When you go to the pump, here is what you pay

Source: French to English Tester   Published on: 2026-04-07

Source: The Conversation – France (in French)– By Salomée Ruel, Professor, Léonard de Vinci Center

Pump prices rise like a rocket, but fall like a feather. A seemingly mysterious paradox. In reality, a liter of fuel is the sum of three parameters: the product, namely crude oil which is then refined, the logistics and distribution pair, and above all taxes. Understanding this breakdown clarifies the possible room for maneuver of the State, producers, and distributors.

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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 opening of the stock exchange on February 15, 2026, the price of aBrent barrelwas $68.54 (59.77 euros), $100.88 (87.98 euros) on March 24, 2026, and $106.6 (92.97 euros) on March 30, 2026.

Logically, when the price of a barrel ofBrentincreases (or when the euro falls), the cost of raw materials in the final price of fuel also increases. Conversely, if the price of crude oil decreases, the cost of raw materials mechanically decreases, but not always immediately! Indeed, there are delays related to stocks or supply chains.

An order of magnitude helps to get oriented: a barrel of Brent contains 159 liters. An additional ten-dollar variation per barrel (8.69 euros) raises the price of one liter of gasoline by 6 cents of a dollar (0.052 euro cent) “before taxes”, to which the effects ofexchange rateand refining.

From the oil depot to the service station

Another part of the price concerns the transportation, storage, and sale of fuel from the oil depots to the gas stations.

These logistical costs increase year after year due to theinflation – 5.2% in 2022 and 0.9% in 2025. Higher salaries or compliance upgrades will have consequences on the fuel price. According to theInsee, since 2022, transport-distribution costs have increased “more moderately” than crude oil and refining, but still by about + 9 euro cents per liter over the studied period.

Even before the gas stations’ margin, part of the price reflects marginsupstream, notably the refining margin and the conditions of the wholesale market. They can vary quickly, especially in case 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 stations in large retail chains to about 8 euro cents per liter for more expensive stations in the independent network.

State Taxes

Thetaxes, set by the State and complemented 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 a part of the pump price can adjust, the rest being tax-related and therefore relativelyrigid.

Two elements must be taken into account:

• The excise duty (formerly internal tax on consumption of 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 tax has been stable since 2018.

• The value-added tax (VAT),Down 20% since 2006, which applies to the price excluding tax, but also to the excise duty. When the product price increases, the VAT increases automatically.

In 2025, all regions,except Corsica, adopted the maximum increase in the excise rate.

Counterintuitive effects of a tax cut

On the State side, the main room for maneuver is fiscal. For example, temporarily or permanently modifying the excise, and playing with compensation mechanisms such as universal or targeted “discounts.”

In 2026, the government of Sébastien Lecornu favors a support plan of 70 million euros with“targeted aids”.

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Also to read:
How the Iranian revolution sparked the second oil shock of 1979

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Any tax reduction has a very significant budgetary cost, because the excise duty on fuels remains a major source of revenue. In 2022, the discounts on pump prices had cost more thaneight billion euros to the StateIn 2023, fuel vouchers nearlybillion.

A key counterintuitive element to note: when prices rise, motorists often end up reducing their consumption. Now, the excise duty is perceivedper liter. Consequently, if volumes decrease, excise revenues also decrease, which can cancel out (or even reverse) the VAT gain related to a higher price.

(Low) margins of distributors

On the distributors’ side, service stations such as Shell, Avia, TotalEnergies, Carrefour, Leclerc or Esso can adjust their margins. On a highly competitive product like fuel, it is only a matter of a few cents.

That is why the National Automobile Federation and the Association of 40 Million Motorists (opposed to urban speed cameras and bike lanes in Paris after the lockdown) launched on March 19, 2026“The ‘transparency operation'”}]} essional news and public-information translator.. The issue: displaying at their checkout the precise breakdown of the price of one liter of fuel.

“Rockets and Feathers”

“Prices go up like a rocket, but come down like a feather.” In economics, this phenomenon is known asRockets and Feathers.A studyin the British market emphasizes that retail prices adjust more quickly when costs rise than when they fall. Aanother study, in the United States, confirms this contradiction.

This asymmetry arises for several reasons.

Deadlines 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.

On the contrary, when costs rise, the risk of selling at a loss makes the adjustment faster. Because selling at a loss isa prohibited commercial practice.

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Also to read:
Why the strikes on Iran remind us that it is urgent to abandon oil

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Adjustment and coordination costs

In many distribution networks, prices are changed “in waves” rather than continuously. Stations do not update their displays with every micro-variation in the market, but at specific moments (for example, once or twice a day), often considering the prices of neighboring stations. This adjustment method can make 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 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 visible).

Long-term costs

When geopolitical news becomes tense,notably in the Strait of Hormuz, it is above all the “product parameter” that runs wild, then relentlessly passes on to the pumps at service stations. Consequently, motorists see their fuel bills inexorably increase.

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 focus on the speed of price transmission, with limited profits.

These leeways exist, but they are rarely immediate, and almost always come with a medium and long-term cost.

Salomée Ruel does not work for, advise, hold shares in, or receive funds from any organization that could benefit from this article, and has declared no other affiliation than her research organization.

–ref. When you go to the pump, this is what you pay –https://theconversation.com/when-you-go-to-the-pump-heres-what-you-pay-279632