Price Of Oil Drops But Price At Pump May Lag Behind
PITTSBURGH (KDKA) - Oil prices dropped to below $100 a barrel on Tuesday after hitting $139 a barrel at the start of the Russian invasion of Ukraine.
That's good news for consumers, but as KDKA money editor Jon Delano explains, that drop may not be reflected at the gas pump, at least not right away.
When the price of oil shot up two weeks ago, gasoline prices jumped to record levels, too. Ten to twenty cents overnight for a number of days was common. Now that the price of oil has dropped nearly 30 percent, you'd expect a similar quick drop in the price at the pump. But don't count on it.
"We've seen prices level off, and actually the last couple of days in Pennsylvania, they've fallen by a couple pennies here and there," says Jim Garrity with AAA East Central.
Not much of a drop, as the state average for gasoline is still $4.41 a gallon.
Tim Redshaw is president of Countywide Petroleum, which supplies gasoline to a number of service stations in our region.
"It's going to swing up and down. I think this is an odd time in my history where the prices have moved so dramatically in such short periods of time," says Redshaw.
WATCH: KDKA's Jon Delano reports
Redshaw says that today's world price of a barrel of oil is somewhat unrelated to today's price of a refined gallon of gasoline. It takes time to see price reductions at the pump, he says.
"They are a little bit unrelated and it does take a little bit of time, maybe a week to ten days before you would see anything at the pump is my guess," he says.
In the meantime, someone is making money, but Redshaw says it's not those at the end of the supply chain,
When the refiners raise the rack price of gasoline to distributers like him, he says he passes along the price increase to the service station dealers while keeping his own price margins flat.
Delano: "When the price goes up, it's not you that's making the money? Is it the service station dealer, or is it somebody else?"
Redshaw: "When the price goes up, I would push that more on the people controlling the rack and the major oil companies."
The price of oil has dropped, say analysts, because OPEC appears to be willing to produce more oil and China, hit with COVID, is likely not to need as much energy in the short-term. If nothing else, that is easing the likelihood of even higher gasoline prices.
"I think maybe it's stabilized a bit, so I'm hopeful this is as high as it's going to get," says Redshaw.
If oil stays around $100 a barrel – instead of hitting $150 or even $200 as some predicted – that should halt the price rise at the pump and maybe start us back down to prices below four bucks a gallon.
But, says Garrity, "Crude oil has been going down the past couple days which could mean relief at the pump, but there are many factors at play. We've learned this is an incredibly volatile situation."
For a breakdown of state-by-state gas prices, click here. To find cheap gas in Pennsylvania, click here.
