• Mattart says losses are estimated at around €100 million due to price cap
• Industry expert calls for government to do away with K-factor correction mechanism

BRUSSELS

Belgium’s decades-old fuel price control system is facing growing strain as volatile global energy markets expose structural weaknesses, an industry representative said.

Speaking to Anadolu, Johan Mattart, general manager of BRAFCO – the Belgian federation of fuel distributors – said recent price surges linked to Middle East tensions have put suppliers under severe pressure.

"With the war that started in the Middle East, we saw that the prices of oil products on the international markets were going up,” he said.

“And because we have in Belgium a system of official maximum prices for oil products, we saw that our members … had to buy … gas, heating oil, gasoline, at prices that were higher than the maximum price that they (are allowed to sell to consumers)."

"They were obliged to sell with losses. That … was not acceptable," Mattart added, estimating industry losses at around €100 million ($115 million).

At the center of the issue is Belgium’s maximum price cap system and its built-in correction mechanism, known as the K-factor, originally designed to protect consumers during the 1970s oil crisis.

However, the industry is now struggling to absorb rising global costs, creating what Mattart described as an unsustainable situation for fuel distributors.

Global energy markets have been rattled by escalating tensions in the Middle East following the Feb. 28 airstrikes by the US and Israel on Iran, which killed more than 1,400 people, including former Supreme Leader Ali Khamenei.

Iran has responded with a wave of drone and missile attacks targeting Israel and Gulf states hosting US forces, while the strategic Strait of Hormuz has been effectively choked, disrupting the daily flow of roughly 20 million barrels of oil and sending global energy prices surging.

Correction mechanism distorting prices

Belgium's pricing formula is recalculated daily by the Ministry of Economic Affairs. The K-factor softens sudden price spikes for consumers.

But according to Mattart, the mechanism now delays necessary price adjustments, causing official rates to lag behind actual market conditions.

"When prices are rising sharply, the full increase isn’t passed on to consumers; prices are capped to prevent consumers from paying too much. The problem is that these prices no longer reflect reality," he said.

This distortion has led to striking disparities with neighboring countries, he said. At one point, diesel prices in Belgium were as much as €0.50 ($0.58) per liter cheaper than in the Netherlands, triggering cross-border fuel tourism and long queues at Belgian filling stations near the border.

"The Dutch people come over the border and they are in a row waiting to get the fuel in their cars... In some cases there is a queue of two hours," Mattart said.

Retailers squeezed by rigid system

The rigidity of the system has created severe financial strain for distributors, particularly during periods of rapid market fluctuation, he said.

Mattart highlighted a recent example where official diesel prices were reduced by 12.6 euro cents per liter due to earlier market declines. However, by the time the reduction took effect, international prices had already surged again.

"In the service stations, they have to respect the maximum price. But the maximum price … today … is lower than the price at which they have bought their stock," he said.

Compounding the issue, many distributors are bound by long-term contracts with large clients, such as transport companies, that guarantee fixed discounts based on the official maximum price.

"But if the maximum price does not reflect the reality … it's a situation that is catastrophic … it's very, very difficult," Mattart added.

Call for shift to advisory pricing

Mattart urged the Belgian government to overhaul the system while maintaining the broader program contract framework. "Now the price mechanism is not flexible enough to adapt the price directly in function of the prices on the international market," he said.

The federation's primary proposal is to replace mandatory maximum prices with advisory prices, allowing station operators to set rates that reflect real-time market conditions.

He also called for the removal of the K-factor, arguing that it artificially suppresses prices during periods of volatility.

However, Belgian Prime Minister Bart De Wever dismissed calls for new government aid to ease soaring energy costs, citing the country's precarious fiscal position and escalating geopolitical tensions in the Middle East.

The prime minister warned that Belgium's mounting national debt, legacy of poor fiscal management, and high energy dependence leave little room for additional spending, urging policymakers to resist impulsive interventions that could worsen the nation's financial strain.

"As the government has no … financial capacity, because we have budgetary problems here in Belgium, the government is not … likely to … lower the excise duties," Mattart said. "They (have) decided not to intervene and let the market play (out)."

Excise duties in Belgium currently stand at around €0.60 per liter for diesel and gasoline, well above European minimum levels of €0.33.

He also pointed to EU regulations that limit the scope for reducing value-added tax (VAT) on petroleum products, unlike electricity and natural gas. "That's a measure that would be helpful for people who have financial problems."

No immediate supply shortage, but risks remain

Despite pricing tensions, Belgium is not facing a supply shortage.

The country maintains strategic reserves through ASEVA, Belgium’s agency responsible for managing petroleum stocks, in line with International Energy Agency requirements to hold at least 90 days of supply.

"Europe does not have a problem of sorted shortage, but they have to keep an eye on their strategic stocks. And the problem is, in my opinion, that Europe leaves the initiative to the member states, there is no holistic approach," Mattart said.

Looking ahead, Mattart emphasized the importance of reducing reliance on imported fossil fuels, particularly from geopolitically sensitive regions.

Although Belgium sources less than 10% of its oil imports from the Middle East, prolonged instability could still have indirect effects on global markets.

"We are, for the moment, comfortable, but if the problem (persists), I think that it could have an impact also on us.

“So I hope that the situation in the Middle East will de-escalate."