Pump prices may inch down more

**Donger** · 01-19-2007, 05:54 PM

I know that some folks here are interested in gasoline-related stuff, so here...

http://news.yahoo.com/s/ap/20070119/...asoline_prices

NEW YORK - The headlines say oil prices have fallen 15 percent this year. Gas station receipts tell a different story — the cost of filling 'er up has slipped from about $35 to $33. Big deal.

The cost will probably drop further, but drivers shouldn't hope for a big windfall at the pump: there's a lot more that goes into gasoline prices than the current cost of crude oil.

Besides taxes and the costs of refining, distributing and marketing, there are factors such as local competition among gas stations. Just as with other forms of retail, consumers see savings when one retailer lowers its price, and the others scramble to match it.

"If gasoline costs me a dollar a gallon, and my competition down the street is selling it for 89 cents, my customer doesn't care what I paid for it," said Richard Oneslager, president of Balmar Petroleum, which operates 14 gas stations in Colorado.

Crude oil prices have fallen from about $61 to $51 a barrel this year on the New York Mercantile Exchange, but the price of gasoline on the side of the road has declined more slowly. The average price for a gallon of regular is down about 13 cents from $2.33 on Jan. 1 to $2.20 on Friday, a day after crude briefly fell below $50.

A typical car holds 12 to 15 gallons, so if it's filled four times in a month, that's savings of less than $8 in a month — not even enough for that daily cup of coffee.

Pump prices haven't plunged to $2 a gallon yet, which is where they were back in early 2005, when crude oil prices were also around $50 a barrel. The big difference was that, unlike now, crude oil wasn't coming off a record high of $78 a barrel just six months earlier.

Essentially, the recent price drop hasn't completely sunk in on the wholesale level, so gasoline retailers are still paying a lot for their product and won't lower prices until competition forces them to do so.

The Energy Department says the price of crude oil accounts for about half the retail price of gasoline. That means if crude oil is down 15 percent, pump prices should be down almost 8 percent.

But the time it takes for a drop in wholesale prices to fully affect retail prices is around 12 weeks, though most of the drop happens within the first two weeks.

"Retailers aren't making their price decisions on the price of crude oil," said John Eichberger, vice president of government relations at the National Association of Convenience Stores. Instead, they focus on how much they paid for their current load of gasoline, and how much their supplier is telling them their next load will cost.

"We don't care about anything except what that tank the truck just brought in cost," Oneslager said.

A sharp rise in crude oil is another story. After crude spiked to record highs the past two summers, it didn't take much time for gasoline prices to follow suit. That's mainly because retailers got nervous that their next shipment of gasoline would cost a bundle, and also because they knew that summer demand is high and drivers could at least for a while pay inflated prices, albeit reluctantly.

Contrary to what many drivers think, the huge "ExxonMobil" or "Chevron" signs above your local gas stations don't necessarily mean they're run by big oil companies — a lot of them are franchised. Jeff Sundstrom of AAA estimates that over 80 percent of the nation's gas stations are run by individuals or small to medium-sized businesses.

The average gasoline retailers have to charge 13 cents per gallon more than they paid to break even, Eichberger said, and mark it up even more to make a profit.

The Oil Price Information Service shows that in 2006, the average gross margin for retailers was 13.76 cents a gallon — meaning profit was less than a cent per gallon. Because of credit card transaction fees, the credit card industry profited more from gasoline sales last year than gas stations did, Eichberger said.

So station owners are loath to bring prices down too far too fast, especially if they're recovering from profits that were squeezed last year. Price wars hit in November and December, Oneslager said, even though wholesale prices were fairly steady and crude oil was down from its summer highs.

Crude oil prices are about $10 lower than where they were a month ago, and many market analysts are saying they could tumble even lower. The reasons include the Northeast United States' warm winter, which caused a glut in heating fuels, and traders following a wave of big funds in making bets in the market that prices will fall. Also, demand may not be as high as some had thought: the American Petroleum Institute said Friday that in 2006, U.S. demand for petroleum fell to below 2004 levels.

At this point, aside from retailers who are trying to make up big losses from last year, there's no reason gasoline prices need to stay high, Sundstrom said.

"Retailers need to see the development of a trend to lower prices. They need to be convinced that these prices will stay down. Now that we're going into third week of prices below $60, AAA's position is that a trend has been established," Sundstrom said.

He guessed that pump prices will fall further, nearing $2 a gallon in the coming weeks, as gasoline retailers ramp up the competition.

