Friday, August 15, 2008

Crude Oil Down, But Price at Pumps Lags

Once again, the cost of light crude is down, dipping to a close of $113.77 a barrel near the end of the market's close today. This is roughly a 23 percent drop from a high in mid-July of about $147 a barrel.

Unfortunately, the price at the pump still does not reflect a similiar dramatic drop. The AAA national average in the United States today is about $3.77 a gallon. That is
an eight percent drop at the pump from a high of $4.11 a gallon on July 17. If the price at the pump had match the light crude drop, we'd be paying $3.17 a gallon.

Prices don't fall at the pump as quickly as they rise. Much of that has to do with the nature of the beast. As the cost of gas increases, gas-station owners are forced to increase the retail price, or else face the consequence of losing money on every sale. As prices ease for the dealers, the free market takes control. Dealers reduce their prices to generate more sales than their competition down the block. They sell gas at the highest price they can within their own market, but not so high that they lose customers.

But you have the final say. The best thing consumers can do is vigilantly seek out the lowest price in town and buy there. The more drivers do that, the faster prices will drop. By the way, I was very happy buying at $3.48 a gallon yesterday, even though I had to drive across town to get it.

No comments: