While U.S. crude oil prices have dropped 38 percent since June 20, gasoline prices have slid much less — 26 percent from their June average.
So why the discrepancy?
The answer is simple, according to John Schoen of CNBC.com. "The gasoline you buy today was made with crude oil bought when prices were higher," he writes. "What's not so obvious is why [gasoline] prices seem to move faster to the upside when the price of crude oil rises."
Schoen presents some of the explanations offered by economists.
- "Competition: when gasoline prices are falling, some gas stations hold onto higher prices simply because they can," he says. That would be stations that face little competition.
- "Clueless consumers," who don't realize that prices have dropped.
- "Location." Transportation costs, taxes and supply can vary in different markets.
January crude oil futures settled at $66.81 a barrel Thursday on the New York Mercantile Exchange, while the national average price for regular gasoline stood at $2.73 a barrel, according to the American Automobile Association.
The AAA forecasts average gas prices will drop to $2.55-$2.60 by year-end, "as retail prices catch up with steep declines in the cost of both crude oil and wholesale gasoline."
"Gas prices likely will remain relatively low this winter due to abundant supplies and OPEC’s decision to maintain crude oil production," the group says in a report.
The cartel refrained from taking any action at its meeting last week to boost oil prices.
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