Soaring Oil and Gas Prices Push Europe’s Inflation Fight Into 2027

Eurozone inflation could remain elevated until mid-2027 due to soaring oil and gas prices, warned the European Central Bank's chief economist, Philip Lane. Lane predicts that the second wave of energy price increases will lead to higher and more persistent inflation before eventually receding towards the ECB's target rate of 2% in mid-2027.

So far, there has not been a spill from oil and gas prices to other prices, such as electricity, but such a spill may occur later in the year, potentially impacting food prices. Lane noted that retail fuel prices in the European Union are at record highs, with gasoline up by 29% since February and diesel up by up to 40% on a weighted average basis.

The ECB anticipates diesel prices to peak by October, but the prospect of the United States banning exports of the fuel could make this expectation unrealistic. The eurozone's energy inflation reading for August reached 14.3%.