petrol prices lag behind oil prices both on the way up and on the way down. When oil prices are rising operators might receive a notice that they will be paying 10 cents more per litre for future shipments. The operator will go ahead and increase his selling price for petrol based on that new cost -- but not by 10 cents.
This because customers are price-sensitive the operator may increase their price 6 cents and absorb the other 4 cents.So when petrol prices rise, petrol station operators lose money.
vice versa, that means when prices are dropping they might receive a notice at some point that their next shipment of petrol is going to cost less. operators then need to make for up for how hard they got hammered on margins when prices were rising. So as the operators cost for petrol falls, they increase the markup on each litre. And that's is what's been happening these past few months.
What people see is that the price at the pump drops, but not as dramatically as does the price of oil -- because it is when prices are falling that operators make their money.
