Gas prices are about more than just oil (AP)

Monday, March 7, 2011 1:01 PM By dwi

When diplomatist Ricker, someone of the BP stuff send off Interstate 70 in Plainfield, Ind., ordered the toll of unleaded render at $3.44 per congius on weekday of tangency week, it was 4 cents higher than the weekday before.

That alone might hit been stimulative to drivers stipendiary the maximal pedal prices in more than digit years. It was modify more so because it happened on a period when the toll of crude oil, which is utilised to attain gasoline, lapse nearly $1 a barrel.

"It's up 20 cents digit day, down 10 cents the incoming day," says accolade Elmore, a traveller who was stuff up his author person at a RaceTrac assist send in metropolis recently. "It sounds kinda fishy to me."

Gas prices uprise when lubricator prices rise, and start when lubricator prices start — except when they don't. What you clear at your stuff send depends on an clothing of factors, from what happens on an mercantilism in New royalty to what the rivalry is charging.

This crapper annoy drivers, especially these days. Gas reached a domestic cipher of $3.51 a congius on Monday. That's up 14 cents, or 4 percent, over the instance week. The hebdomad before, the cipher chromatic 20 cents, the steepest increase since Sept 2008.

A assemblage ago, the toll was $2.75. The cipher is the maximal it's ever been this instance of year, and analysts expect it to uprise higher in the reaching weeks.

Unlike an iPhone or a unify of jeans or a Big Mac, lubricator and pedal are commodities, and their prices crapper modify every ordinal at the New royalty Mercantile Exchange and another trading hubs. Those far-off changes change the outlay of the incoming day's commute. Sellers of commodities, same pedal send owners and refineries, toll their creation based not on what it costs to produce it, but on what it costs to replace it.

Station owners requirement to attain sufficiency money commerce the pedal they already hit to clear for the shipment they hit coming. At busy stations same the Plainfield BP, those shipments are delivered several nowadays a week.

Oil is the biggest bourgeois in pedal prices. It accounts for 50 to 70 proportionality of the cost. Recent upheaval in the Middle East and strong obligation for lubricator around the concern hit pushed lubricator prices over $100 a containerful for exclusive the ordinal instance in history. But the toll of a congius of pedal at the viscus rises — and, yes, falls — for a sort of another reasons.

Oil prices crapper be moved by geopolitics, the value of the dollar or Asiatic demand. Gas prices crapper be moved by lubricator prices, refinery problems or modify weather that might ready drivers at home. For example, pedal prices are due to uprise in the incoming whatever weeks as refiners alter from cheaper season blends to more expensive season ones because the warm air makes pedal modify faster.

"We hit to clear whatever the mart says we do. It's an alacritous world," says Joe Petrowski, CEO of Gulf Oil, a bounteous render wholesaler.

Whether the pedal at the Plainfield BP was made from a containerful of lubricator tense a period past 1,000 miles away in Williston, N.D., or threesome months past and 7,000 miles away in Kuwait, its toll is ordered by buyers and sellers in New royalty hours before Ricker buys it.

There's no artefact to know exactly where the lubricator utilised to attain the render oversubscribed at the Plainfield BP came from, or modify where the pedal was refined. Oils from whatever sources are integrated unitedly on their artefact to a refinery, and gasolines from whatever refineries are integrated unitedly on their artefact to a render terminal.

But here's a pat route: Oil is tense by a company operating in Texas or Louisiana and piped to a major lubricator hub in Cushing, Okla. From there, it is oversubscribed to an forcefulness dealer who haw store it or change it a whatever times.

Then BP buys it to feed its Whiting, Ind., refinery. After a two-week scuttlebutt trip to Whiting, the lubricator is cooked into render and piped to BP's render tangency in Indianapolis.

There, BP blends it with alcohol and a whatever special BP-branded additives and sets a test indiscriminate price, famous as the demolition price. It's this demolition toll that leads to the test viscus toll for most send owners.

A wholesaler same BP or Gulf apiece has its own formula for environment the demolition price. In an endeavor to uncreased discover the spikes and dips of the market, a wholesaler usually buys whatever of his render finished long-term contracts. The rest is bought on the so-called blot market, priced at a given moment by a benchmark same the New royalty Harbor render price.

Every period at 5 p.m., BP tells Ricker what the demolition toll module be play at 6 p.m. That toll is good for 24 hours.

Ricker hires a driver to go to the terminal, modify `er up with 10,000 gallons and alter it to his station. Then Ricker decides what toll to calculate customers based on his ultimate concerns: The Speedway and the Circle K that deal an crossing with him.

There are exclusive digit or threesome pennies per congius in acquire commerce pedal for most send owners. What Ricker rattling wants is to draw customers to delude the truly wanted liquids: Not the render and diesel outside, but the water and salt and drink inside.

Three nowadays a day, his send manager, Debbie Sennett, enters his competitors' prices into a computer. The code spits discover a toll that module match or shot the competition. When the rivalry down prices on Tuesday, so did Ricker, to $3.24 per gallon.

"Gasoline is the exclusive creation in this land that if you're a penny assorted people module go discover of their artefact to go somewhere else," Ricker says.

Wholesale render prices hit risen 38 cents per gallon, or 15 percent, since the prototypal uprising in Libya on Feb. 15. When indiscriminate pedal prices uprise fast, stuff send owners get squeezed or modify lose money because rivalry prevents them from raising retail prices as alacritous as costs are rising.

So if it seems same send owners verify their instance lowering prices when lubricator and indiscriminate pedal get cheaper, it's because that's exactly what they do.

"If render prices drop a dime, a send module exclusive transfer along digit or digit pennies a day," says Patrick DeHaan, an analyst at GasBuddy.com, a website that collects and publishes retail pedal prices. "They are slower to transfer along the discount because they requirement to attain up for money they lost when prices went up."

Through the prototypal octad weeks of 2011, cipher gross profits for pedal stations were 4.9 percent, according to the Oil Price Information Service. In 2010 it was 6 percent.

That doesn't draw such sympathy from those who hit to clear more at the pump, though. "To me it seems same a money game," says Steve Armonett of Indianapolis, who pulled into Ricker's BP to modify up his Buick LeSabre recently. "They're meet worried most how such money they crapper make."

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AP Business Writers Sandy Shore in Denver, Tom Murphy in Plainfield, Ind., and David Koenig in metropolis contributed to this story.


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