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Oil prices dropped, why hasn't the price of gas?

Crude oil prices have dropped $30 a barrel since March 6
Posted at 7:35 AM, Mar 17, 2022
and last updated 2022-03-17 10:28:04-04

WEST PALM BEACH, Fla. — Drivers are seeing only a slight relief at the gas pump this week.

Gas is averaging at $4.29 per gallon as of Thursday morning according to AAA, down from an average of $4.36 per gallon one week ago.

The price of crude oil is down even more, dropping under $100 a barrel after setting a 13-year high on March 6 at $130.50.

So many are asking, "Why we aren't seeing that same price drop at the gas pump?"

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Getting gas from the source to the pump is a complex process with a lot of moving pieces.

Larger companies are able to lock in prices months in advance closer to the source.

However, the owner of West Palm Gas Station, Alex Fernandez, said their prices are a direct reflection of prices set down south at Port Everglades.

Fernandez said they are in contact with the port several times a day to figure out how much a tank of gas is going to cost and when they can get it.

He said 6 months ago they talked half as often.

To fuel even more frustration, Fernandez said they are buying half as much gas at one time.

He said one tank costs $40,000. A year ago, he said it was $20,000.

"It’s not that they are trying to gouge," Fernandez said.

He said prices at the pump aren't declining as fast as the price per barrel of oil because gas stations owners must prepare for their next shipment.

"They just want to protect themselves, in terms of, I just spent $40,000, how long can I make this tanker last before I have to spend another $40,000 on a tanker," Fernandez said.

So, are prices going to keep going down?

Florida Atlantic University Associate Professor of Economics William Luther said by the fall prices could be back to where they were prior to the Russian invasion of Ukraine.

Luther said it's demand and supply pressures that push the prices of gas.

He said expanding oil supply and easing sanctions on countries like Venezuela could ease the supply pressures.

"I think that there are a lot of supply constraints at the moment that look like they are going to ease up," Luther said.

But there's a lot of uncertainty surrounding these decisions, which he predicts will lead to more volatility in the coming weeks.

"OPEK seemed pretty open to increasing supply when oil was $127 per barrel. They might not be so open when its $100 per barrel. The U.S. is thinking about easing sanctions on Venezuela, and that's an easier political decision to make at $127 per barrel, but at $100 per barrel maybe not so much," Luther said.