Why are prices at the pump not falling when oil prices are falling?

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rob oyle

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Just listening to Charlie Weston talk to Pat Kenny about the slow reaction in pump fuel prices relative to oil market prices (one is holding steady while the trading price is down significantly in recent weeks).
Apparently, Charlie Weston spoke with Irish Fuels (the industry lobby group) and they said that the strengthening of EUR against USD is part of the reason why prices haven't come down yet. This was mentioned twice during the segment, when this is the exact opposite to what the currency movement should lead to... this (should) mean a greater reduction in the EUR cost of USD denominated products!
The old trope about a high level of tax take from fuel prices was also raised (this would have an impact on the rate of reduction, not the timing of it) and neither Pat nor Charlie seemed to question these points or see the counter-logical fallacies being made.

I've heard plenty of these mathematical mistakes made on broadcasters and no one in studio ever seems to pick up on them. How bad is innumeracy among public broadcasters/commentators (and politicians, for that matter)? Leo Varadkar mentioned this last year I think (after leaving politics, of course!) but while policymakers are held to account when they misspeak, no one seems to react when the numbers are counter-factual.
 
It’s years since I looked at this but oil prices often move in the opposite way to dollars.

Ireland sources oil mainly from Europe and just because the dollar is used as the numeraire price it doesn’t really matter as everyone in the market is retailing in euros or sterling.

But this should mean the dollar valuation change is neutral.
 
Here is what Charlie has written in the paper

Asked why fuel prices had not fallen at the pumps, Kevin McPartlan of Fuels for Ireland, the representative group for oil importers and distributors, said the price charged on commodity markets for Brent crude was a significant factor in the cost of fuel for Irish consumers, but not the only one.



He said the impact of the fall in crude-oil prices on forecourt pump prices would take time to materialise.

“Additionally, the recent strengthening of the dollar has partially offset some of the effect on retail transport fuel prices in Ireland,” he said.

“It’s crucial to remember that approximately a euro in tax is paid to the Government for every litre of petrol and diesel purchased by Irish motorists.

“External market conditions can only influence the remaining portion of pump prices. Consequently, Irish motorists benefit less from falling crude-oil prices compared to the majority of their European counterparts.”
 
So he is writing the exact opposite of what you heard him saying on the radio. Did he misspeak or did you mishear?

To be fair to the media, it's not always easy to get stuff right on live radio. I have misspoken (the equivalent of oral typos) often. When I make a typo on Askaboutmoney, it's pointed out quickly and corrected.
 
FWIW, pump prices have fallen three times in the past ten days in this neck of the woods. But perhaps Charlie's local pumps in Donabate haven't been as responsive!
 
Fuel delivered to stations is priced on the refined finished product not the crude price, if you look at sites like Bloomberg commodities you will see the refined price for gasoline, diesel etc and it does not always move the same way as crude oil prices.
 
The petrol that is in the pumps today was bought 3-6 months ago by the oil companies at the price then. So on theory, there will always be a lag between todays price on the wholesale markets and the price you see at the pump. Having said that, I am cynical enough to think that the retailers put the prices up in reaction to increases in the wholesale market far quicker then reacting when reductions occur
 
The points made above may have some relevance for the latency in fuel prices at the pumps changing, but they weren't made by the industry representative to the journalist as a justification (as far as we know) and the points broadcast weren't relevant. That's what prompted my original post, it didn't occur to the broadcaster or guest that the points were the opposite to a justification/reasoning or just weren't pertinent to the topic. It looks like from the quote from Brendan that the exact opposite point in the article was made on the radio segment (you can listen back to the segment here) - certainly the falloff in oil prices was in line with a fall off in the dollar index, so that would magnify the price change in the Eurozone. The dollar did strengthen in the later part of 2024 (per the article quotation) but the radio segment discussed the EUR/USD rate going the other way.

Then maybe the issue isn't innumeracy per se but an understanding of how markets work.
 
It's a simple rule...

When costs go up, Irish filling stations and distributors bump the prices up immediately,

But, when costs go down, Irish fuel stations and distributtirs are very low to reduce prices, and use every excuse under the sun.

We've seen all of this before - it was only a few years ago when people were boycotting Circle K for suspected price gouging (Google it, I'm sure you'll find it, easily enough).
 
Petrol locally was €1.699/litre yesterday down from €1.73+ / €1.669 last week and the 3 or 4 stations do seem to compete, within a few cents of each other. I run my yoke down to the last dregs and then brim it when the prices seem OK. If I have a few longer trips to make I'll fill my two petrol cans as well as the tank in a single pump visit. I am getting about 40 mpg (old money) in mixed driving which isn't bad.
 
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