I can't figure the price any more. Price of crude goes up and gasoline prices spike upward the same day or the day after. Price goes down and gasoline takes it good old time slowly... slowly dropping in price. That is the way it has always been.
So why was the price at the pump about the same when oil was $120 vs $150 a barrel? At that point, I gave up trying to understand the whole thing and have moved into the "price gouging" or "get what you can" point of view. Oil is a commodity. From the gasoline retailer's perspective, sometimes you win and sometimes you loose or that is the way it should be. If not, then make it a set price and don't change it regardless of the price of crude oil.
Gasoline retailers gouging customers are in the minority. This is quite simplistic, but explains the situation.
Say I'm a gasoline retailer. I have 10,000 gallons in the ground, and I paid $1 a gallon. To make a profit and pay overhead, I charge $1.25 a gallon. 10,000 x $1.25 = $12,500. Need to set aside $10,000 of that for next week's gas delivery, and pay $1250 in overhead. Leaves me a $1250 profit.
I call my distributor to arrange next week's delivery. Distributor says "Due to the per barrel prices skyrocketing, I'm going to have to raise the price $.40 a gallon."
Let's see. To buy the same 10,000 gallons of gasoline, I'll have to come up with $14,000. I could not pay my overhead from last week and not take a profit, but I would still come up short by $1,500.
Only solution to keep me out of the red is to raise the price of the gasoline I already have in the ground. Immediately.
Say gas prices fall, and I have 10,000 gallons in the ground for which I paid $1.40 a gallon, my retail price $1.65. Current price is back to $1.00 a gallon wholesale. Some of the retailers in my area have that $1.00 a gallon gas in the ground, and are selling for $1.25 a gallon. To stay competive, I am going to have to lower my prices.
If I put the price at $1.25, I will be in the red $4000 on that $1.40 a gallon gasoline. So, I lower the price, reluctantly, and try to cut my losses as much as possible.
I may not have explained it clearly, but that's why retail gasoline prices rise quickly and fall slowly.
