Skip to comments.Prices will fall, not plummet, at the pumps
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.
If the Dems have their way, they'll go up.
If iy goes up, it's Bushes fault. If it goes down, what a wonderful job Pelosi is doing.
Won't be happy until Hugo has to wear a sign saying,
"will work for food!
Pure BS. Gas here in AZ has dropped about 12% since the summer highs.
Just paid $1.99 (1/20/07) a gallon here in Texas and just last week I 2.16, at least its moving in the right direction
We've seen $1.92 in Ohio and I haven't checked COSTCO yet, they're usually the cheapest.
Paid $1.95 a gallon this morning in Central New Jersey.
Oh Hush ... $2.58 at Costco on Thursday. Here in the socialist republic of say WA?
I guess I don't see the nuance between fall and plummet.
sounds like time for a tea party if ya know what I mean
Which probably reflects the local, state, and federal taxes per gallon.
$1.97 here in Huffman , Texas.
That didn't occur to me when I read the title (Still too early in the morning), thanks for pointing it out
Claire McCaskill: Just look at the gas prices. Look at the manipulation of the gas prices. I'm not sure anybody in Missouri believes these gas prices are going down for any other reason than that we're having an election. And I'm sure most people know they're going to go right back up after the election's over. That is because there are five companies that control all of the oil in this country.
Your new senator from Missouri, in a debate with Jim Talent before the election.
I hope those that voted for this dolt in Missouri are now happy.....Maybe she can give Patty Murry a run for money as the "Queen of Stupid" in D.C.
Well... cost is not a downward pressure on price. The only downward pressure on price is competition.
As cost to the supplier goes down, price will stay the same as long as people continue to pay that price. There's a certain inevitability though, that competitors will start shaving the price down in order to attract more customers.
Remember now, us happy workers in the People's Republic of Washington have to pay that additional $.12 per gallon gas tax foisted upon us by our Democrat AND Republican legislators in 2005. The price of our gas will never go down to what it was prior to the large price increase in crude oil. Unless, of course, the price of crude oil goes way down.
$1.89 in Louisville, KY today.
That's what we're being told NOW, now that the price of crude is falling. But when crude goes up and we get gouged at the pump, the price of crude is the controlling factor.
Lies on top of lies ...
Exactly various forms of government makes at least as much as the oil compays do in TAXES..
TAXES on one of the most important drivers of any economy.. ENERGY.. Taxes on energy that ADD NOTHING but only forces prices up.. They get you at the pump and get on the price of ANYTHING retailed..
Taxes on ENERGY(all forms of energy) is the most parasitical tax of all..
It should be outlawed and made a felony to make a law taxing energy in any form..
Maybe a hanging offence and a Constitutional ammendment..
At last, a grain of truth. Downward pressure on retail price is resisted, while upward pressure is encouraged, even manufactured.
Sadly, I doubt that Claire McCaskill can come anywhere near Patty "Osama" Murray for the title of dumbest Senator. The only person who could challenge Patty for that title is Barbara Boxer.
Having said that, I still don't understand how Missouri could elect a twit like Claire McCaskill over Jim Talent. From up here in the Northwest, Jim Talent seemed like a pretty decent, articulate and effective senator. I can understand why George Allen in Virginia lost, since he couldn't keep his foot out of his mouth. However, Talent seemed like a good man and it is a shame that he lost.
It rises alot quicker then it falls and we all know why hmmmmm
Filled up at Costco yesterday for $2.05/gal here in Crook County.
The author is no Galileo.
What is your agenda?
Maybe this is the reason?
Monday June 26, 6:42 AM
Iraq's oil production back above 2.5 million barrels a day: minister
Iraq's oil production is now over 2.5 million barrels a day, a record since the fall of Saddam Hussein, the country's oil minister said.
Oil Minister Hussein Shahristani said on US television that Iraq hoped to be producing 4.3 million barrels by 2010 and to be challenging Saudi Arabia as the world's largest producer by 2015.
Production was about 2.5 million dollars a day when President Saddam Hussein was deposed by US-led forces in 2003. It then collapsed to virtually nothing and has been slow to rebuild because of insurgent attacks and other problems.
In an interview with CNN television, Shahristani emphasized that only one month and three days after the Iraqi government took office "we have been able to break a record".
"Today's oil production was in excess of 2.5 million barrel a day. And that's a record since the fall of Saddam's regime in April 2003," he told CNN's "Late Edition" programme.
He said Iraq hoped to increase production to 2.6-2.7 million barrels by the end of the year, to 4.3 million barrels by 2010, which would be a new all-time record for Iraq. The minister said Iraq's highest oil production was 3.5 million barrels a day.
"Our ultimate aim is to reach more than six million barrels a day, hopefully by 2012.
"And needless to say, Iraq holds one of the largest reserves of oil and gas in the world, and we are determined to prove it has the largest world reserve."
The oil minister said that by 2015, Iraq could challenge Saudi Arabia as the world's largest oil producer.
Maybe this is why Iran wants to stop it?
Pray for W and the 13 in the Copter
Almost fainted when I got 1.899 in GA yesterday. :)
Not hard to find. Not even hard to understand.
I repeat. What is your agenda in spreading blatant lies?
yeah...around 1.75 in the Spartanburg/Greenville SC area
I ask what gas station are you affiliated with?
I paid 2.01 last night in northern Morris County, but it was at a no-name kinda place.
Why are you trying to change the subject?
Are you worried that your agenda is being exposed?
Why are you spreading blatant lies?
Ok my statement still stands
Um, that chart is pretty hard to argue, even if he did work for Exon. Now why don't you show some proof of gouging or apologize? You do understand capitalism and that old supply/demand model?
Pray for W and Our Troops
The Saudis are behind this. They feel threatened by Iran. (Shia Vs. Sunni) This will seriously hurt Iran very much. Iran is under heavy Sanctions and they operate their country with Oil revenues pretty much exclusively.
Notice all the latest turmoil over the dissatisfaction the Iranian government is having over their President? The plan seems to be working and I'm all for it.
this should keep inflationary pressures down
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.