Fuel prices are continuing to hit consumers hard, even as crude oil prices have fallen substantially from their wartime peaks. Brent futures are approximately 35% below their previous high, having unwound about 70% of their early 2026 rally. However, global average fuel retail prices are only down around 45% from their peak, sitting at about $202/bbl and leaving a record gap of $128/bbl between retail fuel prices and Brent crude on a 28-day moving average. This discrepancy is largely attributed to elevated wholesale refined product margins and sticky retail margins, meaning that while crude costs have decreased, the savings are not being fully passed on to consumers.
The persistence of high prices at the pump is fueled by several factors. The refining sector faces tight fundamentals, with high utilization, low product inventories, and a lack of spare capacity. Geopolitical issues also play a significant role, as outages in Russia and the Middle East remain above seasonal norms, causing disruptions to usable refined product barrels. For instance, the US has seen recent refinery outages, including at Marathon Petroleum's 146,000-barrel-per-day refinery in Detroit and Delta's 190,000-barrel-per-day refinery in Trainer, PA. These disruptions, coupled with robust US fuel exports reaching a weekly record of 8.7 million barrels per day, contribute to tighter supplies and higher prices. US gasoline inventories are nearly 10 million barrels below the five-year average, exacerbating supply concerns.
Adding to consumer woes is the asymmetric nature of retail price adjustments. When energy costs increase, firms are quick to raise prices; however, when costs fall, they are slow to reduce them, opting instead to protect margins. This lag in price adjustment, combined with low retail stock levels, gives retailers less incentive to discount. For example, average US pump prices recently rose $0.06 cents in a week to $3.88 per gallon, the largest weekly increase since mid-May. This situation keeps inflation psychology alive among consumers and poses challenges for central banks aiming to declare victory over inflation, as high fuel retail prices continue to squeeze household finances.
The global oil market's story is therefore more complex than simply tracking Brent crude. While the crude headline might seem less threatening, the refined product complex still carries the scars of supply constraints and elevated costs. The tightness in refining fundamentals, coupled with geopolitical supply risks and the tendency for pump prices to rise quickly and fall slowly, ensures that consumers continue to feel the impact of high fuel costs despite a cooling in the underlying commodity market. This makes high gasoline prices a political issue, especially in the US during an election year.
