Why are gasoline prices rising while diesel prices fall?

Evidence-backed: Gasoline and diesel both come from crude oil, and crude is the largest shared input cost, which is why the two fuels often move together. But the price a consumer pays is built from crude prices, processing and distribution costs, local demand, the strength of the local currency, local taxation or subsidy, and the availability of local supply (ef3caa06-b581-4bb7-913c-8a49582334a9). Each of those layers can move differently for gasoline and diesel. A currency move or a tax change hits both, but a change in the relative demand for one fuel, or a constraint on the supply of one fuel, hits only one side. That is the basic reason the two prices can separate even when crude is flat.1

Evidence-backed: The trade layer matters too. Fuels are traded worldwide, so trade prices are similar across markets, while the price paid by consumers largely reflects national pricing policy (ef3caa06-b581-4bb7-913c-8a49582334a9). This means two countries can see different gasoline-versus-diesel gaps at the pump even when they import from the same global market, because taxes and subsidies are applied nationally. Most countries tax gasoline, and a few, such as Venezuela, subsidise the cost (ef3caa06-b581-4bb7-913c-8a49582334a9).1

Evidence-backed: Fuel prices also feed back into behaviour, which can change demand for one fuel without changing the other. In Budapest, fuel prices were capped from 15 November 2021 to 6 December 2022; when the cap was suddenly removed, fuel prices rose by around one-third, and bicycle-sharing ridership rose by 2-6% in a difference-in-difference analysis, with the increase concentrated in the outer parts of the city, though some areas saw a decline (4d353ea3-a285-4ed8-9706-6d03d9cf452a). That is a demand response to a fuel price shock, not a gasoline-versus-diesel comparison, but it shows that a price move in one fuel can shift behaviour in ways that later feed back into demand.4

Evidence-backed: Energy prices respond significantly to uncertainty measures, and during the COVID-19 pandemic economic policy uncertainty affected the prices of most energy types, with predictive potential found in the VIX, COVID-Induced Uncertainty and the Misinformation Index of Uncertainty for global energy sources (eda3efc0-7296-40a3-b939-6d2e0b615a7d). That study spans 2 January 2020 to 19 January 2021, so it describes a specific shock period rather than a general rule. The relevant point for divergence is that uncertainty does not hit all energy types identically, so a shock can widen or narrow the gasoline-diesel gap.2

Evidence-backed: Shipping costs are another channel that can separate the two fuels, because they are moved and stored differently. Spikes in the Baltic Dry Index are followed by sizable and statistically significant increases in import prices, PPI, headline and core inflation, and inflation expectations, with an impact similar in magnitude but more persistent than shocks to global oil and food prices (004c2346-b836-4f52-a875-68d68068d741). The effects are more muted in countries where imports make up a smaller share of domestic consumption, and in those with inflation-targeting regimes and better-anchored inflation expectations (004c2346-b836-4f52-a875-68d68068d741). Because gasoline and diesel have different trade routes, storage requirements and regional balances, a freight-cost shock can land more heavily on one than the other.3

Evidence-backed: National pricing policy is a large and often underrated reason the two fuels can diverge at the pump. Most countries impose taxes on gasoline, whereas a few, such as Venezuela, subsidise the cost, and no country's taxes cover all the negative externalities (air pollution and CO2 emissions) associated with usage (ef3caa06-b581-4bb7-913c-8a49582334a9). Because taxes and subsidies are set per fuel and per country, two fuels can carry very different policy wedges even when their pre-tax trade prices are close.1

Evidence-backed: The Budapest price cap is a concrete example of policy overriding market prices for a period: the cap ran from 15 November 2021 to 6 December 2022, and its sudden removal raised fuel prices by around one-third (4d353ea3-a285-4ed8-9706-6d03d9cf452a). A cap or subsidy applied to one fuel and not the other would mechanically create a divergence, and its removal would mechanically close it.4