Local News
Email
Print
Pump Puzzle
Consumers paying more as refiners produce less
Journal photo by David Rolfe
Lashameica Shepard pumps gas at the BP station at Brewer Road and Peters Creek Parkway. Many motorists are questioning why they are paying more for gas when the price of crude oil is depressed.
ADVERTISEMENT
Published: February 20, 2009
Memories of $4 gas from last summer are still fresh in Charles Miller's memory.
He owns a 30-foot motor home.
"It really hurts on that," Miller said as he pumped gas at the Brewer Family Fare on Peters Creek Parkway yesterday.
And as are many motorists, he is well aware that the price of gas has been going up while the price of crude oil has been going down.
"I think it's been a rip off by the major oil companies because they're making maximum profits right now," Miller said.
Robert Johnson of Winston-Salem agreed.
"Something needs to be done about it is all I can say," Johnson said.
Benchmark crude for March delivery surged 14 percent, or $4.86, to settle at $39.48 a barrel yesterday, but overall the price is well below the peak of $147 a barrel last July.
In the Triad, the average price of a gallon of regular unleaded gas was $1.89 yesterday, according to the AAA Carolinas auto club. The state average was $1.91, and the national average was $1.95.
The price in the Triad was $1.75 a month ago.
So why are gas prices rising as oil prices fall?
Tom Crosby, a spokesman for AAA Carolinas points to a couple of things.
"Fewer miles are being driven and less gasoline is being consumed and refineries are not making as much gasoline, thus using less crude oil," he said.
The biggest issue, according to industry experts, is that oil refineries are cutting back on production.
Crosby said that the oil refineries that had losses from storms in the Gulf Coast last year are trying to make a little bit of their money back.
"They don't want to create an oversupply of gasoline that would drive the prices down," he said. "They still want a little bit of demand there, so that's why they are cutting back."
He also said that the crude-oil price that's always quoted in reports is called West Texas Intermediate. This benchmark for crude-oil prices is drilled in Texas.
Right now, West Texas Intermediate crude is selling for about $10 less than international oil, he said, but there's no way to get that crude to the refineries in enough volume to offset the cost of the international oil.
"What we pay at the pump comes from overseas crude, mostly because they have delivery distribution channels that we don't have with West Texas Intermediate," Crosby said.
In addition to the slowdown in oil production by refineries as a result of lower demand, there is a lag in price between when crude is refined and when it reaches the pump, said Travis Sheetz, the vice president of regional operations for Sheetz Inc., based in Altoona, Pa. The price that Sheetz Inc. pays for its gas is set by refiners, he said.
Sheetz said that the volume of product purchased by retailers also affects the prices they pay to refiners.
"Some people can buy in big quantities, and some people can't if they are a smaller operation," he said.
■ Fran Daniel can be reached at 727-7366 or at fdaniel@wsjournal.com.
Email
Print
