Why aren't gas prices dropping??

Greed!!

 

Only 3.29? That looks insanely cheap to me. Around here it's about 1.15 per litre, which is 4.37 a gallon, ignoring a slight exchange difference. And even that's cheap compared to Europe.

 

Oil prices are only part of what influences pump prices.
In addition you have the prices refineries are charging, refinery downtime (which I believe we are getting into the season for) which is generally done each spring and fall??
Downtime/repairs make for less refinery utilization which generally raises prices. So while oil prices are going down, if refinery utilization is also down, you get competing forces on the price.

That said, prices in my area are down (MN) over the last couple of weeks. So you may also be looking at local demand or some other local/regional issue supporting prices.
Gas station location always plays a role as well. In general, the further from a highway/high traffic area you are, the lower the price.B

 

Supply and demand determine price only where there is competition. Collusion among suppliers, too few suppliers, and heavy speculation all undermine the free market. There is competition among gas stations, but all get their gas from the same suppliers, so the free market does not function the way its proponents theorize it should. In any given area, all the gas stations are probably getting their gas from the same refinery.

 

Inventory control.

When you but a widget at Home Depot - the retail price is based on an average of cost over time, usually the fiscal year, or a rolling last 12 months. I've even seen 36 months (for paint).

Some non-inventory stores - like for computer chips - don't stock - and their price is based on last purchased cost. Or more simply, the replacement cost.
Such a store loses money when the next 'one' is more expensive (in electronics price always goes down, so stores never stock large quantities).

If the purchase cost to replace varies greatly over time, the accounting practice of using averaged cost is best.

For gas, manual tweaking is also done. When the 'next batch' is cheaper, sell price won't go down immediately until the median (avg with total inventory) goes down.

Different 'at-the-pump' sellers have different inventory quantities, so they all don't go down in price at the same time.

Worse is that they speculate and buy large quantities ahead of time, to try and increase the profit margin. Which is quite low - however even at 1% profit at the pump, consider :

- pumps are fixed cost, low maintenance
- people pump themselves
- just one employee needed to man the register
- upselling chips, soft drinks, etc at 250% profit margin

So until the 'previous' inventory dwindles enough and the next 'batch' is bought at sufficient low price and quantity to affect the average purchase cost, price at the pump won't change much.

Unless you buy from an independent gas reseller, like a farm Coop, that has a small inventory, and his price varies faster. However that same indy can lose big when he buys high and the major resellers sell low in a price war.

Just be glad that US/Canada gas prices are amongst the cheapest in the world. Which is part of the oil addiction problem...

 

dont complain i pay 1.50 a litter here in greece and thats in euro not dollar amount ! hahaha your doing lovely there in ny !

 

When I lived in small-town N.D. this kid bought the local gas station, and promptly went out of business. He complained that there was no profit in gas and he had to make his profit on tires, but that nobody bought tires from him because they were cheaper at the big tire stores in the city. He also complained that the girl he hired to pump gas was breaking him by using too much hand cleaner: she cleaned her hands after every customer. The next owner was a mechanic, and he was still running the place and making a living when I moved away. I'm sure there's a lesson in there somewhere.

 

I just paid $2.99 (credit card) per gallon in LI. I saw $3.29 this morning in other stations. I guess I got lucky.

 

So, is the lesson that "dirty girls do more business?"

 

Gas prices at the pump are ruled by so much more than the barrel price. We are still at the mercy of the oil companies and they are more than greedy.

 

There's more money in offering specialized services (mechanical repair) in a relatively small market where people are likely geographically incentivized (e.g if their car breaks down in the middle of nowhere, and you are the only repair shop for 50 miles, then they don't have too many options) as opposed to trying to sell highly commoditized products (e.g. gas and snacks) with a competitive market? Sorry for the long sentence.

 

It's actually a very simple rule: When the price of crude oil goes up, that same day all the gas station guys are out on stepladders, raising their prices. However when the price of crude oil goes down, it takes six months for the lower price to "work its way down to the pumps."