas stations. It extends throughout the entire production chain.

• Field: Diesel, irrigation and equipment operation prices are becoming more expensive.
• Production: the cost of energy, fertilizers and packaging increases.
• Warehouse: refrigeration, storage and loading costs become more expensive.
• Shipping: Carriers are raising tariffs due to fuel.
• Shop: cost increases are included in the final price of the product.

Oil is also used as a raw material for plastic production. Therefore, bottles, film, containers, bags and other packaging are becoming more expensive.

An additional risk comes from fertilizers. The Persian Gulf is an important hub for the production and export of ammonia and urea, and their costs are closely linked to natural gas prices and shipping safety.

The most rapid increases in costs can be seen in the prices of fresh vegetables, fruits, dairy products, meat, fish and goods with a short shelf life – where transportation and the cold chain take up a significant portion of the cost.

Energy has already become one of the factors accelerating Greek inflation. Previously, its growth to 3.7% was discussed in detail in the article “Inflation in Greece jumped to 3.7%”.

Transportation, tourism and islands

Expensive oil affects road freight, courier services, taxis, buses, ferries and aviation. The islands, where a significant portion of food and goods are delivered by sea, are especially vulnerable.

Transport companies do not always raise prices immediately. For some time they may work under previous contracts or reduce their own margins. However, with a prolonged oil shock, a fuel surcharge gradually appears in tariffs.

For tourism, this means an increase in the cost of air travel, bus tours, transfers, car rentals, shipping and hotel operations. Not all businesses will be able to fully pass on these costs to tourists, so part of the hit will fall on their profits.

Heating fuel at €1.80: still a forecast, but no longer fantasy

Sales of heating diesel fuel – πετρέλαιο θέρμανσης – traditionally begins in Greece on October 15. Therefore, €1.80 per liter is not yet the current retail price, but a preliminary estimate by market participants.

Baseline forecasts call a range of about €1.75–1.80 per liter. If Brent remains above $100 and wholesale prices continue to grow, the unfavorable scenario allows for €1.85–2 per liter.

This may be approximately 70% more expensive than the opening level of the previous heating season. But the final price will depend on Brent, the euro/dollar exchange rate, refining margins, taxes, shipping costs and possible government subsidies.

For apartment buildings, an additional problem arises: some residents may refuse to pay their share, which is why the house boiler will be turned on less often or not at all.

The state can soften the blow with an increase in heating allowance, a temporary subsidy or tax measures. However, for now we are talking mainly about possible scenarios, and not about the finally announced support package.

What happens next: three scenarios

The first scenario is rapid de-escalation. If the strikes stop and traffic through the Strait of Hormuz begins to recover, the geopolitical premium could decrease. Brent is able to return below $90-95, although retail prices in Greece will decline with a delay.

The second scenario is a protracted conflict. With Brent in the $100-$110 range, gasoline and diesel will remain expensive, and the gradual increase in production costs will be passed on to products, transportation and services. The heating season will begin at a significantly higher price.

The third scenario is a new escalation. Additional attacks on tankers, terminals, oil pipelines or Saudi facilities could push Brent to $120 or higher. In this case, the question will no longer be only about rising prices, but also about government subsidies, the use of reserves and the protection of the most vulnerable households.

Main risk for Greece

What is dangerous for Greece is not one specific Brent price, but the duration of the oil shock. The market can survive several days above $100 without dramatic consequences. A few months means that expensive oil will have time to pass through refineries, gas stations, agriculture, logistics, stores and heating bills.

Therefore, the current growth is no longer just stock exchange news. This is a warning that in the fall, Greek families and businesses may simultaneously face expensive transport, a new rise in food prices and a much more difficult heating season.

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