The roller coaster of gas prices

October 26th, 2007 at 01:14pm Thomas V. Bona

It never fails - every time gas prices in Rockford jump up, calls roll in to the Register Star. People are rightfully concerned whenever such a valuable commodity increases in price. What they often ask is “Are we being gouged in Rockford?” or “Are we paying higher than elsewhere?”

The challenge is that “gouging” is a legally specific term - from government’s point of view, gouging is only when prices jump excessively high in a disaster situation (for example, the Illinois attorney general famously went after some gas stations in the wake of Hurricane Katrina and eventually settled with some of them). There’s not a legal sense of “gouging” at normal times.

What’s easy to answer is the question of how much we pay compared to others. The short answer is “It depends on the day.” Gas prices are a roller coaster driven by a variety of factors - supply nationally, supply in specific areas (if a refinery goes down in Indiana, prices go up in the Midwest), demand (prices go up in the summer when more people drive and thus less gas is available), taxes in different areas, cost of doing business in different areas (rent, etc), competition, etc. Head swimming yet?

Some rules of thumb - gas prices in more urban areas are higher, partly because the cost of land is higher and the demand is higher; gas prices near a big box retailer like Wal-Mart can go down because that chain charges less and the competition follows; and, while energy companies report large profits, the gas stations themselves tend to make a very small profit from gasoline. That product has become the thing that gets people in the door, where they then are bombarded with opportunities to buy groceries, toys and other things.

A great site to monitor gas prices is AAA’s Fuelgaugereport.com, which has a daily update of average gas prices in markets throughout the state. Each metro area includes city, suburban and rural retailers - so Rockford’s average price includes Winnebago and Boone counties, for example.

To illustrate the roller coaster effect: Today, Rockford had the third-highest gas prices in Illinois, behind Chicago and Quincy. A month ago, Rockford had the fifth-highest prices in the state. A year ago, we were tied for second in the state. Given that Rockford is the second-largest market on the list, that doesn’t seem out of line. What is also interesting is that Illinois is tied for 17th highest gas prices in the country - not too long ago, we were near the top. You may not enjoy the prices you’re paying now, but folks in Alaska, California, Hawaii, Oregon and Washington are paying over $3 a gallon.

(Another oddity - diesel prices don’t go lock-step with gasoline prices. While we now have the second-highest diesel prices in the state, were were 9th just a month ago. Overall, Illinois is 23rd in the nation.)

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