Gas-price rise expected to trickle out
Crude oil closed at $81.62 a barrel in New York today, up 35% since January. And yet, the mysteries of the refining pipeline have kept gas prices essentially flat since the beginning of summer. Jeff Tyler reports on the disconnect -- and why it's not expected to last.
Prices over $3.50 per gallon at a San Francisco gas station on May 7, 2007. (Justin Sullivan/Getty Images)
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KAI RYSSDAL: One hates to ruin a perfectly fine Friday, but have you seen the price of a barrel of oil lately?
Sure, crude fell 16 cents today to close at $81.62 a barrel in New York -- but it's still closer to $100 than it is to $50, up 35 percent since January, 17 percent in just the past month.
And yet, somehow, the mysteries of the refining pipeline have kept gas prices essentially flat since the beginning of summer. Marketplace's Jeff Tyler explains the disconnect, and why it's not expected to last.
JEFF TYLER: Higher crude oil prices didn't bump up gasoline prices over the last month, in part because refiners still had a fat profit margin. But that margin is getting thinner, and with demand for gas falling in the wake of the summer travel season, gas stations have been reluctant to raise prices at the pumps.
TOM KLOZA: There are many, many places across the country where, if you pull and buy gasoline, they're not making any money on the gasoline -- might even be losing a little money. And they hope that you go inside and buy some expensive coffee or expensive in-store items, because that's the only place there's a profit margin at the moment.
That's Tom Kloza, chief oil analyst with Oil Price Information Service. Going forward, he expects that every time the price of crude oil goes up a buck, retail gasoline prices will increase by two-and-a-half cents.
KLOZA: We're going to see increases as crude goes up from now on. It has to, or else you're going to see bankruptcy signs on some of the service station chains.
Others expect the rise in gas prices will be more modest. Justin Perucki is an equity analyst at Morningstar.
JUSTIN PERUCKI: Maybe in the near-term, we might see gasoline prices increase slightly just due to the price of oil. And some refiners will be going down over the next few weeks to gear up for the winter heating season.
Even if all the refineries were up and running, there still wouldn't be enough of them to handle demand. Today, Royal Dutch Shell said that it will double the capacity of its Texas refinery. But that won't have an immediate impact on gas prices -- the facility won't be ready until 2010.
I'm Jeff Tyler for Marketplace.
