How Are Fuel Prices Set in Latvia? Oil Markets, Taxes, and Retailer Margins

Why Does Fuel Cost So Much - and Why Does It Change?

Every driver notices fuel prices. They go up after a news story about the Middle East, fall briefly in January when demand drops, then creep back up again. The price you see on a station forecourt is the end result of a long chain of factors, most of which have nothing to do with the station itself. Understanding the components helps you make sense of price movements and know when you are getting a fair deal.

The Global Foundation: Brent Crude

Almost all transport fuel in Latvia is refined from crude oil. The benchmark that drives European fuel prices is Brent crude, extracted from the North Sea and priced in US dollars per barrel. In early 2026, Brent crude trades in the range of 70-80 USD per barrel.

One barrel of oil contains roughly 159 litres. After refining losses and the fact that not all of a barrel becomes diesel or petrol, a barrel might yield approximately 70-80 litres of transport fuels combined. That gives a raw material cost of roughly 0.55-0.65 USD per litre before anything else is added.

Refining turns crude oil into finished fuel products. A typical refining margin adds another 0.05-0.15 USD per litre, depending on refinery efficiency and product demand. The refined fuel then needs to reach Latvia: typically by tanker to Riga port and then by road tanker to stations, which adds logistics costs.

The EUR/USD Exchange Rate

Because crude oil is priced in US dollars, the EUR/USD exchange rate has a direct effect on what European drivers pay. When the euro strengthens against the dollar, the cost of oil imports falls in euro terms - and pump prices tend to drift down. When the euro weakens, import costs rise even if the dollar price of oil stays the same. This is one reason Latvian pump prices can change even during periods when oil prices appear stable.

Excise Tax: The Largest Fixed Component

The single biggest line item in a litre of Latvian fuel is excise tax: a fixed levy set by the Latvian government per litre of fuel sold. As of 2024, the excise rates are approximately:

Fuel Type	Excise Tax
Diesel	~0.414 €/L
Petrol (95/98)	~0.509 €/L

These rates are fixed regardless of the oil price. When crude oil falls dramatically, excise tax does not move with it - the government collects the same amount per litre. This is why pump prices in Latvia (and most EU countries) do not fall as fast as the crude oil price when markets drop.

VAT at 21%

VAT of 21% is applied on top of everything: the fuel cost, the excise tax, the logistics, and the margin. Because VAT is a percentage applied after excise, a rise in fuel price causes a larger rise in the total pump price. Latvia’s 21% VAT rate is among the higher standard rates in the EU.

Retailer Margin

The fuel station itself earns a relatively slim margin: typically somewhere between 0.05 and 0.15 €/L on standard fuels. This margin covers staff, property, electricity, card processing fees, and profit. Premium fuels (Pro Diesel, 98miles+, XTL) carry higher margins, which is why chains promote them actively.

How a Litre of Diesel Is Priced

A rough breakdown at April 2026 market average diesel price of 2.131 €/L:

Component	Approximate Share
Crude oil + refining + logistics	~0.55-0.65 €/L
Excise tax	~0.414 €/L
Retailer margin	~0.05-0.15 €/L
VAT 21%	~0.37 €/L

The numbers are approximate because excise and VAT interact, but the structure shows that over half the pump price is tax: excise plus VAT together account for roughly 0.78 €/L at current prices.

Why Latvia Pays More Than Poland or Lithuania

Latvian fuel prices tend to run higher than in Poland and sometimes higher than Lithuania. Several factors contribute. Latvia has a smaller domestic market, which means less bargaining power with fuel distributors and higher per-unit logistics costs for supply. Geography also matters: Latvia does not have a domestic refinery, so all refined fuel is imported. Poland, with its larger market and domestic refining capacity (through PKN Orlen), generally achieves lower retail prices. Excise tax differences between countries also play a role.

Why Prices Change Daily

Major chains in Latvia (Circle K, Neste, Virši) update prices daily, typically in the early morning. This reflects the underlying commodity market movement: crude oil prices, product prices on the Rotterdam commodity exchange, and the EUR/USD rate all change every business day. Stations do not set prices independently; they follow central pricing systems managed at chain level.

Check today’s live prices at The Fuel Pulse dashboard before your next fill-up.