The price of oil has registered one of its largest weekly drops in recent years. Brent, the benchmark in Europe, has lost 17.25% over five sessions and has gone from the $117.64 of Friday, October 30 to stand at around $97 at the close of this week. However, the decline in the raw material has not yet been reflected with the same intensity in the prices paid by drivers at service stations.
Data from Spain show that fuels have already begun to get cheaper, although at a much slower pace. 95 gasoline has gone from an average of €1.73 per liter on October 30 to €1.70 per liter on November 5, according to the Ministry for the Ecological Transition’s daily series. That is three cents less per liter, about 1.7%.
In the case of diesel, the weekly decline is also more limited: the national average has fallen by approximately 2.4 cents per liter, to €1.873, according to price tracking prepared from the Ministry’s official data. The difference between the trend in crude and that of fuels reflects that the price of the forecourt does not depend only on the quotation of the barrel.
How much has gasoline and diesel fallen in Spain
The comparison between the latest available figures makes it possible to see that the drop in oil is starting to be felt at service stations, although still in a moderate way.
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Brent: a 17.25% decline over the week, to around $97 per barrel.
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95 gasoline: from €1.73 per liter on October 30 to €1.70 per liter on November 5.
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Diesel: a weekly reduction of about 2.4 cents per liter, to an average of €1.873.
The reference dates are not exactly the same for all indicators: the Brent quotation corresponds to the weekly market close, and fuel prices are published on their own update calendars. That is why the difference should not be interpreted as a direct comparison between two equivalent products nor as an exact transfer of the crude drop to the forecourt.
Why the oil drop does not reach gas stations immediately
The first reason is that the oil and gasoline sold at service stations are not the same product. Brent is a reference crude, which then has to go through a refining process to obtain gasoline, diesel fuel, and other derivatives. The price of these products also depends on their own supply and demand in international markets.
To that cost are added the expenses for transport, storage, distribution, and marketing. Supply contracts and the inventories that the companies have already acquired also play a role: a drop in the barrel quotation does not mean that all the fuel sold today was purchased at that lower price.
Another factor is the exchange rate. Oil is traded in dollars, while Spanish consumers pay in euros. If the European currency loses value against the dollar, part of the international cheaper price may be offset when converting the cost of the raw material.
Finally, service stations do not necessarily update their prices at the same time. Competition between operators, commercial policies, and the costs of each facility can also lead to differences between gas stations.
Taxes also weigh on the final price
The price shown at the pump includes much more than the cost of the raw material. Part of it corresponds to refining and distribution costs, and another part to the taxes that levy fuels, including the tax on hydrocarbons and VAT.
In November, moreover, the 20-cent-per-liter tax reduction for gasoline and diesel continues to be in effect, as planned in the package of measures approved by the Government to respond to the increase in energy prices. The activation of this price cut was maintained after fuels recorded sharp rises in September.
The presence of taxes means that a fall in the cost of oil does not automatically translate into a proportional reduction in the final price. Even though the component before taxes decreases, levies and the rest of the costs continue to form part of the amount paid by the consumer.
When the drop will be noticed the most when refueling
There is no fixed timeframe for a Brent drop to reach gas stations completely. The trend will depend on how refined products markets behave, on the stability of the crude quotation, and on the costs of supply and distribution.
The evolution of the coming days will make it possible to check whether the decline is consolidated and continues to be passed on to retail sale prices. If oil keeps quotations lower, fuel could continue to get cheaper, although not necessarily in the same proportion or immediately.
For now, the data available points to an initial reduction in Spain, but still far from the weekly collapse recorded by oil. For drivers, the most useful reference will continue to be the price per liter at service stations, not only the day-to-day evolution of the Brent barrel.