Oil broke $90.00 yet the price at the pump doesn't budge? Can someone explain that?

[Iwasthere]

So oil drop 40% and stays down there for awhile. The price at the pump should at the least go down 20% but NOT just 4% imo.

[Captain Hilts]

1. People have shown they'll buy it at the higher price.

You'll have to wait for a price war among stations.

[mtnsnake]

17. Yup

They'll charge whatever consumers are willing to pay

[yellowdogintexas]

2. maybe stations have not purchased at the newer price? nt

[verges]

9. Gas pricing is based

on replacement cost.

[Canuckistanian]

3. Price drops need time to work through the system

Price increases are applicable immediately.

You're not supposed to ask why.

[RUMMYisFROSTED]

4. Let me try.

[Doityourself]

5. Dropped about 20 cents here...

[SheilaT]

6. I'm in Santa Fe, NM, and

prices at the pump have come down here. I've seen it as low as $3.44 for regular, and it's been mostly hanging in around $3.50-$3.60. I'm not sure what the peak here was, since I just moved here two and a half months ago, but it was a little over $4.00/gal back then. So it's down ten percent or so.

Keep in mind that the destruction of the oil rigs in the Gulf during Hurricane Ike, which seems to be a direct cause of the gas shortages in the southeast, may be why gas at the pump hasn't come down as much as it might.

[Frustratedlady]

7. We dropped below $3 last week

That's in Iowa.

[Marrah_G]

8. It's down to 3.20ish here in my town in Mass.

I don't expect it will last, but I am glad to save what I can.

[walther]

10. Simple: retailers price at replacement cost in rising markets, inventory cost in falling markets.

This is pretty standard for anybody in business to make a buck.

If replacement costs are going up, most price according to replacement costs. If replacement costs are going down, most will price at current costs. Just the way things are done in the business world whether it is Costco or the local gas station.

[verges]

11. Dropped in NE Ohio.

I paid 3.04 yesterday. Hoping for 3.00 today!

[Terran]

12. It's been falling where I live...

Down to $3.13, that's about $.80 less than a month ago.

[yellowdogintexas]

19. falling here too. nt

[MiniMe]

38. In the DC area too. It's down to $3.40

It was up to $3.75 right after Ike.

[bridgit]

13. At it's height we paid 4.45+ out on the road, yesterday found some for 3.54...

[The_Casual_Observer]

14. They hold off dropping the price as long as they can.

[1corona4u]

15. When republicans are in office, gas always drops right before an election.

At least while the Bushes were in office anyway...

[orwell]

16. There are still a lot of refineries offline from Gustav...

There is a gas shortage at the retail level...

[TankLV]

18. Oil industry GREED?

Juat a hunch...

[Supersedeas]

20. Bushler's Oil Cronies want to sqeeze every last Billion out of their front-man while they can

[abumbyanyothername]

21. Refinery capacity.

I hope the price at the pump doubles by the way.

Every kilowatt of solar electricity that we produce will get cheaper next year. Every kilowatt of wind power that we produce will get cheaper next year. Not so with oil and nuclear.

Switch to renewables immediately.

edit to remove nt from caption after I decided to add text.

[anigbrowl]

34. Correct answer FTW.

Damage to refinery capacity causes both drops in the price of oil and keeps the pump price high. In general, it takes 1-3 months for price signals to show up at the pump, though (as with all things) when prices go up retailers pass it on to the customer faster than when it goes down.

[izzybeans]

22. 4.29 at the station down from my house (chicago)

[Gidney N Cloyd]

25. I saw $3.87 at a Des Plaines BP-Amoco this morning. That's definitely down.

[izzybeans]

36. It was down to 4.09 when i got home.

My wife says its lower today.

[GrizzlyMan]

23. It's dropped like a rock in central Oklahoma

We're down to $2.89 in some places. Was as high as $3.88 this summer.

[TexasObserver]

24. Oil is a worldwide raw commodity. Gasoline is a US refined commodity.

The price of oil is based upon demand worldwide versus supply.

The price of gasoline is based upon the price of oil AND the cost of refining it to gasoline. When refining is down, as a result of the two hurricanes, it means gasoline supplies are down, irrespective of the drop in oil prices.

In summary, it's supply and demand.

[msallied]

26. It's actually dropped here. It's getting close to the $3 mark than it's been in awhile...

[DefenseLawyer]

27. There is no competition among retailers or wholesalers.

Everyone is selling all of their product and at a profit. There is no incentive to "undersell" the competition because there is no additional profit to be made in increasing your market share by lowering the price. They are satisfied to fix the price and carve up the pie rather than trying to get a bigger piece of the pie with a lower margin. That is made much easier by the fact that there are basically only 5 "competitors" in the wholesale gasoline market. It's called collusion.

[RayOfHope]

28. $2.88 in sourthwest mo n/t

[Skidmore]

29. I payed $3.19 this morning for the ethanol blend.

Didn't think to check the other grades because I never use them.

[4lbs]

30. Here in San Diego, CA, I saw gas for around $3.39 a gallon at an ARCO station late last week.

A month ago, it was well over $4.00.

So, it has dropped significantly in some parts of the country.

[jberryhill]

31. Refinery throughput

A bunch of refineries are still offline. If you want to run your car on crude or rather, push it down the street after filling it up with crude, you are welcome to try.

[HughMoran]

32. Yeah, it's $3.22 here, but really should be closer to $2.50

Funny how it goes up quickly and drops slowly. Unfortunately, oil contracts through December are already commited at much higher barrel prices (good when oil goes up, bad when it goes down).

[Overseas]

33. The GOP controls the executive branch. Grand Oil Party.

Republicans want us to let the oil guys decide what they want to do. The "free" market, don't you know.

And Johnny wants to extend their big tax breaks.

Country Club First.

[fNord]

35. ...And Oil CEOs announce record earnings for the 28th quarter in a row

Has nobody really noticed this for the last 7 years?

[Seedersandleechers]

37. I paid $2.92 yesterday

In Kansas City, Mo.

[Okie4Obama]

39. Gas in Oklahoma: 2.87. This is why I live in this god-forsaken place.

[Terran]

40. And now two days later

it's down to $2.99 (in mid-Missouri). That's the first time under three bucks in a looong time.