Source: French to English Tester Published on: 2026-04-03
Source: The Conversation – France (in French)– By Salomée Ruel, Professor, Léonard de Vinci Pole
Pump prices rise like a rocket, but fall like a feather. A seemingly mysterious paradox. In reality, a liter of fuel consists of three components: the product itself, namely crude oil which is then refined, the logistics and distribution pair, and especially taxes. Understanding this breakdown clarifies the possible room for maneuver of the State, producers, and distributors.
In the beginning was the product, the “black gold.” The fuel comes from crude oil, often indexed onthe price of Brent, converted from the dollar to the euro, then processed in refineries. At the stock market opening on February 15, 2026, the price of aBrent barrelwas $68.54 (€59.77), $100.88 (€87.98) on March 24, 2026, and $106.6 (€92.97) on March 30, 2026.
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Logically, when the price of a barrel ofBrentincreases (or when the euro falls), the cost of raw materials in the final fuel price also increases. Conversely, if the price of crude oil decreases, the cost of raw materials mechanically decreases as well, but not always instantly! Indeed, there are delays related to stocks or supply chains.
A rough estimate helps to get your bearings: a barrel of Brent contains 159 liters. An additional ten-dollar increase per barrel (€8.69) raises the price of one liter of gasoline by 6 cents of a dollar (0.052 euro cents) “before taxes”, to which the effects ofexchange rateand refining.
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From the oil depot to the gas station
Another part of the price concerns the transport, storage, and sale of fuel from oil depots to service stations.
These logistical costs increase year after year due to theinflation– 5.2% in 2022 and 0.9% in 2025. Higher wages or compliance upgrades will have consequences on the fuel price. According to theInsee, since 2022, transportation-distribution costs have increased “more moderately” than crude oil and refining, but still by about +9 euro cents per liter over the period studied.
Even before the gas stations’ margin, a part of the price reflects marginsupstream, notably the refining margin and the conditions of the wholesale market. They can vary rapidly, especially in the event of logistical tensions.
Another important point: despite the debates, the net margin of a gas station generally remains low. From 2 euro cents per liter for hypermarket stations to about 8 euro cents per liter for more expensive stations in the independent network.
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State taxes
Thetaxes, set by the State and supplemented by the regions, are the most visible part of the price of a liter of fuel. They represent between 50% and60%of the final price, depending on the type of fuel and the barrel level. Result: when the crude price varies, only part of the pump price can adjust, the rest being tax and therefore relativelyrigid.
Two elements must be taken into account:
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The excise duty (formerly the domestic consumption tax on energy products, or TICPE), which represents 36% of the pump price of diesel and 39% of that of unleaded petrol (SP95). The fixed amount per litre (in2026, excluding regional surcharges, is 68.29 euro cents per liter for gasoline and 59.40 euro cents per liter for diesel. The national excise duty has been stable since 2018.
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The value-added tax (VAT),At 20% since 2006, which applies to the price excluding tax, but also to the excise. When the product price rises, VAT increases automatically.
In 2025, all regions,except Corsica, adopted the maximum surcharge on the excise rate.
Counterintuitive effects of a tax reduction
On the part of the State, the main room for maneuver is fiscal. For example, temporarily or permanently modifying the excise tax, and playing on compensation mechanisms such as universal or targeted “discounts”.
In 2026, the government of Sébastien Lecornu favors a support plan of 70 million euros with some“targeted aid”.
Also to read:
How the Iranian revolution caused the second oil shock of 1979
Any tax cut has a very significant budgetary cost, as the excise on fuels remains a major source of revenue. In 2022, discounts on pump prices had cost more thaneight billion euros to the StateIn 2023, fuel vouchers nearlybillion.
It is important to note a counter-intuitive essential element: when prices increase, motorists often end up reducing their consumption. Now, the excise duty is perceivedper liter. Consequently, if volumes decrease, excise revenues also decline, which can cancel out (or even reverse) the VAT gain related to a higher price.
(Low) profit margins of distributors
40 million motorists,CC BY-NC
On the distributor side, service stations, such as Shell, Avia, TotalEnergies, Carrefour, Leclerc, or Esso, can adjust their margins. On a highly competitive product like fuel, the discussion is only about a few cents.
That is why the National Automobile Federation and the association 40 Million Motorists (opposed to urban speed cameras and bike lanes in Paris after the lockdown) launched on March 19, 2026“the transparency operation”. The issue: displaying at their checkout the precise breakdown of the price of one liter of fuel.
“Rockets and Feathers”
“Prices rise like a rocket, but fall like a feather.” In economics, this phenomenon is known asRockets and Feathers.A studyon the British market emphasizes that retail prices adjust more quickly when costs increase than when they decrease. Aanother study, in the United States, confirms this contradiction.
Roole,CC BY-NC
This asymmetry appears for several reasons.
Delays and stocks
A station sells “today” fuel purchased “yesterday.” If crude oil prices drop, the “theoretical” price drops immediately, but the fuel in the tank was paid for at the old cost.
Conversely, when costs rise, the risk of selling at a loss makes the adjustment quicker. Because selling at a loss isa prohibited commercial practice.
Also to read:
Why the strikes on Iran remind us that it is urgent to abandon oil
Adjustment and coordination costs
In many distribution networks, prices are changed “in waves” rather than continuously. Stations do not update their display with every slight market fluctuation, but at specific times (for example, once or twice a day), often by looking at the prices of neighboring stations. This adjustment method can make price decreases slower because the station waits for more information (confirmation of the drop) or the “right moment” to align.
Behavior of motorists
When prices soar, consumers compare more, switch stations, and competition “activates”: hence the more frequent price updates. When prices fall, competitive pressure is generally less intense. The decrease then spreads more slowly.
“Rigid” Taxes
The presence of a fixed excise tax, or “rigidifies,” the price. When the product price decreases, the tax portion remains the same. Logically, the total decrease at the pump is mechanically less dramatic than the variation in oil prices (and therefore, sometimes less noticeable).
Long-term costs
When geopolitical news tightens,notably in the Strait of Hormuz, it is especially the “product parameter” that runs away, then relentlessly passes on to the gas pumps at service stations. Consequently, motorists see their fuel bills increase inexorably.
To offset these price increases, the State has a real leverviataxes (VAT and excise duty), but it is politically sensitive and costly for public finances.
Theoil producers, like Canada, Saudi Arabia or Kazakhstan, influence upstreamviathe production level and the price of a barrel of crude oil (Brent). Distributors mainly rely on the speed of price pass-through, with limited profits.
These margins of maneuver exist, but they are rarely immediate, and almost always come with a medium and long-term cost.
Salomée Ruel does not work for, does not advise, does not hold shares in, and does not receive funds from any organization that could benefit from this article, and has declared no other affiliation than her research organization.
–ref. How is the price of a liter of fuel set? –https://theconversation.com/how-the-price-of-a-liter-of-fuel-is-set-279632