Why Gasoline Prices Can Stay Up When Oil Goes Down

When energy prices surge, there are few places where the pain is felt so acutely as at the filling station. The cost of gasoline for your car or the diesel that powers trucks is driven by a complex mix of Middle Eastern politics, refinery capacity, government policy and, sometimes, war. While Russia’s invasion of Ukraine was the trigger that fired fuel prices to new highs in 2022, it wasn’t the only cause.

Probably not, at least in nominal terms. Nationwide prices in the US briefly surged above $5 a gallon to a record in June. In some places they topped $6, according to American Automobile Association data. Prices also hit records in the UK, where filling an average car cost more than 15% of a week’s earnings in some areas. For emerging economies in particular, there was a double hit, with a surging dollar compounding the already severe impact of higher oil prices.