When petrol prices rise, the explanation often seems obvious: oil has become more expensive.
That is usually part of the story, but not the whole story. Before a litre of petrol reaches a driver, crude oil has to be produced, transported, refined, traded, stored and distributed. Taxes and exchange rates then shape the price that appears on the forecourt.
This is why a change in the global oil price does not translate into the same change in petrol prices everywhere, or necessarily at the same time. To understand what happens at the pump, it helps to follow a litre of fuel through the different markets it passes through.
Crude oil is traded in a global market. Europe does not have its own isolated oil price, and neither does any individual European country. Different grades of crude trade at different prices, but they are closely connected through international trade. The U.S. Energy Information Administration explains how global factors influence crude oil prices.
At its simplest, the oil price reflects supply, demand and expectations about the future.
When the global economy grows, demand for oil tends to increase as more fuel is needed for transport, industry and other activities. When economic activity weakens, demand can fall. Supply moves for different reasons: production decisions, investment, OPEC+ policy, technical problems and geopolitical events can all change how much oil reaches the market.
Neither side can adjust instantly. Consumers cannot quickly replace most petrol- and diesel-powered vehicles, while producers cannot bring large amounts of new oil online overnight. The gradual shift towards electric vehicles is changing the long-term outlook for oil demand, but it does not remove the short-term dependence on petrol and diesel. For a closer look at whether electric cars are actually better for the environment, see our guide to the environmental trade-offs of electric vehicles.
This limited short-term flexibility helps explain why relatively small changes in supply or demand can produce large price movements, as the U.S. Energy Information Administration explains in its overview of oil prices and the factors that influence them.
One of the most important sources of supply decisions is OPEC+, the group that brings together OPEC members and several major non-OPEC oil producers.
OPEC coordinates the petroleum policies of its member countries. OPEC+ extends that cooperation to major non-OPEC producers.
Production cuts can tighten the market and push prices higher, while increases in production can add supply and put downward pressure on prices. But OPEC+ does not simply choose a price and impose it on the rest of the world. Demand, production elsewhere, inventories, spare capacity and expectations all matter.
Spare capacity is particularly important. If producers can quickly replace barrels lost elsewhere, a disruption may have a limited effect. If little spare capacity is available, the same disruption can have a much larger impact, according to the U.S. Energy Information Administration.
Crude oil comes in different grades. Some are heavier, some lighter; some contain more sulphur than others. Refineries are designed to handle particular types of crude, so the price of a particular grade also reflects how useful it is to different refineries.
For Europe, Brent is the most important reference price. But Brent is only the beginning of the story. Drivers do not buy crude oil. They buy a refined product.
Oil is not produced and consumed at exactly the same moment. Large quantities are held in tanks, pipelines, refineries, terminals and ships, creating a buffer between supply and demand.
When supplies suddenly fall, inventories can temporarily make up the difference. When production exceeds consumption, stocks can build. These buffers matter because they determine how much flexibility the market has when something goes wrong.
That means today's oil price also reflects expectations about tomorrow. A disruption can push prices higher before a major physical shortage has actually developed because traders are already pricing in the possibility of tighter supplies.
The U.S. Energy Information Administration explains that inventories and spare production capacity can determine how severely markets respond to a disruption. When those buffers are limited, uncertainty about future supply can add a risk premium to the price of oil.
Geopolitics matters because much of the world's oil production and transport infrastructure is concentrated in strategically important regions.
Russia's invasion of Ukraine provides a clear European example. Russia's share of EU oil imports fell from 25.8% in 2021 to 2.2% in 2025, with imports increasingly coming from suppliers including the United States, Norway and Kazakhstan, according to the European Commission's overview of EU oil supply security.
Europe therefore reduced its dependence on one major supplier. But it did not escape the global oil market.
Replacing Russian oil with oil from another country changes where Europe buys its barrels. It does not change the fact that those barrels are traded in a global market. If the global price rises, European buyers generally face that higher price too. This is one reason the transition towards low-carbon fuels and other alternatives is increasingly important: reducing dependence on imported oil is not only a climate issue, but also a question of energy security.
Russia is not the only geopolitical risk, however. The Middle East presents another vulnerability because of the importance of the Strait of Hormuz, the narrow waterway connecting the Persian Gulf with global oil markets.
The Middle East presents another vulnerability because of the importance of the Strait of Hormuz, the narrow waterway connecting the Persian Gulf with global oil markets.
Before the 2026 conflict, around 20 million barrels per day of crude oil and oil products passed through the Strait, representing roughly a quarter of global seaborne oil trade. Alternative pipeline routes have only limited capacity, making the waterway difficult to replace quickly, according to the International Energy Agency's analysis of the Strait of Hormuz and global oil markets.
