“ Gas Prices Stay High Despite Oil’s Dive”
–Tri- City News -Friday Aug. 14th, 2015
“ (Gee)… I wish there was a simple explanation”, lamented Jason Parent of the Kent Marketing Group when asked why gasoline prices don’t seem to follow falling oil prices.
When crude oil cost $110 per barrel, gas at the pump was $1.50 per litre. Today, oil is $44.00 per barrel and gas is $1.35. Oil dropped 60% in price while gas dropped 10%.
So what’s up with that?
It’s complicated says Mr. Parent, who offered up to Black Press staffer Jeff Nagel, the standard oil (no pun intended) orthodoxy.
He explains that B.C.’s 17 cent per litre Translink tax and our carbon tax make gas prices higher in B.C.
It’s all about supply and demand. The wholesale price of gas has little to do with the price at the pump.
Oh, and the falling loonie is largely to blame.
And don’t forget, B.C. gas prices are tied to western U.S. prices, a circumstance Mr. Parent implies might be mitigated if B.C. got more gas from the Kinder Morgan pipeline.
Mr. Parent goes on to say that even if the price of crude oil goes down more following the lifting of Iran sanctions, that we shouldn’t expect gasoline prices to follow.
Wow! I hope the price of oil doesn’t go down too much more, or we won’t be able to afford to buy gas at all.
In order to help Mr. Parent complete the reading of the dog eared script, I offer several other commonly used petroleum industry explanations as to why gas prices don’t respond to lower crude oil prices:
The paucity of refineries, prickly maintenance issues at Cherry Point, civil unrest in Venzuela, bad weather in the Gulf, environmental extremism, and resistance to pipelines and drilling.
The point is, gas prices won’t budge even as the price of crude oil plummets due to complex fiscal and geo- political forces that we lay people don’t really appreciate.
As Mr. Parent says;
“ There isn’t much of a relationship on a day to day basis between crude oil and retail gasoline”
And we’re silly to expect;
” … gas (prices) to move in lockstep with crude oil…”
Mr. Parent’s logic might be more plausible had he offered up even one economic or geo-political force that might serve to keep the price at the pump from skyrocketing at the mere rumour of a crude price increase or when a long weekend is imminent.
Apparently, the immutable laws of the market to which Mr. Parent enlightens us, apply only when the price of crude oil goes down.
No oil company has ever been stuck with a large inventory of gas they purchased at a lower price, so it may take a while for current higher prices to be reflected at the pump.
No gasoline price has ever gone down because peace broke out in Venezuela orthe annual maintenance at some refinery went better than expected.
No oil company has ever dropped its gas prices because they were so high as to affect demand.
“(Gee)… I wish there was a simple explanation? There is.
Gas prices go down only when we need to be re-convinced that there may be some logic or market force in play. Prices remain lower only long enough to lull us into complaining about something else; then prices are raised as quickly and as high as will be born, using any plausible excuse.
Gas prices go up whenever someone comes up with an excuse plausible enough to do so. The excuse must be complex enough to be uncheckable and must require several steps of logic and/or enough technical terms to make the public’s eyes glaze over.
Oil companies know their days are numbered, like tobacco companies. They may have ten or fifteen more years to take profit – and they will extract maximum profit for as long as they can.