Business

Gas prices are slow to follow oil prices

Posted August 19, 2011 3:55 p.m. EDT
Updated August 19, 2011 6:55 p.m. EDT

Gas Prices

— A dramatic change in oil prices isn't an indicator that gas prices will immediately shift.

After a dip earlier this week, oil prices began rising again on Friday as investors assessed the global economy and the dollar weakened. The national average for gasoline was unchanged at $3.585 a gallon on Friday. AAA says that's about 10 cents less than a month ago.

Steve Byers, owner a Grocery Boy Jr.gas station on Lake Wheeler Road in Raleigh, said the oil news can be a little misleading.

"It may be sitting in a harbor in Saudi Arabia, (and) it takes a while before it gets here and gets refined," Byers said.

Once the oil is refined into gas and put into Byers' tanks, he has to manage the inventory. 

"You have to reflect that almost right away. You can't take a loss," Byers said.

The same is true when gas prices fall.

"If we still have 15,000 gallons of gas in the ground, and some comes in that's cheaper, we still have gas in the ground at old prices," Byers said.

Some economists say that another reason gas prices don't go down is simple competition. When wholesale prices rise, retailers who don't raise the price quickly lose money.

When the prices fall, they try to make up for those tight margins by squeezing extra money out of every gallon.

Other economists believe that when prices fall, consumers stop shopping, and that reduces competition.

Wake Technical Community College student Juliana Ajibolade just wants gas prices to go down.

"Sometimes, I want to go shopping, but I can't because I have to put my money (aside) for the gas. Sometimes, I want to get food, but I can't because I have to put my money toward the gas," she said.