That is why a disruption in Hormuz can move prices far beyond the Middle East itself.
The 2026 Middle East conflict demonstrated this on an unusually large scale. The International Energy Agency described the disruption as the largest supply disruption in the history of the global oil market. Flows through Hormuz fell dramatically, while Gulf producers also cut production.
The disruption was serious enough for IEA member countries to agree to release 400 million barrels from emergency reserves, the largest coordinated stock release in the agency's history, according to the International Energy Agency.
The mechanism is straightforward. A geopolitical event threatens physical supply, shipping routes or refinery capacity. Buyers then compete for fewer available barrels and fuel cargoes, and prices rise.
Europe is deeply connected to the international oil market because it imports large quantities of both crude oil and finished petroleum products.
In 2024, oil and petroleum products accounted for 67% of EU energy imports, while oil represented about 38% of the EU's overall energy mix, according to Eurostat's 2026 overview of energy in Europe.
But Europe is not one uniform fuel market. Some countries have significant refining capacity; others rely heavily on imported petrol or diesel. Some have major ports and storage facilities, while others depend on pipelines, road transport or neighbouring markets.
The route from crude to petrol can therefore look very different from one country to another.
Crude may arrive at a port, travel by pipeline to a refinery and emerge as petrol or diesel. Those finished fuels can then move by ship, pipeline, rail or road to storage terminals before reaching petrol stations. A country can have access to plenty of crude and still face a shortage of petrol if refining, shipping or distribution is constrained.
Europe also maintains substantial emergency stocks. Under European Commission rules on security of oil supply, EU countries must hold oil stocks equivalent to at least 90 days of net imports or 61 days of consumption, whichever is higher.
The European Commission's Weekly Oil Bulletin tracks fuel prices across EU countries, including prices before and after taxes.
The important point is that the price drivers do not stop when crude reaches Europe. The fuel still has to be refined, transported, stored and sold.
And that makes the refinery the crucial missing link.
Crude oil cannot go directly into a car. It has to be processed into petrol, diesel, jet fuel and other products.
That distinction matters because the price of crude oil and the price of petrol are related, but they are not the same price.
Refineries buy crude and turn it into a range of products. The difference between the value of those products and the cost of the crude is broadly captured by refining margins. Those margins can rise when a particular fuel becomes scarce or refinery capacity is disrupted.
The 2026 shock provided a clear example. The ECB's analysis of how fuel prices are formed found that disruption to oil flows through Hormuz reduced global refined-product exports by around 4.5 million barrels per day in the second quarter of 2026, while refining costs and margins rose sharply.
So petrol can become more expensive even when the movement in crude oil alone does not explain the size of the increase.
The same thing can happen during refinery maintenance, accidents or transport disruptions. If enough refining capacity becomes unavailable, the market can run short of finished petrol or diesel even when crude itself is available.
That is why motorists are buying into a global market for refined fuel, not directly into the crude oil market.
If oil is traded globally, why does petrol cost much more in some European countries than others?
The simplest answer is that the pump price contains much more than the cost of crude.
Fuel taxes are particularly important. EU rules establish minimum excise-duty rates, but individual countries can set higher rates. Governments can also influence the cost of fossil fuels through mechanisms such as carbon pricing, which puts a cost on greenhouse-gas emissions and can affect the relative price of different energy sources. For unleaded petrol, the EU minimum excise rate is €359 per 1,000 litres, or €0.359 per litre, under EU rules on excise duties for energy products.
VAT works differently because it is charged as a percentage. If the pre-tax price rises, the amount of VAT collected can rise even when the VAT rate has not changed.
Taxes therefore help explain why petrol prices can have very different levels across Europe. They do not, by themselves, explain a sudden increase if tax rates have remained unchanged.
The pre-tax price can also differ because countries have different refinery access, import requirements, transport costs, storage infrastructure, wholesale markets and levels of retail competition.
The Weekly Oil Bulletin is particularly useful here because it shows prices both including and excluding taxes. That makes it possible to separate movements in the underlying fuel market from differences created by national taxation.
So there is no contradiction between saying that petrol is a global commodity and saying that petrol prices vary considerably from one European country to another.
The global market sets much of the underlying cost. National markets determine how that cost reaches the driver.
There is another complication: oil is generally priced in US dollars, while Europeans pay for petrol in their local currencies.
Suppose Brent crude costs $80 a barrel.
