If it seems like gasoline prices are quick to skyrocket when the price of oil goes up, but then take their sweet 'ol time coming back down when crude prices sink, the answer is simple: They do.So we have an oil industry shill and a AAA PR flak making the same argument - blame "Mom and Pop" filling stations. That seems to be the industry's newest line of defense. But then I remembered hearing this:
"There is a rocket and feather aspect," said Tom Kloza, chief oil analyst at the Oil Price Information Service. And the reason seems to be simple economics.
The service stations are still selling the same amount of gasoline when wholesale prices fall, said Kloza, "so there's no reason to drop."
Human nature being what it is, [service stations] typically react [to a spike in oil prices] by pushing prices higher, even before they replace their inventories," said Geoff Sundstrom, spokesman for the motorist organization AAA.
"And [again] human nature being what it is, unless other stations bring their prices down, he's going to be very reluctant to bring down his."
Say you're an oil executive and you want to keep the Republicans in control of Congress. What can you do prior to an election?One of the above is an editorial based upon hard data. The other is a great example of corporate interests shopping around a new public relations strategy to a willing dupe in the media. I'll let you figure out which arguement I give more credence to.
Well, you can keep your refineries running at full speed, flood the market with extra fuel, and take less per gallon in profit than usual.
And guess what: Department of Energy data suggest that's exactly what the oil companies did this fall.
By the second week in October, gasoline prices fell 70 cents from summer's record highs. Refineries were running full throttle and America's gasoline inventories were up nearly 7 percent from the three previous Octobers.
The rise in supply came despite BP's major pipeline disruption in Alaska. Ordinarily, that's an industry excuse to shrink supplies and raise prices.
Now, the oil industry claimed pump prices fell because crude oil prices dropped.
But gas prices dropped far more steeply than crude oil. Crude oil comes in barrels. There are 42 gallons in a barrel and the price of each gallon was down 10 cents this October over last. But gas prices fell 61 cents a gallon over the same time last year.
In other words, in the run-up to the election, oil companies cut gasoline prices 500 percent more than their raw material cost fell. And it wasn't because refining and distribution costs rose. They're relatively stable.
Oil companies simply took less profit from their refineries for a short period of time. Could it have been to influence a political outcome?
Well, right after election day, the price of gas suddenly rose after two months of sharp decline. Post-election, refineries have slowed down, inventories are shrinking, and gas prices are climbing.
It's back to business as usual, unless the new Congress starts to do business differently.