How fuel prices are set and why they vary station to station

Why does one station cost noticeably more than another a mile away? The number on the pole isn't plucked from thin air: it's the sum of several very different costs, each set by a different force. Understand the layers and the price stops looking random.

By the Refuelia Editorial Team · Reviewed 10 July 2026

The layers inside a pump price

A pump price is best thought of as a stack. Each layer is added by a different part of the supply chain, and each moves for its own reasons. From the bottom up, the main layers are:

• Crude oil. The raw commodity, traded globally and priced in US dollars. When the world benchmarks move, every country feels it, though not always at the same moment.
• Refining. The cost and margin of turning crude into finished petrol, diesel or jet fuel. This spread widens when refineries are stretched and narrows when they have spare capacity.
• Distribution and storage. Shipping, pipelines, terminal storage and the tanker that finally reaches the forecourt. Remote or hard-to-supply sites carry more of this cost.
• Taxes and duty. Excise duty plus sales tax such as VAT. This is frequently the largest single slice, and it varies enormously from country to country.
• Retailer margin. The station's own cut, covering staff, rent, card fees and profit, the layer most shaped by local competition.

Crude oil and refining: the part that moves with the world

Crude is a global market. A supply shock, an OPEC decision or a surge in demand pushes the benchmark price up everywhere at once. But crude is only the starting material. Refineries turn it into the specific fuels vehicles use, and the gap between the crude price and the wholesale fuel price, the refining margin, expands and contracts with how busy the world's refineries are. Seasonal maintenance, unplanned outages and shifts between petrol and diesel demand all nudge this margin, which is why petrol and diesel don't always move in lockstep even though they come from the same barrel.

Distribution: geography adds a cost

Once fuel is refined it still has to travel. Coastal terminals near major ports tend to receive fuel cheaply; an inland town at the end of a long road haul does not. The further and more awkward the journey from terminal to forecourt, the more distribution cost lands in the price. This is a quiet but persistent reason why rural and island stations often sit above the national average even when nothing else has changed.

Taxes and duty: why identical fuel costs so differently across borders

The same litre of diesel can cost dramatically more in one country than in its neighbour, and tax is usually the reason. Governments apply a fixed excise duty per litre and then add sales tax such as VAT on top, often calculated on the price including duty, so it stacks. In many European countries, taxes make up a large share of the total pump price, which means the commodity underneath can fall sharply while the price you pay barely softens. It also explains the classic border effect: drivers filling up on the cheaper side of a frontier are usually chasing a tax difference, not a difference in the fuel itself.

Retailer margin and why neighbours differ

The top of the stack is the station's own margin, and this is where two sites a mile apart diverge. A forecourt with three competitors in plain view prices keenly; an isolated site, or a captive location such as a motorway services or airport, charges closer to what the market will bear. Supermarket forecourts frequently treat fuel as a loss leader: cheap petrol pulls shoppers through the door, so they routinely undercut standalone brands. None of this changes the fuel in the tank; it changes only who is competing for your visit.

Why prices move day to day

Wholesale costs shift constantly with oil markets and, for countries that import fuel, with exchange rates. Because crude trades in dollars, a weaker local currency can push pump prices up even when the barrel price hasn't moved at all. Stations pass these changes through at different speeds, and there is a well-observed tendency for pump prices to rise quickly when costs climb but drift down slowly when costs fall. Layer on holidays, local demand spikes and occasional supply disruptions, and you get the short-term wobble drivers notice week to week. It is also why any single price is only meaningful with a timestamp attached.

A worked example

Picture two drivers filling identical cars on the same morning. One stops at a supermarket forecourt in a competitive town surrounded by rival stations; the other, low on fuel, pulls into a motorway services with no alternative for miles. The crude oil, refining and tax layers underneath both prices are essentially the same: those are set nationally and globally. The gap between what the two drivers pay is almost entirely distribution and retailer margin: convenience, captivity and a lack of nearby competition. Same fuel, same day, meaningfully different price, and the difference lived entirely in the top two layers of the stack.

Using this when you fill up

You can't change tax, crude or exchange rates, but you fully control where you buy, and that is precisely the layer with the most room to vary. A few habits do most of the work:

• Favour competitive clusters and supermarket forecourts over isolated or captive sites.
• Avoid running the tank to empty near motorways or airports, where you lose the freedom to choose.
• Treat any posted price as fresh only if it's recent: prices move, so a timestamp matters.

Use the map to compare recent, timestamped prices near you before you commit to a forecourt. And report what you paid: fresh, crowd-sourced price data is what makes everyone's comparison actually work.