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.
Hopefully you don't have far to drive.
I wonder if a solar powered car would actually make sense in Hawaii. You seem to get enough sun shine and in your case I suspect the price has a lot to do with the shipping costs. IIRC Hawaii does not have a refinery and so your gas must be shipped to you ready to go.
To see if this one is different you would have to look back at it in about a month.
Ping me in a month and we will look at it.
I don't know where this guy gets his coffee, but he's nutts to pay $8 for a cup of coffee. I can get the whole danged bag at Wal Mart for $6.87. Geeze, talk about misleading.
Most dealers in our area dropped to $1.99 9/10 today. But I paid $1.75 out on the fort.
I plan on going to COSTCO tomorrow and I am guessing anywhere from $1.85 to $1.78
That is a minority opinion. The rest of us wish to believe the myth that gasoline only goes up in price and stays up and we will continue to parrot that revelation regardless of actual data.
Would someone please provide a quantitative definition of price gouging so that we can all recognize it when it occurs?
Price Gouging is defined as a profit made by an evil Oil Company. As opposed to profits Apple makes on iPods.
Pray for W and Our Troops
As of today gas is now under two dollars a gallon in western Wisconsin (La Crosse). That's a drop of twenty cents a gallon in two weeks.
Claire McCaskill, like many Democrat Senators, is an utter idiot who has zero grasp of economic realities, and her foolish statement underscores it. But worse, she signed up for the Democrat plan for higher energy taxes and prices. The House Democrats this week voted for billions in higher taxes in the energy sector. The net result will be less domestic energy production, which mean higher trade deficits, higher taxes and more money for the oil dictatorships.
These idiots are making our energy future less secure in their zeal for socking it to companies who provide a vital sevice to the economy. Their actions will hurt all of us a energy consumers and will hurt our energy independence. Thanks for nothing, Democrats!
That would be as difficult as providing such a definition for "cheating," "stealing," or "exploiting." But the inability to quantify the phenomenon doesn't mean that it doesn't exist, just that its dimension is qualitative.
"Cheating" and "stealing" are not difficult to define. For instance, stealing is the unauthorized taking or use of something that does not belong to you.
In contrast, "price gouging" seems to mean nothing more than charging a price that is higher than someone else wants to pay.
Which doesn't mean that those offenses don't exist, or that they can't be egregious.
Just filled up at the E'town Kroger. $1.79 with the Kroger card's $0.10 per gallon discount.
$1.95 per gallon in TX
$2.37 today in Syracuse, NY
Actually, reviewing your chart actually shows him to be right, if the statement you're arguing about is that consumer price rises faster than it falls. The chart shows gas price rises almost directly corresponding with the crude price, but falls almost always smooth and slowly.
I don't mean to rain on your parade, HTB, but the conventional wisdom seems to be true based on this chart. In fact, this makes the gas stations look even worse, because as prices stabilize at a higher level, their margin compared to the barrel price would seem to similarly stabilize and drop. This chart doesn't seem to show that at all (note the gap between red and blue shrinking and widening, mostly as crude price drops). Only when crude's in freefall do gas prices seem to drop relative to crude.
Again, this is simply based upon the chart you posted. Historically, you might be 100% correct.
Thank You but when the name calling began I cut off any more talk about it
$1.99 today in Kirtland, Ohio.
Sorry but you might notice the spike began in 3/12 and prices rose for four periods before steadying out a bit.
However if you look straight across at the point where the red line appears at that point again in 8/15 you notice that it takes only three periods for the price to fall that same amount.
The price of gas fell in 75% of the time that it took to go up. Proving conclusively that prices do not rise faster then they fall.
but the conventional wisdom seems to be true based on this chart.
Actually it doesn't. In fact there are several places where there is a short spike in crude price that is not reflected in the gas prices. Consider for example the week of 4/17 where there is a small short spike in Crude but no corresponding spike in gas. Please point out ANY corresponding spike in gas that is not found in crude.
In fact, this makes the gas stations look even worse, because as prices stabilize at a higher level, their margin compared to the barrel price would seem to similarly stabilize and drop.
I am not sure what you are trying to imply here. Are you saying that as the price of crude rises that gas stations make less of a profit margin?
That might be true.
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