Kevin Lindemer, head of Global Insight's energy group, said that historically, gasoline prices tend to drop 2-2.5 cents for every $1 that crude oil drops in the energy markets. With crude oil prices down $10 now from its December levels, U.S. drivers are likely to see pump prices fall about 10 cents further.

That's an average of all U.S. gasoline prices; many regions are already seeing pump prices well under $2 a gallon, while others are still around $3.

Only three states, as of Friday, saw an average price under $2: Michigan, Missouri and Oklahoma. What makes these states special is lower taxes, Sundstrom said, as well as proximity to pipelines and barge routes, which make distribution costs lower. The states that generally see the highest gas prices are California, Hawaii, Oregon and Washington.

Overall, drivers should see a bit more savings when filling their tanks, perhaps enough to upgrade their coffee to a latte occasionally. But they shouldn't get too comfortable, because the spring and summer driving seasons could push prices back up. Not only does demand rev up as more people go on road trips, but the type of gasoline is more expensive to refine — summer gasoline has to meet environmental regulations that winter gasoline does not.

88TG88 · 01-19-2007, 05:54 PM

teedubya · 01-19-2007, 05:58 PM

I bought some gas last night for $1.879

I have been conditioned to believe that this is an incredible deal.

**Donger** · 01-19-2007, 05:58 PM

Quote:

Originally Posted by Ari Chi3fs

I bought some gas last night for $1.879

I have been conditioned to believe that this is an incredible deal.

It is.

PinkFloyd · 01-19-2007, 06:00 PM

Average price around here today was between $1.90 to $1.93.... Not to shabby I guess...

Is this a hint we should be stocking up our gas barrels for some outlandished occasion about to happen ???

**Bugeater** · 01-19-2007, 06:01 PM

Quote:

Because of credit card transaction fees, the credit card industry profited more from gasoline sales last year than gas stations did, Eichberger said.

Just out of curiousity, does anyone know how much the fees are that the CC companies charge?

**Donger** · 01-19-2007, 06:02 PM

Quote:

Originally Posted by Pinkfloyd

Average price around here today was between $1.90 to $1.93.... Not to shabby I guess...

Is this a hint we should be stocking up our gas barrels for some outlandished occasion about to happen ???

No. Come spring and summer, they'll go back up as usual, but it sure looks like the national average could get near $2.10 before that happens.

88TG88 · 01-19-2007, 06:04 PM

2.30 is the average in LA. 1.87 is a great deal

chief52 · 01-19-2007, 06:05 PM

Quote:

Originally Posted by Ari Chi3fs

I bought some gas last night for $1.879

I have been conditioned to believe that this is an incredible deal.

$2.63 here in remote NoCal. They screw us big time up here. Worst in the nation.

chief52 · 01-19-2007, 06:05 PM

Quote:

Originally Posted by chief52

$2.63 here in NoCal. They screw us big time up here. Worst in the nation.

**Donger** · 01-19-2007, 06:06 PM

Quote:

Originally Posted by chief52

$2.63 here in remote NoCal. They screw us big time up here. Worst in the nation.

Who's they?

ferrarispider95 · 01-19-2007, 06:08 PM

Quote:

Originally Posted by Bugeater

Just out of curiousity, does anyone know how much the fees are that the CC companies charge?

Depends on volume, but it a lot of cases large chains will have a negotiated rate that is carry out through all the stations.

Anywhere from 1.5 % - 2.4 %, and there could a per cent charge on each transaction from 0 - 30 cents.

However, debit purchases where you entered your pin are a lot cheaper.

boogblaster · 01-19-2007, 06:09 PM

193.9 at Johnson's General in se kansas ...

**Bugeater** · 01-19-2007, 06:13 PM

In a related story, we're going to have Terror-Free oil in Omaha soon!

Terror Free Oil

Drivers are always on the lookout for the lowest gas prices. But after we fill up, where does the money go? A new kind of gas station in Millard wants people to think about that question.

The gas station at 131st and Q streets used to show a Sinclair dinosaur. Now, in big bold letters "Terror Free Oil."

The idea is to sell gasoline made from oil originating in countries friendly to the United States.

On its website, the terror free oil organization says the U.S. is funding its own demise.

It's not open yet, but when it is customers will have some not-so-light reading while they fill up.

The terror free oil initiative says its goal is to cut funding to terrorist organizations and countries sympathetic to terrorism by not buying their oil.

