Gas price puzzle | Arkansas Blog

Wednesday, September 10, 2008

Gas price puzzle

Posted By on Wed, Sep 10, 2008 at 10:40 AM

A reader sends along the following observation on gas prices. Good point, I thought. File it with some other interesting questions, such as how the U.S. will make multinational oil compaies who drill in Alaska sell the oil only in the U.S. And how we can make oil companies who aren't exploring all of their existing leases ramp up to explore offshore territory newly approved for exploration.

Although crude oil prices are dropping rapidly (according to the Department of Energy EIA website), the retail cost of gasoline in Little Rock and across the U.S. is making a somewhat slower descent. A barrel of oil is cheaper than it was six months ago, and yet a gallon of gas is 40 to 50 cents more expensive in the LR area and most of Arkansas.

The last time light sweet crude dropped below $100 barrel, in early March, the price for a gallon of regular unleaded was $3.16. Today, as crude hovers again around $100, most of us are paying anywhere from $3.50 to $3.65 for regular unleaded. Big Oil and their lobbyists often repeat the mantra that rising pump prices follow the same trend line as crude oil prices. But when the price goes down, they change their argument to say that the current price reflects the delay that it takes for crude to be refined to gasoline, and then delivered to the local gas station. Either way,  the pump price in Little Rock should be closer to $3 a gallon than $4 a gallon.

Oil companies have us right where they want us now -- after the shock of $4 a gallon gasoline, we think that $3.50/gallon gasoline is cheap. Next year, we will be saying that $4/gallon is cheap. The question that consumers and our lawmakers should be asking now, including Attorney General Dustin McDaniel, who made a campaign promise that he would protect consumers from price-fixing and collusion, is why are we being gouged?


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