Oil Drops Below $57, Gas Prices Rise
January 7th, 2007 | by Brian Carr |Despite the nearly 10% drop in the price of oil during the past week, the national average price of a gallon of gasoline has actually gone up $.03. That seems pretty fair, right?
The price of oil briefly fell below $55 during Friday’s trading session before rallying to close at $56.31. Despite closing higher, the price of oil fell over 8% for the week - the single largest weekly drop in oil prices since early in 2005.
Unfortunately, the decline of the price of oil didn’t carry over to the national average price of gasoline, which actually has increased three cents during the past three weeks.
Just for the sake of comparison, I checked to see what the national average gas price was the last time oil dropped to $55 per barrel, which was nearly a year and a half ago during June 2005. During mid-June 2005, gas prices were down around $2.05 - more than $.25 lower than current gas prices.
Unfortunately, this comparison is more apples to oranges thanks to the fact summer gas prices tend to be higher as it is thanks to extra additives designed to help reduce smog. It’s likely that if these additives were able to be taken out of the equation that the average price of gas would have been well below $2 per gallon.
I guess this just gives even more credence to the fact that gas prices shoot up like a rocket but fall like a balloon.
7 Responses to “Oil Drops Below $57, Gas Prices Rise”
By matt on Jan 8, 2007 | Reply
the market for second-hand commodities usually lags. therefore, a drop in oil prices would not necessarily constitute an immediate drop in gas prices.
By sprky777 on Jan 8, 2007 | Reply
lets see if our newly elected democratic congress will force oil companies to cut prices. It would stimulate the economy making democrats look good.
anyway, try to buy an electric car.
By Charles on Jan 8, 2007 | Reply
But Matt, they raise the price immediately not wait for the secondary market lag.
By nobrainer on Jan 8, 2007 | Reply
Gasoline retailers will smooth the peaks and valleys. The actual profit per gallon will vary, but they end up averaging about the same profit per gallon.
If you think oil price peaks (and the oil wholesale to gasoline retail lag cycle) are ridiculous, start studying point pricing on the electrical grid. Prices can change by 1000% (yes a thousand) in a day depending on the load. Of course your power company will charge you an average price, not the actual price.
By Brian on Jan 8, 2007 | Reply
I always found it rediculous that Gas prices will raise the same day oil prices go up but the oil we are pumping was bought months and months ago.
If the gas companies were following those rules to make more sense to the consumer then they should lower the prices on the same principal.
Even if the gas companies make their 5% or whatever profit which isnt higher than other companies thats still 5% times billions and billions of dollars in a monopoly that will never go away. And we still give them billions in tax breaks.