The main difference in performance is not how the variables are allocated, it's in how they are accessed.
Local variables are allocated on the stack, which takes no time at all. Literally. The allocation is done by moving the stack pointer, and that is done anyway to create a stack frame for the method, so allocating local variables doesn't take any more time.
Static variables in an instance method are allocated as part of the data for the class, and that is done only once in this case. Allocating another variable only means that more data is allocated, so that doesn't increase the time.
Accessing the variables is a different story. A local variable is accessed by addressing part of the stack frame, which is easy. A static variable on the other hand is accessed by getting a pointer to the static data of the class, and then addressing the variable at an offset from that. That means that every access to a static variable needs a few more instructions.