Gas prices sneaking back up again

Dan Grech Jan 16, 2009

Gas prices sneaking back up again

Dan Grech Jan 16, 2009


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.

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