MNN - Mother Nature Network

Are we feeling the pain at the pumps? Yes, indeed. The average retail price for gasoline in the U.S. is $3.78, which the Energy Information Agency says is up 45 cents a gallon since the year began. It’s the highest late-winter gas price for many years.

 

As EIA reports, “The rise in gasoline prices is partly due to higher crude oil prices,” but it’s more complicated than that — the fundamentals of the international crude market are fairly weak right now, but still prices have gone nothing but up. Why is that, exactly?

 

If you want to get outraged around this point, please do. You can even say you’re mad as hell and won’t take it anymore, but it probably won’t help — you’ll still have to drive to work. Fight back by buying an electric car, because otherwise you’re going to be subject to the vagaries of the capricious oil market. So many factors affect what you pay that it's really hard to find the smoking gun. But most of us are smelling something rotten, so there's probably a dead fish or two around.

 

The Wall Street on Friday noted that the crude oil futures market was “battered in a sharp two-day selloff sparked by demand worries” — but gasoline futures rebounded. A barrel of benchmark Brent crude was up slightly after falling to $3.99 in the previous two days — “to a three week low.” Meanwhile, in the U.S. inventories are up by 4.1 million barrels, reports EIA, and that should send gas prices down, down, down. Gasoline demand dropped 2.8 percent in January, and that should have depressed prices, too.

 

 

Instead, prices are still soaring — in four states, says AAA, people are paying more than $4 a gallon, and a couple others are close to that. “Unfortunately, it doesn’t look like there will be much relief at the pump in the next couple of weeks,” said Jessica Brady of AAA, citing U.S. refinery maintenance in March as one factor likely to cut supply and keep gas prices high.

 

Jeff Lenard, a spokesman for NACS, the National Association of Convenience Stores (which pump most of the nation’s gas), explains that there’s always a lag between lower crude oil prices and cheaper retail gasoline. Blame the fact that gas retailers — those convenience stores — often make just 3 cents a gallon selling the stuff.

 

Here’s the problem: When oil prices are rising, retailers absorb some of that cost to remain competitive with consumers — who are increasingly willing to go across the street to find cheaper prices. Gas, of course, remains one of the only product whose shifting price is posted on huge signs for all to see, and these days 30 percent of consumers in a NACS survey are shopping harder for gas bargains.

 

When oil prices fall, Lenard said, retailers “can capture bigger margins” by not lowering their prices quickly — as long as the other gas vendors do the same thing. We may be in that phase, with relief in sight. But there are other factors, such as the annual shift from winter- to summer-weight gasoline. The latter contains anti-smog oxygenators such as ethanol, and that makes it more expensive. But isn’t it a bit EARLY for that switch? Lenard says it’s already underway in California. Here's a fairly cogent Associated Press analysis of the mess we find ourselves in with regards to gas prices:

 

 

Traditionally, gas prices peak around Memorial Day, because of increased road traffic in the “summer driving season.” Go back to 2000, and the annual peak of prices was never before April or after June. This year appears different, not to mention that the first-week-of-February price, all the way back to 2000, was never higher than it is right now.

 

We may have reached a peak price for the year, and if so pump prices could drop pretty soon. But right now, there’s universal suffering. The NACS survey found 44 percent of consumers surveyed saying that gas prices have “a great impact” on their view of the economy. And 71 percent blame oil companies for their plight. Nearly half say they are driving less, and 37 percent are combining trips.

 

It’s tough out there. When Jack Kerouac went "On the Road" to write his book circa 1950, he was probably paying 18 cents a gallon. If it matters, Fox says the high oil prices "endanger Democrats," though more people blame oil companies than government regulations, and President Obama is enjoying a relatively good ride in the polls.