HOUSTON — You may do a double take as you pass your local gas station. Chances are, the price you pay at the pump has jumped markedly in the past couple of weeks, even as crude prices have fallen.
The average national price for a gallon of regular gasoline rose seven-tenths of a cent overnight to $1.799 — well below the $3.05 average of a year ago but up nearly 14 cents in the past month, according to the AAA travel club, the Oil Price Information Service and Wright Express. (For local prices, see Page A13.)
At the same time, the price of crude — which accounts for about 60 percent of gasoline's cost — has been on a steep decline.
So what gives?
Here are some questions and answers about the connections between oil and gasoline prices.
Q: Why aren't gas prices falling at my local service station right now?
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A: While crude oil and gasoline prices very often move in the same direction, there's usually a lag between crude's decline (or rise) and that of gasoline. Analysts say the ongoing uptick in gasoline prices is likely tied to oil's sharp rise at the end of last year, when fighting between Israel and Palestinian militants raised concerns about supply disruptions in the oil-rich Middle East.
Q: If that's the case, now that oil has retreated to below $40, shouldn't gasoline get cheaper?
A: It should — and it might — but other factors are at play.
For one, the companies that process crude into products such as gasoline are sharply cutting production, in part because demand has fallen off so much. Less production means less supply, which tends to push prices up.
The gasoline producers are trying to make some money in the wake of a dismal 2008.
Q: But doesn't that mean they're simply inflating the price of gasoline?
A: That's the opinion of the non-profit group Consumer Watchdog, which tracks the industry closely and has consistently called for greater regulation of refineries.
Consumer Watchdog says production cuts at refineries in California, for example, have far exceeded the state's drop in consumption.
Q: Are gasoline prices going to go up even more this summer?
A: Probably, but how much depends on whose forecast you use. Remember that summer is driving season, and gasoline prices always climb when thousands of people begin to take sun-inspired road trips.
Tom Kloza, chief oil analyst at the Oil Price Information Service, predicts prices will move sideways over the next few weeks before they begin to climb in the spring, reaching $2 to $2.50 a gallon. He said he doubts that prices can get much higher than that, given the weak economy.
In another forecast, the U.S. Energy Department has said gasoline prices will likely average $2.37 a gallon through 2009.