Why Aren’t Gas Prices Falling as Fast as the Price of a Barrel of Oil?
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As I stare at the gas price boards, I often wonder why the prices haven’t ticked as low as I see the cost of a barrel of oil dropping. Oil prices have dropped 25%, while the average gas price has only dropped about 12%. Why?
It looks like suppliers took a hit when the prices peaked.
“Had the cost of gasoline kept up with the cost of crude … gasoline prices at the peak should have been 20 percent to 25 percent higher,” said Flynn, adding that refiners had to eat a lot of the rising costs and “are trying to make back some of the money as prices go back down.”
So now they are trying to recoup their money as the price of oil falls. There are lots of facts related to this topic in this article: Gas prices not falling as fast as oil’s drop. It answered a lot of my questions. I still wonder though, how oil companies are still making record profits if they took such a bad hit back when the price of oil peaked.
5 Comments
Frank Schnyder
September 8th, 2008
at 1:00pm
It doesn’t seem right that the oil companies have had record profits in such a bad economy. It almost makes one think that it’s their fault.
William D'Avanzo
September 8th, 2008
at 6:20pm
A couple of other points. Oil is the major component of gas prices but not the only component. Taxes, refining costs, dealer profit etc. all enter in and in many cases these are not tied to the price of oil.
Also, I’ve heard that gas station operators tend to raise prices quickly when their costs go up (otherwise they may have low or even negative profit) but they do so slowly on the other side - hoping that prices will stay up there for a while.
William Gardenhire
September 8th, 2008
at 8:16pm
Excuse me, but I am quite certain that the pump price is immediately adjusted upward with each and every increase in barrel price. In fact, with Hurricane Gustav, the pump price in Dallas, TX went from $3.24/gal to $3.45/gal in one single day; based on the possibility that Gulf Coast oil supplies might be disrupted. Because Gustav did not strengthen as thought, damage to the oil infrastructure was minimal to non existent. Today (9-08-08), prices are $3.37/gal. Now if someone can explain that, I would be willing to listen.
Ray
September 8th, 2008
at 11:51pm
I think the hurricanes should make it blatantly obvious.
Many oil platforms were shut down and many had to
be inspected for safety after Gustav, now the same
thing will happen with Ike.
Yes, I think $3.39 a gallon is dastardly. I still
remember as a kid gas prices being 17 cents
a gallon.
Deanna
October 9th, 2008
at 7:31am
I think that gas prices should have fallen by now. In the state that I live in it is hard to find gas. The gas stations keep saying that it is coming but never does. The gas is higher than it is in Florida and we are usually cheaper. Why is that? It is $3.65 a gallon as of 10/9/08