Whenever fuel prices in Serbia are discussed, it is common for explanations of their level to be sought in the movement of international prices, the exchange rate of the dinar, and state taxes and fees. What is less clear to the general public is how international prices are formed and how Serbia’s excise policy works.
The price of crude oil, from which derivatives are obtained through refinery processing, serves as a benchmark for the entire market of finished products, including motor fuels. Prices on two exchanges – the New York Mercantile Exchange (NYMEX) for American WTI crude from Texas and the Intercontinental Exchange (ICE) in London for Brent crude from the North Sea – cover two-thirds of global crude oil trading. Other significant exchanges are located in Dubai, Tokyo, and Shanghai.
How crude oil prices are determined on the global market
The average daily turnover of “paper” crude oil on the two leading exchanges amounts to around two billion barrels, while global consumption is about 103 million barrels per day. Trading is dominated by futures contracts for future delivery, whereby participants undertake an obligation to buy or sell crude oil at a precisely defined time. Each contract covers 1,000 barrels of standard-quality crude oil for delivery at a specified terminal within a strictly defined timeframe.
However, almost 100% of the crude oil traded on exchanges is not physically taken by the main participants – commercial users such as oil companies and traders who use exchanges to hedge against sudden price changes – nor by speculators such as financial funds, institutions, traders, or individuals aiming to profit from price trends.
A simplified explanation of a hedging operation can be illustrated using a scenario similar to the operations of NIS. NIS purchases about 316,000 tonnes of crude oil monthly, or roughly 2.3 million barrels. Suppose that in January, before the Middle East crisis, when oil cost about $70 per barrel, it decided to hedge for March delivery. It would buy 2,300 futures contracts at $70 per barrel, worth $162 million. By March, the price rises to $100 per barrel. NIS buys physical oil at $100, incurring a loss of $30 per barrel (around $70 million total), but simultaneously sells futures contracts at $100, gaining about $70 million (minus costs), effectively “locking in” a price of around $72 per barrel. If prices had instead fallen to $50, the opposite would occur – profit on physical purchases and loss on futures – yet the effective price would still be about $72.
Thus, exchange prices influence but do not determine the price of physical crude oil. Around 75% of global trade is based on Dated Brent quotations published by PLATTS, which estimates prices based on real transactions, offers, and bids. These prices may exceed exchange prices during supply shortages (backwardation) or fall below them when there is oversupply (contango).
How diesel and petrol prices are determined
In Europe, PLATTS Euromarketscan reports are used to set prices of petroleum derivatives. For diesel in Serbia, key reference points are PLATTS quotations for ULSD 10 ppm Cargoes CIF Mediterranean, meaning delivery at ports in Romania, Bulgaria, or Croatia. Serbian regulations changed this to FOB pricing, referring to loading terminals in Italy, Greece, or other Mediterranean ports.
Transport costs are fixed by regulation. Prices are expressed in dollars or euros per tonne, with additional costs such as seller premiums, quality control, and contractual losses. These form the procurement price at the terminal. Logistics costs are then added to determine the price in storage in Serbia.
Prices per litre are calculated based on density. Diesel density ranges from 820 to 845 kg/m³, meaning one tonne equals 1,183–1,219 litres. The regulation fixes density at 845 kg/m³. For example, €1,300 per tonne translates to €1.066–€1.098 per litre.
The dinar price depends on the National Bank’s exchange rate, forming the net company price. The gross price includes storage, handling, and profit margins. State levies – excise duty, strategic reserves fees, energy efficiency charges, transport costs, and retail margins – are added. VAT of 20% is then applied to determine the final retail price.
Although the fuel market is formally liberalised, NIS controls about 80% of the wholesale supply, effectively creating a monopoly regulated by the government. True competition would only reduce prices marginally.
High fiscal burdens due to major public investments
Differences largely stem from state levies. The EU introduced minimum excise duties in 2003. For example, petrol carries €359 per 1,000 litres, diesel €330, and LPG €125 per 1,000 kg.
In Serbia, excise duties are significantly higher: about €598 for petrol, €616 for diesel, and €480 for LPG. This means Serbian excise on petrol is 67% higher than the EU minimum, diesel 1.87 times higher, and LPG 3.84 times higher.
One reason may be Serbia’s heavy reliance on public investment projects such as highways, railways, Expo 2027, and the National Stadium, requiring substantial budget revenues.
Government prioritises NIS over environmental protection
Excise policy aligns with refinery output and consumption patterns. Petrol production exceeds domestic demand, while LPG usage has been discouraged through higher excise, reducing its competitiveness despite environmental benefits.
Diesel production is insufficient for demand, yet excise remains higher than for petrol – an unusual situation in Europe – aimed at encouraging petrol consumption.
Motor petrol accounts for approximately 17.5% of processing at the Pančevo refinery, which is considered one of the most efficient in Europe. Out of 4.1 million tonnes of crude oil processed annually, this amounts to around 717,000 tonnes, while domestic petrol consumption remains steady at between 500,000 and 550,000 tonnes per year.
Consumption of LPG (autogas) reached its peak in 2012 at around 290,000 tonnes, reducing petrol consumption by approximately 245,000 tonnes. Since the Pančevo refinery was unable to increase its processing capacity until autogas was effectively removed from the market, the state accommodated this need by increasing excise duties, making autogas uncompetitive and reducing its consumption to around 90,000 tonnes annually. Environmental considerations were pushed into the background in favour of corporate interests; consumers were deprived of a cheaper alternative fuel, and private investments of around €150 million in engine conversions for autogas use and related logistics were devalued.
The Pančevo refinery produces about 1.84 million tonnes of diesel, while consumption stands at around 2.5 million tonnes. The aim of excise policy is to encourage petrol consumption, which is why excise duty on diesel is higher than on petrol – an arrangement that is unique in Europe.
The escalation of conflict in the Middle East has disrupted supply chains for oil and petroleum products, as well as petrochemical feedstocks and finished goods, including urea and helium, with Asian markets currently the most affected. Sooner or later, these effects will spread to Europe, leading to expected price increases, as well as concerns over availability and occasional shortages. It would be prudent to use available reserves rationally, so as not to find ourselves in a situation where there is a willingness to temporarily abolish excise duties, but nothing left to apply them to.
Additional costs include fuel marking (€0.285 dinars/litre) and quality monitoring. These costs, amounting to about €10 million annually, are passed on to consumers.
Strategic reserves
Releasing 40,000 tonnes of diesel covers less than six days of consumption. Sustained intervention would require far larger volumes, risking depletion without long-term supply solutions.
It is now clear how valuable the time since the introduction of OFAC sanctions on the Oil Industry of Serbia in January 2025 has been, during which it received its latest special licence extending operational activity until 17 April. Without an operational NIS, the supply of the Serbian market would cross a critical threshold, while the pace of a solution – subject to government approval – is being dictated by MOL and ADNOC from the Emirates as buyers, and Gazprom as the seller. Each of these parties is preoccupied with its own priorities, which explains why the deadline for concluding the sale and purchase agreement, originally set for 24 March, has been extended. There remains doubt as to whether, under the new circumstances, the agreement will be concluded at all, particularly if Viktor Orbán, Russia’s preferred candidate, loses the elections on 12 April. Does the Government of Serbia have a contingency plan?
(Radar, 07.04.2026)
https://radar.nova.rs/ekonomija/cene-goriva-skuplje-srbija-region/