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Gas prices sneaking back up again
The price of self-serve unleaded gasoline hit the $2-per-gallon mark at some gas stations, including this ARCO station in Los Angeles County.
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Scott Jagow: The price of oil dropped to $35 a barrel this morning. But you may have noticed that gas prices are on their way back up. An explanation from Marketplace's Dan Grech:
Dan Grech: AAA says the average price of a gallon of gas is almost $2 -- 17 cents more than a month ago.
Philip Verleger is an oil economist at the University of Calgary. He says the main factor in this price jump is refiners have cut supply, allowing them to charge gas stations higher wholesale prices.
Philip Verleger: Margins have gone back up towards a more normal level of, say, 40 cents a gallon or so, and that's where we are right now.
Refiner's profits had gotten as low as 6 cents a gallon in the second half of last year, as gas prices tanked.
Verleger: It's essential that the people who make the petroleum products earn a rate of return on their capital. Otherwise, they're going to go bankrupt and they're going to close.
One refiner, Lyondell, did declare bankruptcy last week.
The price jump at the corner gas station could be temporary. If crude oil prices stay below $40 a barrel, AAA predicts gas could hit an average of $1.55 a gallon in coming weeks.
I'm Dan Grech for Marketplace.
Markets are a great way to see the value of items...only if they are open and infinte in supply. When the amount of supply is limited the "market" is controlled by those who have the supply. Think of the diamond market. If OPEC wanted the price of oil to be $100 a barrel then they could set the rate and listen to people complain. Sure there would be those who sell curde cheaper, but for how long can they keep up the supply to maintain those lower rates.
This is in reply to the earlier comment, I can understand the need for an alternative to petroleum (and yes, lotsa people are working on that), but the "Market" is a very effective medium that translates the true value of a product, We don't want that to go away. If you can't deal with the volatility in the Crude price, you could hedge ( the markets provide you with the tools ).
