Oil Drops, Pump Prices Follow More Slowly

Retail gasoline prices lag wholesale costs on the going up and the coming down.

May 11, 2011

SAN FRANCISCO - It might frustrate consumers to see that gasoline prices have not dropped despite the fall in crude oil prices last week, but that??s to be expected, MarketWatch reports. Crude oil prices plummeted close to 15 percent last week, but pump prices remained high throughout the United States.

"Retail prices lag wholesale prices on the way up and the way down," said Jeff Lenard, NACS spokesman.

Motorist might see a slight dip in prices starting this week. Monday??s average price for a gallon of regular gasoline reached $3.96, still higher than last week??s average of $3.952.

"Customers generally don??t see the first few days of wholesale price increases because they are absorbed, full or in part, by retailers trying to keep customers," said Lenard. "On the way down, the opposite happens and retailers try to make up for what they lost on the increase." Generally, price swings take seven to 10 days to be fully processed to the consumer.

The volatile nature of crude oil swings also factors into gasoline prices. "Volatility can be the friend of retailers, but it??s a friend that stumbles on your lawn with drunken breath sometimes," said Tom Kloza, chief oil analyst with Oil Price Information Service.

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