For U.S. consumers, there's good news and bad news on the gasoline price front.First the good news: U.S. retail gasoline prices have fallen every day for about a month, CNNMoney.com reported Monday, citing motorist group AAA data.
Now the bad news: Prices are not falling nearly as fast - - or as proportionately - - as they rose, given the same dollar-move in a barrel of oil.
The AAA said the national, average price for a gallon of regular unleaded has fallen 30 cents to $3.81 from a record high of $4.11 set on July 16, 2008, CNNMoney.com reported Monday.
Gasoline prices: Quick to rise, slow to fall
However, during that time period oil has fallen about $25 to roughly $115 per barrel. Given the roughly 2-cent to 2.5-cent move for every $1 move in the price of oil, gasoline prices should have fallen 50-62 cents per gallon. Why haven't they?
Economist Peter Dawson told BloggingStocks Monday the answer is complex and contains many variables, but the strongest factors today appear to be gasoline station cash flow, and profit maximization.
As soon the price of oil increases, some gasoline stations will increase the price of gasoline, in anticipation of a price increase the oil company will institute for the next gasoline delivery, he said. "Failure to do so would create a monthly cash flow deficit for the gas station," Dawson said. "It's sort of like an additional monthly expense."
Using the above logic, then, why don't retail gas stations lower gasoline prices, as soon as the price of oil decreases?
"That's a good question. In many cases, but not all, it's because the gas station owner is trying to hang on to that extra profit margin for as long he/she can," Dawson said. "Many would try to hang on to it even after they received the next, cheaper gasoline delivery, if they could, but market forces usually prevent that."
About all consumers can do (in addition to using less gasoline) is look for the cheapest gas price in their area. Buying gasoline at stations that don't drop their price quickly "encourages them to not drop their prices quickly," Dawson said.
U.S. gasoline demand: bearish for prices
Still, while cash flow tactics may not favor the consumer, U.S. gasoline demand trends do, Dawson added. U.S. consumers are using less gasoline, on a year-over-year basis. If that continues, and if oil prices continue to fall, those factors, combined with the end of the summer driving season in a month, should push gasoline prices lower heading into the fall.
Gasoline Analysis: Economist Dawson's comments provide further evidence that the most effective, immediate relief from high gasoline prices remains consumer behavior. Think more efficient vehicles and shorter commutes, where possible.
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Reader Comments (Page 1 of 1)
8-12-2008 @ 10:57PM
Monser Perez said...
Eso. Lets continue the trend.......... maybe some day those desert tyrants will have to drink their oil....