If €1 is worth $1.10, that barrel costs about €72.73. If the euro weakens to $1.00, the same $80 barrel costs €80.
The dollar price of oil has not changed. But the cost in euros has risen.
The same applies to other European currencies. A weaker local currency can amplify an oil-price increase; a stronger currency can partly offset it.
Exchange rates can also affect the cost of refined products imported into Europe. And the pass-through is not necessarily one-for-one. Research on European fuel markets, including the study “Price Pass-Through Dependence on the Source of Cost Increases”, shows that the response to exchange-rate movements can differ from the response to changes in dollar fuel prices.
For European petrol prices, it is therefore useful to keep three things separate:
- the dollar price of crude oil;
- the exchange rate between the dollar and the local currency;
- the wholesale price of refined petrol.
Only after these costs move through the rest of the supply chain do we arrive at the price at the pump.
Petrol prices do not always fall as quickly as they rose.
Economists sometimes describe this as the “rockets and feathers” effect: prices can rise relatively quickly when costs increase but take longer to come back down.
There are several possible reasons. Retailers may still be selling fuel purchased at a higher wholesale price. Inventories take time to turn over. Companies may also be uncertain about whether a fall in oil prices will last, while competition affects how quickly lower costs are passed on.
The effect does not necessarily originate at the petrol station. It can occur further upstream, where crude prices, refined-fuel prices, inventories and exchange rates move at different speeds.
Research on European gasoline markets has found evidence of asymmetric adjustment, although the size of the effect varies between countries and over time, as shown in the study “Research on asymmetric gasoline-price adjustment in Europe”.
More recent research suggests that the degree of pass-through can also depend on what caused the cost increase in the first place, as explored in the study “Price Pass-Through Dependence on the Source of Cost Increases”.
The important point is that there is no single switch controlling the price of petrol. Different parts of the market adjust at different speeds.
After looking at crude oil, geopolitics, refining, exchange rates, taxes and retail markets, we can return to the original question:
Why has the price of petrol gone up?
For the 2026 episode, the immediate trigger was a major geopolitical shock to global oil and refined-fuel supply.
The conflict in the Middle East disrupted flows through the Strait of Hormuz, pushing up crude-oil prices and making refined fuels harder to obtain, as detailed in the IEA’s March 2026 Oil Market Report.
Then refining added another layer of pressure. The ECB’s analysis of how fuel prices are formed estimates that refined-product exports fell by around 4.5 million barrels per day during the second quarter of 2026, while refining costs and margins increased sharply.
Taxes and exchange rates then influenced how much of that increase reached consumers, while distribution costs, local competition and retail margins added further differences between countries.
In other words, the 2026 increase was not caused by a single price moving higher. Several parts of the fuel market tightened at the same time, and those pressures accumulated as fuel moved towards the consumer.
The final price at the pump is therefore the product of several markets: crude oil, international shipping, refining, wholesale fuel, currencies, national taxes and local competition.
So when someone asks, “Why has petrol gone up?”, the answer is rarely found in one number.
The same principle applies across the wider energy system. Falling production costs in one part of the energy market do not necessarily translate directly into lower prices for consumers, because networks, taxes, infrastructure, supply constraints and wholesale markets all affect the final bill. This helps explain why falling renewable costs have not necessarily lowered electricity prices in the way consumers might expect.
The transition also creates a different infrastructure challenge. Moving away from fossil fuels requires investment not only in generation, but in grids and other infrastructure capable of supporting new patterns of electricity demand. Europe's experience shows that energy transition and electricity prices are closely connected to the cost and availability of that infrastructure.
So, why does petrol go up? Because the price at the pump is the final link in a global chain. Crude oil prices, refining costs, shipping disruptions, exchange rates and taxes can all push it higher, sometimes within weeks.
Europe has seen this clearly in 2026. The Middle East conflict and disruption around the Strait of Hormuz sent oil and refined fuel prices sharply higher, with fuel prices rising across much of Europe.
The impact is not the same everywhere. Countries differ in their taxes, refining capacity, import dependence and government support, meaning the same global oil shock can produce very different prices at the pump.
The episode also highlights a broader challenge for Europe's energy transition. Expanding renewable energy can reduce dependence on fossil fuels over time, but it does not immediately eliminate the oil markets, infrastructure and transport systems that economies still rely on. In other words, solar is not simply replacing fossil fuels; the transition is taking place alongside continued dependence on conventional energy.
For drivers, it may look like a simple number changing on a forecourt sign. But behind every litre is a global story of oil, trade, geopolitics and supply. In 2026, Europe is once again showing just how quickly events far beyond the petrol station can reach our wallets.