There's no word on when the terror free oil gas station in Omaha will open. But, when it does, it'll have plenty of competition.

There's a QT next door, a Bucky's at the end of the block and a fourth gas station on the next block.

According to the website, the "Terror Free Oil" gas station on "Q" street is the first in the nation.

http://www.wowt.com/home/headlines/5271431.html

**Skip Towne** · 01-19-2007, 06:22 PM

$1.87 in Tulsa.

01-19-2007, 05:54 PM
Donger "Think BOOM!" Join Date: Nov 2003 Location: 33.675° N 106.475° W Casino cash: $10219900 VARSITY	Pump prices may inch down more I know that some folks here are interested in gasoline-related stuff, so here... http://news.yahoo.com/s/ap/20070119/...asoline_prices NEW YORK - The headlines say oil prices have fallen 15 percent this year. Gas station receipts tell a different story — the cost of filling 'er up has slipped from about $35 to $33. Big deal. The cost will probably drop further, but drivers shouldn't hope for a big windfall at the pump: there's a lot more that goes into gasoline prices than the current cost of crude oil. Besides taxes and the costs of refining, distributing and marketing, there are factors such as local competition among gas stations. Just as with other forms of retail, consumers see savings when one retailer lowers its price, and the others scramble to match it. "If gasoline costs me a dollar a gallon, and my competition down the street is selling it for 89 cents, my customer doesn't care what I paid for it," said Richard Oneslager, president of Balmar Petroleum, which operates 14 gas stations in Colorado. Crude oil prices have fallen from about $61 to $51 a barrel this year on the New York Mercantile Exchange, but the price of gasoline on the side of the road has declined more slowly. The average price for a gallon of regular is down about 13 cents from $2.33 on Jan. 1 to $2.20 on Friday, a day after crude briefly fell below $50. A typical car holds 12 to 15 gallons, so if it's filled four times in a month, that's savings of less than $8 in a month — not even enough for that daily cup of coffee. Pump prices haven't plunged to $2 a gallon yet, which is where they were back in early 2005, when crude oil prices were also around $50 a barrel. The big difference was that, unlike now, crude oil wasn't coming off a record high of $78 a barrel just six months earlier. Essentially, the recent price drop hasn't completely sunk in on the wholesale level, so gasoline retailers are still paying a lot for their product and won't lower prices until competition forces them to do so. The Energy Department says the price of crude oil accounts for about half the retail price of gasoline. That means if crude oil is down 15 percent, pump prices should be down almost 8 percent. But the time it takes for a drop in wholesale prices to fully affect retail prices is around 12 weeks, though most of the drop happens within the first two weeks. "Retailers aren't making their price decisions on the price of crude oil," said John Eichberger, vice president of government relations at the National Association of Convenience Stores. Instead, they focus on how much they paid for their current load of gasoline, and how much their supplier is telling them their next load will cost. "We don't care about anything except what that tank the truck just brought in cost," Oneslager said. A sharp rise in crude oil is another story. After crude spiked to record highs the past two summers, it didn't take much time for gasoline prices to follow suit. That's mainly because retailers got nervous that their next shipment of gasoline would cost a bundle, and also because they knew that summer demand is high and drivers could at least for a while pay inflated prices, albeit reluctantly. Contrary to what many drivers think, the huge "ExxonMobil" or "Chevron" signs above your local gas stations don't necessarily mean they're run by big oil companies — a lot of them are franchised. Jeff Sundstrom of AAA estimates that over 80 percent of the nation's gas stations are run by individuals or small to medium-sized businesses. The average gasoline retailers have to charge 13 cents per gallon more than they paid to break even, Eichberger said, and mark it up even more to make a profit. The Oil Price Information Service shows that in 2006, the average gross margin for retailers was 13.76 cents a gallon — meaning profit was less than a cent per gallon. Because of credit card transaction fees, the credit card industry profited more from gasoline sales last year than gas stations did, Eichberger said. So station owners are loath to bring prices down too far too fast, especially if they're recovering from profits that were squeezed last year. Price wars hit in November and December, Oneslager said, even though wholesale prices were fairly steady and crude oil was down from its summer highs. Crude oil prices are about $10 lower than where they were a month ago, and many market analysts are saying they could tumble even lower. The reasons include the Northeast United States' warm winter, which caused a glut in heating fuels, and traders following a wave of big funds in making bets in the market that prices will fall. Also, demand may not be as high as some had thought: the American Petroleum Institute said Friday that in 2006, U.S. demand for petroleum fell to below 2004 levels. At this point, aside from retailers who are trying to make up big losses from last year, there's no reason gasoline prices need to stay high, Sundstrom said. "Retailers need to see the development of a trend to lower prices. They need to be convinced that these prices will stay down. Now that we're going into third week of prices below $60, AAA's position is that a trend has been established," Sundstrom said. He guessed that pump prices will fall further, nearing $2 a gallon in the coming weeks, as gasoline retailers ramp up the competition. Kevin Lindemer, head of Global Insight's energy group, said that historically, gasoline prices tend to drop 2-2.5 cents for every $1 that crude oil drops in the energy markets. With crude oil prices down $10 now from its December levels, U.S. drivers are likely to see pump prices fall about 10 cents further. That's an average of all U.S. gasoline prices; many regions are already seeing pump prices well under $2 a gallon, while others are still around $3. Only three states, as of Friday, saw an average price under $2: Michigan, Missouri and Oklahoma. What makes these states special is lower taxes, Sundstrom said, as well as proximity to pipelines and barge routes, which make distribution costs lower. The states that generally see the highest gas prices are California, Hawaii, Oregon and Washington. Overall, drivers should see a bit more savings when filling their tanks, perhaps enough to upgrade their coffee to a latte occasionally. But they shouldn't get too comfortable, because the spring and summer driving seasons could push prices back up. Not only does demand rev up as more people go on road trips, but the type of gasoline is more expensive to refine — summer gasoline has to meet environmental regulations that winter gasoline does not.
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01-19-2007, 05:54 PM	#2
88TG88 don't tell me about collage Join Date: Sep 2006 Location: Los Angeles Casino cash: $10009184	yay
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01-19-2007, 05:58 PM	#3
teedubya Most Valuable Poster Join Date: Oct 2003 Casino cash: $9480002	I bought some gas last night for $1.879 I have been conditioned to believe that this is an incredible deal.
Posts: 36,652

