Fluctuation in Gasoline Prices
by: Laurie Johnson, May 9, 2011 9:05:00 pm
After spiking up rapidly, gasoline prices had just started to slowly come down again in response to last week's drop in crude oil prices. But the relief may be short-lived. Andy Lipow is president of Lipow Oil Associates, a consulting firm. He says gasoline retailers are caught when prices rise.
"The retailer who has to purchase his gasoline at the truck rack, sees an immediate impact in the market price and is passing that on to the consumer. As prices fall, the independent business man, who's the owner of the majority of the service stations that we see around town, sometimes is stuck with some high-priced gasoline and is reluctant to reduce his price immediately as the market goes down and he wants to liquidate his inventory first."
Lipow says there's an added problem in that the supply of gasoline is down.
"Since the beginning of the year, crude oil inventories have risen about nine percent, but on the other hand gasoline inventories since the middle of February have declined 15 percent. So what we have is a problem of refineries, through a combination of scheduled and unscheduled outages, they are unable to take the crude oil and produce gasoline and diesel fuel for the consumer."
The gasoline futures market is likely to fluctuate this week because Lipow says investors are concerned about possible flooding along the Mississippi River near a number of oil refineries.
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