Gas Stations Make More Pennies on the Gallon
Drivers are welcoming the continued drop in prices of gasoline, but the
average cost of a gallon of fuel has only fallen about half as much as
the price of a barrel of oil since both hit records during the summer.
Oil prices are down nearly 50 percent since July, to $74.50 a barrel.
Gasoline nationwide, though, only is down 24 percent, to $3.13 a
gallon, according to AAA Arizona.
Oil hit a record July 11 of $147 a barrel, and less than a week later, a gallon of gasoline hit a national record of $4.11.
Gasoline prices in Arizona spiked at $4.09 in July. They are down 22 percent, to $3.19.
With such a big spread between how much the price of oil has fallen and
how little the price of gasoline has fallen, some experts predict
further gas-price declines.
"Have plenty of faith you are going to see prices drop, and drop
considerably between now and Election Day," said Tom Kloza, chief oil
analyst for the Oil Price Information Service in New Jersey.
Retail gasoline prices have fallen to about where they were in March,
but back then, oil was trading much higher, in the $100 range. Last
time oil prices were as low as they are now was October 2007, and
gasoline averaged about $2.80 a gallon, according to the U.S.
Department of Energy.
While stations often lament tiny margins of a few cents per gallon of
fuel sold, Kloza’s service reports that last week, U.S. stations
averaged a margin of 42 cents per gallon.
"If you took this week and projected it out for 52 weeks, we’d all want
to be in the retail gasoline business," he said. "The problem is, it is like a Yankee game where they score a lot in the ninth inning."
For example, for the week of Sept. 15, the average margin was less than
5 cents, according to his service. Kloza notes a "tape delay" between
declines in oil prices and declines in gasoline.
"The myth is that when prices go up quickly, retailers are gouging,
when in reality that is when they are suffering," he said. "When prices drop, retail prices don’t usually match those drops step for step."
One Arizona expert cautioned that the national figures don’t reflect the "highly competitive" market in the state.
"Retailers, a lot of times, are losing money," said Andrea Martincic, executive director of the Arizona Petroleum Marketers Association. "It is a very cyclical business for retailers."
She said the margin for gas stations in Arizona recently was less than
4 cents on a gallon, far from the 42-cent national average earlier this
month.
And retail prices can’t fall as much as oil prices because taxes,
distribution, marketing and credit-card fees all factor into the pump
price of fuel regardless of oil’s price.
"I don’t know that there necessarily is a lag (between oil and gasoline
prices)," she said. "You notice right away when the price goes up, but
you don’t notice right away when it goes down. I’ve never seen any
research to support that commonly held belief."
Gasoline prices also may get an artificial boost from oil companies
cutting their output, said Judy Dugan, research director for Consumer
Watchdog, a California non-profit group.
"They are trying to drop supplies to keep the price supported," she
said. "Nobody can say what the future will bring, but the fact is that
gasoline ought to be coming down almost as fast as oil, particularly
with the drops in consumption we’ve seen."
U.S. drivers, in fact, have dramatically cut back. Data from the
Arizona Department of Transportation show that the amount of fuel sold
in August this year was 8.4 percent below August 2007.
If not for hurricane disruptions, experts said prices would be even lower today because of drivers’ cutbacks.
"If prices don’t fall further, then it really is time for government to
get in on the act," said Dugan, whose organization advocates for more
regulation.
Dugan said government intervention could help even out price
fluctuations for consumers by requiring more transparency from oil
companies, or by requiring a base level of supply.
"There is now a greater readiness (among the public) to believe that
consumers are abused by enormous corporations, whether they are
financial or commercial, especially by enormous corporations that sell
us something that we can’t do without," Dugan said.
Some drivers who watch fuel prices aren’t optimistic they will continue to fall.
"I doubt it, really doubt it," said Bob Grubbs of Phoenix, who uses his Silverado pickup to escort oversize loads on cross-country trips.
He installed an additional 90-gallon tank in his truck to take
advantage of the most inexpensive fuel he can find, which was at Van
Buren and 32nd streets this week.
"When you see cheap fuel, you buy it," he said.
"A lot of people who do the same work I do don’t want to run a big tank
in their truck, and they think I’m crazy," he said. "But if they are
selling gas for $4 a gallon in California, and I can get it in Phoenix
at that time for $3.50, when you buy 100 gallons at a time, it adds up."