01-19-2007, 06:00 PM	#5
PinkFloyd I've Become - Comfortably Numb Join Date: Aug 2001 Location: Cameron, Missouri Casino cash: $10003795	Average price around here today was between $1.90 to $1.93.... Not to shabby I guess... Is this a hint we should be stocking up our gas barrels for some outlandished occasion about to happen ??? __________________ Sometimes I lie awake at night, and I ask, 'Where have I gone wrong?' Then a voice says to me, 'This is going to take more than one night.'
Posts: 3,089

01-19-2007, 06:04 PM	#8
88TG88 don't tell me about collage Join Date: Sep 2006 Location: Los Angeles Casino cash: $10009184	2.30 is the average in LA. 1.87 is a great deal
Posts: 6,274

01-19-2007, 06:09 PM	#13
boogblaster MVP Join Date: Sep 2005 Location: Verdigris Valley Campsite Casino cash: $10004900	193.9 at Johnson's General in se kansas ... __________________ WR or S please
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01-19-2007, 06:13 PM	#14
Bugeater The Maintenance Guy Join Date: Sep 2005 Location: Renovated Bugeater Estate Casino cash: $6242680	In a related story, we're going to have Terror-Free oil in Omaha soon! Terror Free Oil Drivers are always on the lookout for the lowest gas prices. But after we fill up, where does the money go? A new kind of gas station in Millard wants people to think about that question. The gas station at 131st and Q streets used to show a Sinclair dinosaur. Now, in big bold letters "Terror Free Oil." The idea is to sell gasoline made from oil originating in countries friendly to the United States. On its website, the terror free oil organization says the U.S. is funding its own demise. It's not open yet, but when it is customers will have some not-so-light reading while they fill up. The terror free oil initiative says its goal is to cut funding to terrorist organizations and countries sympathetic to terrorism by not buying their oil. There's no word on when the terror free oil gas station in Omaha will open. But, when it does, it'll have plenty of competition. There's a QT next door, a Bucky's at the end of the block and a fourth gas station on the next block. According to the website, the "Terror Free Oil" gas station on "Q" street is the first in the nation. http://www.wowt.com/home/headlines/5271431.html
Posts: 70,443

01-19-2007, 06:22 PM	#15
Skip Towne Supporter Join Date: Apr 2001 Location: T-Town Casino cash: $10004900	$1.87 in Tulsa.
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