Gas prices aren’t following oil’s drop

Gas prices are falling more slowly than oil prices.

Chicago Tribune

CHICAGO — Drivers, start your griping.

Crude oil costs less than it did a year ago — just under $70 a barrel Thursday — but gasoline nationally averages 12 percent more.

Since gas prices shot up as oil sped to a record $147 a barrel this summer, you might wonder why prices have yet to experience an equally dramatic fall as oil has retreated amid economic woes.

Average gasoline prices were $3.08 a gallon Wednesday, according to the AAA. For those still fixated on the $4.11-a-gallon peak in July, that might appear to be a welcome change, unless you consider that gasoline was $2.76 a year ago when oil was above $75 a barrel.

There are several reasons to explain why gas prices are stubbornly high, not all of them reassuring.

Experts say gas prices climb like a rocket and slowly float downward like a feather, since the industry can bolster its profit margins when oil costs less. Compounding this phenomenon was the recent shutdown of refineries in the Gulf of Mexico as Hurricanes Ike and Gustav struck, which squeezed gas supplies.

“The prices of oil and gas aren’t always in tandem,” said AAA-Chicago spokeswoman Nicole Niemi. “What we’re seeing are ramifications of the hurricanes earlier this year. There were shortages and distribution problems and we’re still catching up from that.”

Experts also note that gasoline prices might not fall as much as they should because they never rose as high as they could have.

Over the past decade, oil prices increased 14-fold, according to government statistics. By contrast, gasoline prices merely tripled.

“When we hit the highs in crude, the refiners weren’t able to pass on all the costs,” said Phil Flynn, an analyst for Alaron Trading Corp. “I’ve done estimates showing that gasoline should have been 25 percent higher when crude oil was at its peak.”