Posted on 01/20/2007 7:17:00 AM PST by Graybeard58
NEW YORK -- The headlines say oil prices have fallen 15 percent this year. Gas station receipts tell a different story -- the cost of filling 'er up has slipped from about $35 to $33. Big deal.
The cost will probably drop further, but drivers shouldn't hope for a big windfall at the pump: there's a lot more that goes into gasoline prices than the current cost of crude oil.
Besides taxes and the costs of refining, distributing and marketing, there are factors such as local competition among gas stations. Just as with other forms of retail, consumers see savings when one retailer lowers its price, and the others scramble to match it.
"If gasoline costs me a dollar a gallon, and my competition down the street is selling it for 89 cents, my customer doesn't care what I paid for it," said Richard Oneslager, president of Balmar Petroleum, which operates 14 gas stations in Colorado.
Crude oil prices have fallen from about $61 to $51 a barrel this year on the New York Mercantile Exchange, but the price of gasoline on the side of the road has declined more slowly. The average price for a gallon of regular is down about 13 cents from $2.33 on Jan. 1 to $2.20 on Friday, a day after crude briefly fell below $50.
A typical car holds 12 to 15 gallons, so if it's filled four times in a month, that's savings of less than $8 in a month -- not even enough for that daily cup of coffee.
Pump prices haven't plunged to $2 a gallon yet, which is where they were back in early 2005, when crude oil prices were also around $50 a barrel. The big difference was that, unlike now, crude oil wasn't coming off a record high of $78 a barrel just six months earlier.
Essentially, the recent price drop hasn't completely sunk in on the wholesale level, so gasoline retailers are still paying a lot for their product and won't lower prices until competition forces them to do so.
The Energy Department says the price of crude oil accounts for about half the retail price of gasoline. That means if crude oil is down 15 percent, pump prices should be down almost 8 percent.
But the time it takes for a drop in wholesale prices to fully affect retail prices is around 12 weeks, though most of the drop happens within the first two weeks.
"Retailers aren't making their price decisions on the price of crude oil," said John Eichenberger, vice president of government relations at the National Association of Convenience Stores. Instead, they focus on how much they paid for their current load of gasoline, and how much their supplier is telling them their next load will cost.
"We don't care about anything except what that tank the truck just brought in cost," Oneslager said.
A sharp rise in crude oil is another story. After crude spiked to record highs the past two summers, it didn't take much time for gasoline prices to follow suit. That's mainly because retailers got nervous that their next shipment of gasoline would cost a bundle, and also because they knew that summer demand is high and drivers could at least for a while pay inflated prices, albeit reluctantly.
The average gasoline retailers have to charge 13 cents per gallon more than they paid to break even, Eichenberg said, and mark it up even more to make a profit.
The Oil Price Information Service shows that in 2006, the average gross margin for retailers was 13.76 cents a gallon -- meaning profit was less than a cent per gallon. Because of credit card transaction fees, the credit card industry profited more from gasoline sales last year than gas stations did, Eichberger said.
Even though it is a lie.
Understood. Truth means nothing to you.
So how long have you been a Democrat?
I dont have to, all I have to do is go to the gas stations and watch how they react to price fluctuations in oil.
I understand that when oil prices rise they quickly raise rates and when oil prices drop it takes weeks. The gas is still the same in the pump. So all the graphs and figures will not change my mind or the majority of consumers who see this with there own eyes. Yes I do have stock in energy companies also.
attacks are why we lost the house and senate, since your so good at research look at my posts for the last couple of years and you will see how idiotic that statement was, this will be my last reply to you
Agreed. I am beginning to think that this whole sectarian/terrorist violence is to keep Iraq oil production down. This could easily be an alliance between Iran/Russia to inflate the price of oil.
Pray for W and Our Troops
No doubt the retail price will continue to decline, but what accounts for the narrowing of the margin since Christmas?
They don't offer proof because they have none to offer. The gas and oil industry is one of the most highly regulated and closely watched industries in the world. Catching them in wrong doing would be the golden ticket for any politician, they could ride it straight to the White House.
But all that has ever been found for decades has been some petty penny ante local stuff.
That graph and common knowledge shows a 1 to 1 correlation. Right now demand is down and production is up so prices are going down. It isn't going to follow exactly since the prices have to reach the pump first.
If you own a station and you know your going to have to pay more for the next truckload you are going to raise prices immediately. If you are going to have to pay less, you raise it later and enjoy the profit, unless your competition lowers his.
The libs have eliminated the competition by forcing the independents out with their clean-up laws which made owners pay millions to keep running. Now the independents are gone and enjoy the monopoly. Thank you libs.
So the overriding factor is the price of crude as the chart shows.
Pray for W and Our Troops
Also during the Clinton years refineries were shut down, this does affect us when supplies are tight unlike now when there is plent of oil on the market. I still believe in what i said but you raise valid points
No these guys are too stubborn to admit they're wrong. They hate big oil and any corportation that makes a profit, except theirs of course. Your chart is pretty clear and so has to dismiss you as an evil big oil person to ruin your credibility. Oldest trick in the book.
Pray for W and Our Troops
Like you are attacking the gas and oil industry with no proof of wrong doing?
I would say more that it happened because we allowed people to smear and spread lies and innuendo with out challenging them to either offer proof of their slander or retract their lies.
this will be my last reply to you
Well at least having admitted that you have nothing to put up you have the decency to shut up.
attacks are why we lost the house and senate,
Like you are attacking the gas and oil industry with no proof of wrong doing?
I would say more that it happened because we allowed people to smear and spread lies and innuendo with out challenging them to either offer proof of their slander or retract their lies.
this will be my last reply to you
Well at least having admitted that you have nothing to put up you have the decency to shut up
The size of the chart.
The gap stays pretty much the same percentage wise over time.
The funny thing is that even if you throw in Canada (which is a net oil producer) you get the same result. The price of crude on the open market is the biggest factor in the rise and fall of gas prices and they track.
I've seen $1.88.
And that's Honolulu. I just filled up at a Chevron station a few days ago. Regular: $3.19 per Gal.
Putting on my tin foil helmet, I will venture to say, market manipulation by Soros or a Soros style organization is a factor in a lot of this. Okay, you can feel free to say I'm nuts.
Agreed. But this recent plunge seems to be an exception. I'm trying to understand the market forces that make this slide any different than those of the past.
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