Who says miracles can’t happen? After four straight days of steady decline, crude oil prices finally plummeted by nearly 9 percent on Thursday to US$99.80 a barrel – the first time it has been under US$100 a barrel for nearly two months.
But don’t start filling up your fuel tanks yet. Although the price of crude oil has been dropping in recent days, the cost of fuel at your petrol station remains impervious to these changes. In fact, the average pump price for regular gasoline has actually increased in the past couple of days for a number of US cities.
"Crude would have to stay around $100 for five to ten days before we see gas prices come down,” according to Darin Newsom, a senior analyst at energy trader DTN.
Historically, gasoline companies have also tended to expand their profit margins first before passing any savings down to the consumers.
ExxonMobil, for example, earned over $10 billion in the last three months – nearly as much as its total earnings in 2002. Furthermore, according to a report by The Hill, “every $10 increase in the world oil price (or 25-cent increase in gas price) yields nearly $5 billion more in profits posted by ExxonMobil alone.”
Not surprisingly, a study by the Pew Research Center showed that 31 percent of Americans blamed corporate greed among oil companies, speculators and oil-producing nations as the main reason behind high gasoline prices. A further 19 percent believed that high gasoline prices were caused by wars and unrest in the Middle East and Libya, while 14 percent blamed national policies for rising fuel prices.
Fortunately, there remains some cause for optimism. Most analysts believe that fuel prices have peaked and will soon drop off. Economists such as Carnegie Mellon University’s Lee Branstetter also remain confident that market forces will eventually counteract any artificially high fuel prices.
“While it takes much longer for price of retail products to adjust downward, eventually you do observe adjustments,” Branstetter said. “The forces of competition do eventually assert themselves."
Rising fuel prices has been a constant source of gripe for many individuals. But how does fuel prices compare to other common household products? Find out through the infographic below.