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

European Central Bank chief economist Philip Lane warned that a renewed surge in oil and gas prices will prolong inflationary pressures across the eurozone and that price growth is only likely to start moving back toward the 2% target around mid-2027. Lane said energy-driven increases have not yet spilled over into other price categories but cautioned that food, electricity and goods could feel upward pressure later this year.

By AI Newsroom· Reviewed by Pranav, Founder & Editor-in-ChiefPublished about 2 hours agoUpdated about 2 hours ago0 views

Why It Matters

Persistent energy-cost shocks can keep headline inflation elevated and complicate central bank policy decisions across the eurozone; the timing and breadth of any spillover into food, electricity and goods will influence when inflation returns to target. These developments also intersect with fuel supply dynamics, including diesel availability and potential U.S. export restrictions, which affect price trajectories.

Key Facts

Speaker: Philip Lane, ECB chief economist
Projection for inflation: Inflation expected to start receding toward 2% from mid-2027
Current spillover status: No broad spill from oil and gas to other prices observed from February to date, per Lane
Potential spillover targets: Food prices, electricity and goods identified as at risk of upward pressure
Retail fuel price moves: Gasoline up about 29% (weighted average) since February; diesel up about 40% (weighted average)

The European Central Bank’s chief economist, Philip Lane, signalled that a fresh round of rising oil and gas prices will keep eurozone inflation elevated for longer than previously expected. Lane told a Swiss daily, as quoted by Reuters, that the current “second wave” of energy price increases is likely to produce higher and more persistent inflation before it begins to move back toward the ECB’s 2% target from around mid-2027. Lane said that, to date, the energy price surge has not produced a broad spillover into other price categories — a development he described as “the good news” — but warned that such spillovers could emerge later in the year. He specifically identified food prices, electricity and goods as areas likely to face upward pressure if the energy shock intensifies, while noting that services inflation should remain comparatively contained. The rise in retail fuel costs has been pronounced across the European Union, with a weighted-average increase of roughly 29% for gasoline and around 40% for diesel since February. Those fuel dynamics pushed the eurozone’s energy inflation reading for August to 14.3%, and the ECB currently expects diesel prices to peak by October. The bank’s outlook, however, faces downside risks from tightening diesel supply and the prospect — described as uncertain — of a U.S. ban on diesel exports. The comments were reported by Oilprice.com in a piece by Irina Slav and underscore how renewed energy-price volatility can alter the inflation outlook and complicate monetary policy planning across the euro area.