Gas hike is crude on the wallet
Published 12:00 am Saturday, March 19, 2005
If we can make it just one more week, spring will finally arrive.
And just in the nick of time.
I don’t know about you, but I’ve just about had enough of winter, 2004-05. I can’t seem to remember a winter this cold and this wet. It seems like rain, sleet or snow is mentioned somewhere within a seven-day forecast.
Enough is enough…bring on the birds chirping, the flowers in bloom and, of course, the warmer weather.
Spring is also a time for us to end a four-month hiatus indoors. We’re all inflicted with cabin fever, so it’s high time we leave our humble little abodes and bask in the glory of the warm sunshine.
However, while we were in hibernation, gasoline prices went through the roof. The per barrel price of crude oil is at an all-time high. But what I fail to figure out is how can the price jump at the pump prior to the arrival of the gas that has been refined using the newly priced crude?
Think about it. The gas we’re presently purchasing was refined and sent to the retailer to sell at a price based upon the per barrel pricing structure at that certain time. There’s no way that a barrel of oil, a newly priced barrel of oil, can be pumped out of the ground in a Middle Eastern country, loaded on a ship, cross an ocean, delivered to a refinery, undergo the transition to gasoline, placed into a storage facility, loaded onto a transport vehicle, taken to a distribution point, picked-up by a retailer and delivered to a local gas station in one day, or one month for that matter.
What was the local price of gas a couple of weeks ago? If my memory serves me correct, it was $1.89 for a gallon for regular unleaded.
Two weeks later, the price is $2.06 per gallon. You can’t tell me that some of the gas being sold today wasn’t a part of a shipment that was originally designated to have a retail price of $1.89. That’s an immediate profit of 17 cents per gallon, not counting the profit margin the retailers were making at $1.89.
I don’t know your buying habits, but I’m the &uot;fill-up&uot; type when it comes to gas. I drive my truck until the fuel gauge registers just below a quarter of a tank. At that point, my truck will take 13-to-15 gallons to fill the tank.
For the sake of an argument, let’s say a motorist purchases an average of 12 gallons of gas. With the new price at the pump and knowing what the retailer paid for what’s in the underground tank, just a 17-cent hike means the average motorist is paying $2.04 more per visit.
Now multiply that by the number of vehicles that visit a gas station per day. Again, for the sake of argument, let’s say that number is 100 vehicles per day. One hundred times $2.04 is $204. Multiply that times seven days and we get a tidy $1,428 in additional income per store.
Maybe I’m way off base here. Maybe the local retailers are forced to immediately pay a higher rate based upon the new per barrel price. If that’s the case, then I apologize for thinking that they are solely out for a profit.
Or are they?
In October of last year, gas was running about $1.60-$1.70 per gallon. It briefly increased to around $1.80 upon the announcement that crude had broken the $50 per barrel price for the first time in history. That hike showed-up immediately at the pump.
However, some political arm-twisting convinced OPEC to increase production, thus driving the per barrel price below $50. Did we see an immediate drop at the pumps? Of course not. It took nearly five days for the price to fall. I interpreted that as a move by the retailers to make sure they sold all the higher priced gas in their tanks in order to make room for the cheaper petro.
Okay, I’ll shut-up whining and complaining. I’ve got to pump gas in my truck in order to drive to work, where I can make some money in order to visit the gas station again. I guess all I’m asking for is fair trade. Sell what you have at a reasonable price based upon its wholesale cost.