Today’s fuel price musings - Why is gas going up while oil is going down?
September 8th, 2008 at 06:57pm Thomas V. Bona
It never fails. Whenever gas prices go up unexpectedly - at least unexpectedly for consumers - I get calls and/or emails accusing retailers of “gouging.” Those calls and emails never come in when gas prices drop significantly (or when the Rockford metro area is paying less than most of the rest of the state), with people meekly saying, “Hey, we’re being undercharged here!”
So even though oil is down around $106 a barrel today, gas is up to $3.78 a gallon in our metro area (and about $3.83 a gallon in the city). And people complain.
Well, there are (at least) two factors at play here. First of all, consumers have the misconception that the world oil price is a direct indicator of gas prices (oil goes up, gas goes up exactly the same; oil goes down, gas goes down the same). But oil has to get shipped, refined into gasoline, shipped some more, sold to retailers, shipped some more and put into tanks. And at every step of the way, there are price points that are affected by supply/demand, pipeline issues, refinery issues, weather, taxes, etc. There are regional differences in wholesale petroleum prices, which force retailers to have regional differences in prices. There are issues that can upend one region and not others (a refinery or pipeline shutdown, for example).
What apparently is happening now is that the threat of Hurricane Ike has raised prices at several levels (fear of supply hits = price hikes to curb demand until supply gets back in line … it’s the market working to avoid gas lines, really.). Meanwhile, a ConocoPhillips refinery in Illinois was out last week due to a power outage and a small fire. Those events, and others I’m sure I’ve missed, have caused an upswing in retail prices up here and in much of the state.
Here’s the other thing - perspective. Even at $106 a barrel, oil is still around 49 cents above where it was a year ago. Gas is up 20 percent in Rockford. I’ve said this repeatedly, but I’ll say it again … gas prices never rose as far or as fast as oil did, so it’s not fair to criticize retailers for keeping prices up a bit while oil falls. They were taking a hit for a while and now they’re trying to get back to the margins they were seeing back before the run up…
Here’s what the price situation for the metro area, state and nation were as of this morning (prices courtesy of AAAs fuelgaugereport.com):
Gasoline: Rockford increased two cents to $3.78 a gallon, up about eight cents over the weekend. We have the second-highest gas prices in the state. The Illinois average rose a fraction of a cent to $3.84. The national average dropped almost a cent to $3.66. Illinois has the seventh-highest gas prices in the nation.
Diesel: Rockford dropped almost four cents to $4.12 a gallon. We have the fifth- or sixth-highest diesel prices in the state (no report from Quincy today). The state average dropped more than two cents to $4.31. The national average dropped almost two cents to $4.22. Illinois the 15th-highest prices in the country (including the District of Columbia).
Entry Filed under: Fuel price musings
5 Comments Add your own
1. James Bryan | September 9th, 2008 at 7:56 pm
I wonder if the writer has a stake in ad revenues to the paper. Each and every time that oil prices went up, within hours the price of gas went up.
Now that oil has fallen below $100 the price at the pumps in the Rockford area is once again on the rise to $4 a gallon. Each station pretty much in lock step. I would say that there is a disconnect which the rrstar has plainly found it not in their interest to follow as a local story.
And pardon me if my concern for oil company margins is not what they would like. At $30 a barrel they were still the top profit making corporations in the country. The cost of refining has not gone up, nor wages in the industry. So wave a rag of rationalizations for Retail prices, but that is all it is. An attempt to get people to accept it, nothing more.
2. Chris | September 10th, 2008 at 9:05 am
Who cares if they were not making their normal profit when oil companies are making a ridiculous amount of profit anyway. Oil companies do not care if we can afford our groceries or water bills, why should we care how they are SLIGHTLY effected. Although I do not know what type of profits gas stations have I am sure they make out very well especially with their prices on the snakes at their store are way above suggested retail price, killing our pockets again, because we are paying for convinience. I would like to see gas prices ot rise to $4.09 a gallon in Romeoville, Illinois while oil is around $ 106 a barrell and falling to $ 104 a barrell.How come gas rises just as fast as oil rises but not vise versa. That my friend is called gauging. Why should I pay more for gas because they want to keep the price around the same for other states when I live next to chicago and paying way more than the national average? I agree with James Bryan that this reporter must have some stakes or hidden agendas because he is lieing to himself to try and think that we are not being price gauged.
3. Joe | September 10th, 2008 at 2:47 pm
The oil is down and the gas price here went from $3.89 2 days ago to $4.17 here in Evergreen Park. Something is wrong here.
4. Thomas V. Bona | September 10th, 2008 at 3:08 pm
Folks,
Thanks for your comments. Check out my latest post for answers to your questions.
5. Ralph | September 13th, 2008 at 11:40 am
this whole thing with gas and diesel is sad in many ways, years ago when President Nixon was in office, he asked that people would drive
55 mph to help save on fuel, ( believe or not , for the most part I still do)
and i laugh often, people pass me going close to 65 or more, and a few minutes later i can come up behind them at a stop light, so what is gained by speeding? why not just leave sooner,and just maybe safe and alive! most people don`t care, but will complain about prices. also
i feel when fuel prices are down how come food and other products don`t come down!? Guess we just have to except what news media says, cause its always the whole truth!. ya right !! we the people on TIGHT budget pay the price, .
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