Why is gas still so expensive?

Question

The price of oil has dropped to just above $50 a barrel, so why are gas prices not dropping as well. Gas rose to it's current price while oil was nearing $80 a barrel, so with the drop in price of oil, why has the cost of gas not followed?

Answer 1

It takes a few weeks to turn crude oil into what is actually coming out of the pump; so they tend to lag behind.

But on that note, oil started dropping the beginning of the month; and gas prices in my area have dropped 18 cents in the past 4 days. They're down to ~$1.98 or so; only about 40 cents away from the prices we saw pre-Iraq war.

Answer 2

Price of Oil is good 'cas the supply has increased allowing the price to drop.

To make gasoline for vehicles, oil companies take the crude oil (@ $50.00 USD/barrel) and process it into the finished product, gasoline. The USA has some major processing plants in the USA with a major one in New Orleans (which was damaged severely by Katrina). For decades oil companies have been working on building processing plants in other areas like Arizona with little avail; the State governments object to having oil-processing facilities in their state. So oil barrels come but they are "Bottle necked" at the processing plants. The cost would significantly drop if we increase the processing plants to increase the supply of gasoline --- or if we found alternative fuel to decrease the demand for gasoline.

Remarkably, I think we're getting a great price for gasoline. 30 Years ago, the price of gas was around $1.00 per gallon. Now at around $2.00 per gallon ...well that's a very low inflation rate for a commodity that has a limited supply.

Answer 3

It is part of the oil companies strategy to get gas prices in America in line with what Europe pays. The difference is that in Europe gas is so expensive because of taxes. Here in America the Oil companies are just pocketing that money. Look at the pattern, you see a huge price jump, over the next few months it drops by 60% and stabilizes. A few months later another spike in prices followed by a 60% drop. It is all about profits but in a capitalist economy they are free to gouge the American people as they see fit.

Answer 4

A better question is, why do people pay attention when gas goes up in price, but ignore it when gas goes down in price? Gas in fact is significantly cheaper than it was earlier in the year -- it's down maybe 25% or more from its highs in most places.

But it does appear that gas falls more slowly than it rises. There is some stickiness to gas prices. If oil goes up, gas immediately goes up. If oil goes down, there often seems to be a delay in gas prices going down. It's not hard to imagine why -- in both cases gas stations are fearful of losing money. When oil's going up, stations know they'll need extra cashflow to replace their tanks at higher prices.

And when oil drops, stations still have an inventory of high-priced gas in their tanks. They don't want to sell that at a loss, and neither do their competitors. So they maintain prices as best they can, til someone gives and competitors start lowering prices.

Answer 5

I can't speak for what's happening in your area, but where I live, prices have dropped.

I think there is a problem in your question in that gas is only expensive compared to what prices were two years ago.

Compared to most of the rest of the world, our gasoline is very cheap. If you compare what we pay to what they pay in Europe, for example, I think you'll see that even though we've had a recent spike in prices, we're very fortunate to pay only $2 per gallon.

Answer 6

I am not sure i have a son working the oil fields and hes doing well working. I think alot of this is politicis .

Answer 7

The big oil companies are greedy.

Along with the friggin Arabs.