Relief at the gas pump? It's coming - eventually
KINGMAN - John Anastasoff is asking the same question a lot of drivers on the West Coast are asking: If crude oil prices have dropped to a six-year low of $43 a barrel, down from more than $60 a barrel in June, why are gasoline prices still so high?
Prices in Kingman range from about $2.75 a gallon for regular unleaded at Terrible Herbst to $3.20 at Beale Street Chevron.
Gasoline dipped below $2 a gallon in Kingman in January when oil was around $50 a barrel. How can it go up in price when the price of oil decreased, and Canadian and U.S. oil and gas production is at an all-time high?
"It's a little frustrating when the price of oil drops 25 percent and we're still at $2.75 a gallon," Anastasoff told the Daily Miner. "There's something really wrong here. We're getting gouged."
Oil companies typically explain that it takes several weeks for gasoline to make it from the refineries to the retailers, and whereas prices may jump overnight, the downward trickle is always over an extended period of time.
But gasoline prices in Kingman haven't budged since June, Anastasoff noted. He was in Houston last week and it was $1.91 a gallon.
A number of determinants factor into the retail price of gasoline, including supply and demand, cost of crude oil, fuel blend specifications, transportation costs and competition in the marketplace.
There are no oil refineries in Arizona, so almost all of the state's gasoline is piped from California and Texas. Disruptions at a refinery or problems with the pipeline can severely reduce Arizona's supply and cause prices to spike for a while. An explosion in an Exxon Mobil refinery in California drove gasoline prices to $5 a gallon in downtown Los Angeles in July.
Good news is coming for Anastasoff and other motorists.
Industry analysts are predicting a steep decline in gasoline prices as summer vacation travel lessens and winter blends begin to make it to the pumps.
The Lundberg survey showed a national average of $2.71 a gallon on Aug. 7, down 11 cents from two weeks ago and down 81 cents from a year ago.
Kingman's average is $2.92 a gallon, down 4 cents from a week ago, according to AAA.
Phoenix-Mesa has seen a 7-cent drop in gas prices from a week ago to $2.75, though prices are up four cents from a month ago.
"We're seeing prices going down for the last 25 days," AAA spokeswoman Michelle Donati said. "They were up a bit when supply issues were happening in California."
Arizona was experiencing gasoline price increases not because of crude oil, but because of production and supply issues, which have softened a bit, the AAA official noted. Gas prices have dropped 5 cents over the last five days.
Rural areas such as Kingman will always have higher gas prices than metropolitan areas such as Phoenix and Tucson because of added transportation costs and less competition, Donati added. QuickTrip opened gas stations in Tucson recently and caused every station to drop their prices.
AAA expects gas prices to remain high through Labor Day. With the drop in crude oil prices, gasoline should come down in the fall and winter, Donati said. Gas stations also switch to a cheaper, conventional blend on Sept. 15.
"If we're going to make a run at $2 (a gallon), it would probably happen in the fall moving into winter," she said. "It may not be possible for places in the state that are 90 cents away from $2. Tucson is at $2.43. It'll show up first at $2."
Consumers have been blaming oil companies and talking about price manipulation since the gasoline shortages of the 1970s, and they've grown accustomed to summer spikes of $1 or more a gallon.
Gasoline prices are not regulated in Arizona. Retailers can sell gasoline as high as the market will bear, unless the high prices are the result of illegal activity.
Consumers often contact the Attorney General's Office to complain about "price gouging" by gasoline retailers, but there are no laws against such business practices.
Gasoline topped $4 a gallon in Arizona in 2008, and prices are back to where they were five years ago, AAA's Donati said.
A global oversupply in oil since last summer, led by strong U.S. shale crude output and record pumping by OPEC producers, have driven prices down from more than $100 a barrel in June 2014.
U.S. crude has lost 19 percent on the year, extending last year's 46 percent drop.
The economic situation in Greece and China also has an effect on crude oil prices.
China devalued its yuan and that sent the U.S. oil benchmark tumbling Tuesday.
Just because the price of crude oil has dropped doesn't necessarily mean gasoline prices will follow, Donati said.
Crude oil can move up and down by $2 or more in trading and it won't show up at the pump at the end of the day.
"Generally when there's an uptick in crude oil, there's a jump in the wholesale price. But when prices dip down, it takes a while to see that relief," Donati said.