BRUSSELS

Belgium's fuel price regulation system is facing mounting pressure as rising global energy costs linked to tensions in the Middle East strain the country's long-standing pricing model, industry representatives have said.

Belgium, along with Luxembourg, remains among the few European countries that impose maximum price caps on petroleum products.

Introduced during the oil crisis of the 1970s, the system was designed to protect consumers and ensure a stable supply.

It includes a correction mechanism, known as the K-factor, aimed at cushioning sharp price increases.

However, sector representatives say the mechanism is no longer sustainable under current market conditions.

During a hearing before the parliamentary Energy Committee, Brafco and Energia warned that profit margins across the fuel supply chain are being severely eroded, Belga news agency reported on Wednesday.

Fuel traders argue they are caught between high international wholesale prices and regulated retail price caps that prevent them from passing on costs to consumers.

Johan Mattart, director of Brafco, said Belgian fuel prices have become "artificially low" and disconnected from market realities, raising concerns over the long-term viability of the system.

He cautioned that continued financial pressure could force some petrol stations to shut down, potentially disrupting supply.

The issue is compounded by cross-border "fuel tourism," as drivers from neighboring countries travel to Belgium to benefit from lower regulated prices.

Stations near the Dutch border, in particular, have reported increased traffic and long queues.

Wim De Wulf, secretary-general of Energia, said the sector has effectively pre-financed around €100 million ($115 million) since the onset of the Middle East conflict through price moderation measures, with only partial recovery expected.

Both organizations are calling for reforms, including the abolition of the K-factor.

Brafco has also proposed replacing the current system of maximum price caps with a more flexible guide-price mechanism.

Industry stakeholders say such changes are necessary to align Belgium's fuel pricing with market dynamics and to safeguard supply continuity.

The regional escalation in the Middle East has continued since the US and Israel launched a joint offensive against Iran on Feb. 28, so far killing more than 1,340 people, including then-Supreme Leader Ali Khamenei.

Iran has retaliated with repeated drone and missile strikes targeting Israel and Gulf countries hosting US military assets.

The Strait of Hormuz has also been effectively throttled since early March. Around 20 million barrels of oil normally pass through it daily, and its disruption has driven up shipping costs and pushed global oil prices higher.