Drivers in Portugal are feeling not just the pinch but the pain of soaring petrol and diesel prices due to the war in Ukraine.
Transport fuel prices are now more than €2 a litre, much the same as in most other European countries. Diesel in Portugal rose from €1.78 per litre on 28 May to €2.08 by 22nd June. Petrol (octane 95) went up from €1.88 in early May to €2.17 in mid-June. Octane 98 is more expensive and not all petrol stations sell it.
An average car drive from Lisbon to Faro will cost just over €76 one way. It’s about 277 km via the A2. Lisbon to Porto - 341 km via the A1 - costs about €85.75. Elsewhere in the world some prices are higher, more are lower. The average price of petrol per litre in the world recently has been €1.89.
Crude oil, the fossil fuel from which petrol and diesel are refined, is imported by Portugal from Angola, Saudi Arabia and Algeria. Natural gas, the fuel used for heating and creating electricity, is imported from Nigeria and the United States. Crude oil and natural gas are shipped into the deep-water port of Sines, south of Lisbon, the closest major European port to the U.S.
Portugal itself has both onshore and offshore areas containing oil and a number of years ago the government granted concession contracts to several large oil companies. The concessions in the Algarve and Peniche offshore areas – highly contentious among environmentalists – were terminated by the government in 2017. There is still no clear evidence as to whether Portugal has sufficiently large quantities of hidden oil to consider commercial extraction.
That aside, Environment and Energy Transition Minister João Matos Fernandes has said that Portugal has strategic reserves of petrol and diesel that guarantee the country’s consumption for 90 days, plus the reserves that energy companies themselves have. The reserves of natural gas are also at very comfortable levels, exceeding 80% of the country’s total storage capacity. Fernandes has said he considers it crucial to increase Iberia’s gas pipeline connections to the rest of Europe as there is only one running from Spain to France.
According to the World Bank, the war in Ukraine could keep oil and natural gas prices at historically high levels through the end of 2024.It expects energy prices to rise more than 50% in 2022 before easing in 2023 and 2024. In the event of a prolonged war, or additional sanctions on Russia, prices could be even higher and more volatile than currently projected.
European and other countries placed hard sanctions on Russian imports to try and stop the Kremlin funding their outrageous aggression. It has backfired in the sense that stopping imports of Russia’s main export commodities – oil and gas – has harmed the West as well as Russia. Germany is particularly concerned that Russia’s moves to slash Europe’s natural gas supplies risked sparking a collapse in energy markets and a situation similar to the 2008 global financial crisis.
Russia is meanwhile benefitting by selling vast amounts of oil at discounted prices to China and India. This surge in demand from Asia is making up for the significantly lower number of barrels being sold to Europe.
China’s imports of Russian oil rose 28% in May this year from the previous month, while India has gone from taking in almost no Russian oil to buying more than 760,000 barrels a day.
The oil is being sold at a steep discount because of the risks associated with sanctions imposed to punish Russia for its invasion of Ukraine. Still, soaring energy prices have led to an advance in oil revenue for Russia, which reaped in $1.7 billion more last month than it did in April.