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Why Is Gasoline Price Staying High?

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Wed, Aug 10, 2011 at 6:11 pm

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Why Is Gasoline Price Staying High?

The old adage about gasoline prices, “up like a rocket, down like a feather,” has never been so true. The price of crude oil in recent days has been down near $80 a barrel, translating to about $1.92 a gallon. But the national average price for a gallon of regular gasoline, according to AAA, is stuck at $3.63 a gallon, what it was a month ago.

Economists are cheering the drop in the price of oil, but it won’t do much to help consumers unless the price of fuel comes down as well.

Attached is the AAA national price chart for Wednesday. Note that the gap between the price of oil and the price of gasoline is about $1.80–around twice the recent usual, and the gap has been growing since the beginning of July. Because stations these days turn over their inventory fast, unlike in the old days of mom-and-pop stations, there’s no visible excuse for the retail prices.

I’m often on the side of gasoline retailers when it comes to pricing, because they get squeezed by refiners and price-setting by their suppliers. But wholesale gasoline prices are also dropping sharply, so it looks like the branded retail chains are reaping a bonanza even as drivers suffer as much as ever from a trashed economy.

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This post was written by:

Judy Dugan

- who has written 655 posts on Oil Watchdog.

Judy Dugan concentrates as an advocate on health care reforms, oil industry issues and telecommunications. She also writes and edits foundation publications and conducts media outreach.

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9 Responses to “Why Is Gasoline Price Staying High?”

  1. Rob Says:

    You imply that retailers are collectively keeping prices at artificially high levels based on the growing spread between wholesale and retail.

    Do you then believe that retailers were keeping prices artificially low in late 2010 and early 2011, when the spread was falling, as your graphic shows? Perhaps there is more to the changing spread than scheming retailers.

    Reply

    • Judy Dugan
      Judy Dugan Says:

      Dear Rob, As I acknowledged in the blog, my sympathies usually lie with the retailer… but in this instance, the price spread from wholesale to retail was getting pretty startling.

      Reply

  2. jjb Says:

    The most misleading part of the chart is that both gas and heating oil futures are now pegged to Brent instead of WTI. They changed the rules in the middle of the game but the cost of crude is meaningless unless you use Brent.

    Reply

    • Judy Dugan
      Judy Dugan Says:

      DEar JJB, What I was pointing out was the increasing gap not just between the price of crude and gasoline but between the wholesale price of refined product and retail gasoline. That’s not affected by Brent vs. WTI. etc. And what we look at is the spread over time… which also is unaffected by the crude product to which a futures price is pegged.

      Reply

  3. Gary Says:

    Oil cost last year on 09/09/2010 was 74.25, this year was 84.12. Last year gas was 2.499, this year it is 3.499, 1.00 more even though oil is minus 9.87 vs last year. A major oil company emailed me with the explanation that almost all of their stations are franchises and it is up to the owners to set the retail based on the competition. The figures show that it is price guaging. In addition, this oil company made over 40% more in profits last quarter but their production was only up about 10% which also shows that they were overcharging the franchises, so is there really a watchdog group for oil, and doesn’t anyone see what is going on?

    Reply

  4. Ronnie Says:

    When the Government steped in in the early 1900s and stopped the Monopoly of Standard Oil, I believe they Dropped the Ball Voluntarily Due to the Oil Companies Lining there pockets , it is Up to WE THE PEOPLE to Shine the Spotlight on Them & Big Oil and all the scandalous things they have facilitated over the years. Building 0 refineries in the past 30 + years to justified Price hikes when needed , KILLING INVENTIONS OF CITIZENS AND THERE OWN THAT WOULD BRING 100 + MPH …..YES THE TECHNOLOGY ..IS..HERE FOR SUCH A VEHICLES …MORE OVER ALL & ANY VEHICLE ON THE ROAD CAN BE ADAPTED TO THIS TECHNOLOGY,BUT IT’S NOT IN BIG OIL’S INTEREST TO SAVE FUEL THEY WANT TO SELL MORE & MORE IT’S A GREED TRIP LIKE CRACKHEADS ONLY THERE “CRACK” IS MONEY. WAKE Up AMERICA AND DO YOUR HOMEWORK It Is SIMPLE ,AND THE OIL SUPPLY IN THIS EARTH. IS GETTING LOW SO NOW IS THE TIME FOR CONSERVATION AND THE TECHNOLOGY TO TAKE OVER AND OVERWHELM BIG OIL AND “MAKE” THEM SMELL THE ROSES. JUST SAYIN

    Reply

  5. Frank DeBilio Says:

    My wife, & I are on social security disability. we are having difficulty deciding between paying our bills, or buying food because of the exorbitant gas prices. can’t anything be done?. our president doesn’t seem to care(he’s a millionaire, why should he worry).

    Reply

  6. Marc Says:

    From what I have been calculating for many years now is, that for every dollar a barrel oil goes up, gas seems to rise about 4-5 cents a gallon ( just from observations over a decade or more ). Now, seems to be 5-6 cents a gallon. If these observations are approx. correct, and oil breaks the old record at $158 a barrel, gas will be well over $6 a gallon. When , at $158, it was just breaking $5 a gallon, I don’t think I am that far off on this, and that was just a few years ago. Worst case scenario here in Maryland, they add six cents per gallon tax AND they want to apply the 6% sales tax TOO !

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    • Judy Dugan Says:

      Marc, That’s something I’ve been thinking about, too, but hadn’t done the work to calculate it. Many thanks. If I get a chance to write about it, I’ll credit you. The extra profit is going mostly to refiners, who are keeping prices up by exporting gas and diesel like crazy.

      Reply

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