So, Why Is The Price Of Gas Rising Now?

Anne writes:

I just don’t get it. Does Consumerist know of a good media source that has a *current* (i.e., in the last week or two) breakdown of why the heck gasoline prices are rising 10 cents a week and more in the last month?

Let’s take a stab at some possible reasons.

There are a lot of partial explanations. It’s partly due to some refineries cutting production, both to increase profit by reducing supply and to make repairs, at least in California. It’s partly due to the crude oil market being in contango, the term for when “the current month’s (Feb.) future price is trading lower than the futures price for the following month”—which means there’s a lot of oil being bought and stored in tankers for future sale. (The problem: we don’t know how this contango directly translates to higher prices at the pump. Does it create a shortage? Can anyone educate us in laymen’s terms?) Oh, it might also partly be due to the temporary spike in crude prices back at the end of 2008, because often pump prices lag crude prices.

Or, gas station owners might be seizing the moment to take advantage of the low price of crude to make the profit they couldn’t make last summer:

That’s exactly why some stations raised prices quickly after oil futures jumped late last year: not because the more expensive oil had made its way through the production process, but because they saw an opportunity to make some money after struggling with paltry profits for months. So the usual lag between oil and gas prices may not have occurred this time at some stations — they wanted to raise prices, and they didn’t feel like waiting.

Quinn Cassidy, an independent gasoline retailer in Slidell, La., said his profit margin on a gallon of gasoline has improved significantly since the summer, when he and others sometimes made pennies per gallon. Now, because of crude’s descent, he says he can make 25 cents to 30 cents a gallon — and he makes no apologies for trying to keep the price as high as possible while remaining competitive.

We were hoping to find a simpler, straightforward explanation, but that’s the best we could come up with after looking around at various recent articles on the topic. Does anyone have a better explanation?

“Why Do Gas Prices Rise As Oil Prices Fall?” [CBS4]
“Gas prices continue upward spiral” [AccessNorthGa]
(Photo: Mingo.nl)