Crude oil jumped 11% in two months. Your pump price hasn't fully caught up yet -- but it will. Understanding the lag mechanism tells you when to expect the hit, and why prices rise faster than they fall.
Pump prices lag crude by 1-3 weeks on the way up and 3-6 weeks on the way down. The asymmetry is called "rockets and feathers" -- prices go up like a rocket and come down like a feather. This is partially structural, partially retailer behaviour.
Crude oil is not directly usable as vehicle fuel. It must be processed at a refinery to produce petrol (gasoline), diesel, jet fuel, heating oil and other products. Refineries buy crude oil at spot or short-term contract prices, process it over several days, then sell refined products to wholesale distributors. This refining step introduces a natural time lag of 3-7 days between a crude price change and a change in the wholesale price of refined products.
Refineries also manage stock levels. If a refinery has significant stocks of crude already purchased at previous (lower) prices, it can buffer a crude price rise for longer before passing it on. This is why the lag is variable -- it depends partly on how much inventory sits in the pipeline.
Refined fuel moves from refineries to wholesale distributors, then to retail stations. Retailers typically buy fuel weekly or bi-weekly. When they purchase at a new, higher wholesale price, they generally pass the increase on quickly -- within days -- because their margin is thin and they cannot absorb higher input costs for long. When wholesale prices fall, retailers are slower to pass on the reduction because their existing stock was bought at higher prices and they need to sell through it first.
This is one of the most consistently documented patterns in retail fuel pricing. When crude rises, pump prices follow quickly -- retailers are motivated to reprice upward immediately because their next delivery will be more expensive. When crude falls, retailers delay repricing downward because: (1) they have existing stock bought at higher prices, (2) if competitors don't reprice immediately either, there's no competitive pressure to do so, and (3) the short-term margin improvement is welcome after a period of compressed margins.
Academic studies across the UK, US, Germany and Australia consistently find that retail prices respond to crude oil increases within 1-2 weeks, but crude oil decreases take 3-8 weeks to fully pass through to pump prices. The degree of local market competition affects the size of this asymmetry -- markets with more supermarket fuel stations (which compete aggressively on price) show smaller asymmetries than markets dominated by branded forecourts.
In most European countries, approximately 45-55% of the petrol pump price is fixed taxes (excise duty + VAT). These taxes don't change when crude oil moves. This means a 10% change in crude oil translates to only a 5-6% change in pump price in Europe, versus approximately 8-9% in the US (where taxes are lower). The tax buffer also means European consumers are partially protected from crude price spikes -- but also benefit less from crude price falls.
© 2026 mycrisiscost.com · Disclaimer · Privacy