Today’s fuel price musings - If I’m getting a cut , why do I still drive an 11-year-old car?

September 10th, 2008 at 09:57am Thomas V. Bona

I appreciate lively conversation, and am glad to incite it on this blog. That means  you’re reading, thinking about what you’re reading and taking time to respond. That’s great.

At the same time, I’m amused at the “kill the messenger” attitude. A couple of readers have basically said I’m in cahoots with the gas stations/oil companies and have a stake in ad revenues or “hidden agendas”.

Well, my agenda is not so hidden. It’s to explain what is going on, and why, as best I can. Let me explain a few things:

•  Wholesale gasoline prices did indeed spike on Monday - 36 cents a gallon in the Gulf Coast region, and about 20 cents in Chicago (don’t have a link, but it comes from the Oil Price Information Service, in emails I’ve been getting). Gas prices spiked in Chicagoland (not just Rockford) a day later. That’s a fact
• Wholesale prices went down yesterday, but are back up today, about 11 cents to $3.29 a gallon. From an OPIS email I just got -   “The supply situation in Chicago is helping keep things elevated. Midsummer saw a few refineries have some problems that caused a disruption to gasoline production. A power outage last week that shut down ConocoPhillips’ Wood River,
  Ill., plant, which at presstime was still not back to full rates, made gasoline supplies even thinner.”
  
• Even at $104 a barrel, oil is 43 percent above a year ago (last post, I mistakenly put that in cents, not percent. Yikes). Meanwhile, gasoline in the Rockford metro area is 21 percent above a year ago. From the start of the oil runup in 2007 to the peak in the middle of this summer, oil prices almost tripled while gas prices didn’t quite double. So that pretty much torpedos the argument that gas prices always rise as fast as oil…
• Oil companies, by and large, don’t own gas stations. ExxonMobil got out of that business, as did ConocoPhillips,  precisely because retail isn’t that profitable. They make their money on gas and oil production, not distribution. Retailers are reacting to the spike in prices, not setting it, and it’s not just a local phenomenon.

Any questions?
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 more than three  cents to $3.81 a gallon. We have the second-highest gas prices in the state. The Illinois average rose four cents to $3.87. The national average rose almost two cents to $3.67. Illinois has the fourth-highest gas prices in the nation.

Diesel: Rockford increased more than two cents to $4.17 a gallon. We have the fifth-highest diesel prices in the state. The state average increased half a cent to $4.31. The national average dropped slightly to $4.21. Illinois the 15th-highest prices in the country (including the District of Columbia).

Entry Filed under: Fuel price musings