The price of gasoline and diesel in Portugal depends essentially on five variables:
- The ex-refinery product price, which corresponds to international prices quoted for the respective product;
- Euro/dollar rate;
- Incorporation of biodiesel (in the case of gas oil);
- Cost of logistics: transport/storage/distribution/marketing (which includes margin);
- Taxes: VAT (Value-Added Tax) and ISP (Tax on Oil Products).
The following figure shows the different components of the price of gasoline and diesel in Portugal and their contribution to the final sale price:
The sales prices of gasoline and diesel exiting the refinery on a weekly basis reflect the trend of average diesel and gasoline prices on the European market, compared to the average price the previous week. These prices depend more on the confirmed demand at each moment for each of these products and the price provided by the refineries, than the prices for Brent.
Prices are set in dollars, so a devaluation of the European currency in relation to the American currency will require more Euros to buy each litre of fuel. Similarly, a Euro appreciation may translate into lower prices at the pump even if, in dollars, the price remains unchanged.
In the case of diesel, the product price also reflects the price of biodiesel, which is compulsorily incorporated, and which is regulated by the State and fixed monthly. This translates into a price increase, unlike in Spain, where companies that produce biodiesel compete with each other.
The costs of all the logistics necessary to take the product from the refinery door to the service stations are added to the price of the product. This logistics component comprises transport, storage and distribution costs, as well as the sales margin. All in all, this slice represents 9.7% of the diesel price, and 8.4% of gasoline.
The largest share of fuel prices is the tax burden (VAT and ISP). This factor is different from country to country and almost entirely explains the price difference between Portugal and Spain. In the Portuguese case, the tax burden constitutes almost half the final price of diesel and more than half the price of gasoline.