The price of crude oil has dropped significantly compared to a month ago, but U.S. drivers are still experiencing a sticker crash at the gas station.
Crude oil has fallen more than $ 20 a barrel, or a nearly 20 percent drop from its March high. But gas prices remain high, averaging $ 4.11 a gallon at U.S. stations, according to GasBuddy, a service that tracks fuel prices. This means that prices at the pump have dropped by about 5% over the same time.
So why aren’t they crude oil savings translates into a price reduction for drivers?
“It sounds weird, but it’s something economists have been waiting for and studied for a long time,” said Ben Storrow, a journalist for E&E News, an energy-covering news outlet.
When the price of crude oil rises, gas stations often wait to raise their prices so as not to scare customers.
“But when prices start to go up, they go up very quickly,” Storrow told CBS News.
On the other hand, when the price of crude oil falls, gas stations gradually lower their prices. This allows them make a profit on the discrepancy between what they pay and what they charge motorists, he added.
“When the price of crude oil starts to go down, prices at the pump will go down more slowly. In fact, this is where gas stations make the most of their money,” Storrow said.
When will gas prices go down?
An imbalance in the market has increased the cost of gasoline over the last year. Demand, caused by the economic recovery after the closures of COVID-19, has exceeded supply, which takes longer to recover.
“Demand has been growing faster than supply. It takes time to get the drilling rigs out into the field, it takes time for oil to flow,” Storrow said.
There may be some relief on the horizon.
The shutdown in Shanghai due to an outbreak of COVID-19 has reduced that in China demand for oil at more than a million barrels a day, according to Bloomberg News. Rising cases in Beijing are fueling fears of closures in China’s capital, which could further reduce oil demand.
“That could alleviate some of the market stagnation right now,” Storrow said.
However, this may not translate into immediate relief for American motorists.
“Predicting oil prices is a complicated business. I don’t know how quickly this would go through the system and consumers would see it at the pump,” Storrow added.
According to the U.S. Energy Information Administration, prices are expected to be around $ 3.80 this year.
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