As you may have heard, the price of a barrel of oil is cratering through the floor, even moreso than last year, when it inexplicably started to freefall. As of press time, the price is now below $39/barrel. And obviously lower barrel prices will trickle down to mean lower gas prices at the pump.
I'm not complaining about it, at all. I just don't see lower gas prices here, or anywhere in the Midwest, actually. When the recent news of plunging oil prices started a couple weeks ago, the price of gas here actually went up. The most egregious case of this came when the price of a gallon of gasoline went up, get this, twenty cents (I think) from $2.60 to $2.80. I don't know what the nationwide average is, but we here in Flyover Country are way over it.
Why the hell is that? Really, I don't know. The given answer, at least according to news reports, is that a refinery in the Midwest had to shut down for repairs. To repeat: A refinery "had to" shut down. What pisses me off about this is that these blindside shutdowns seem to happen when we most notice them. When prices are high, refineries seem to shut down, sending gas prices even higher. And when they're supposedly low, like they are now, they also seem to shut down. You don't think oil companies are making money when those things happen, do you?
There is another reason I can theorize. It's based on a very old investigative report, but the circumstantial evidence is apparent. We here in Minnesota (if not necessarily in the Midwest) are dominated by regional chains that other parts of the country are not familiar with. Grocery stores are one thing, and I might blog about that in the distant future. But when it comes to gas stations, there are no more Amocos or Phillips 66's, the British Petroleum (BP) stations are hard to find, and I know of only one Shell station in the Twin Cities (even though it's close to me). Instead, the Twin Cities gas station market is dominated by two chains, SuperAmerica and Holiday, and I believe SA has a sizable advantage.
Economics say that if a market is dominated by a few chains (or, if you look at it that way, only one in this case), prices are not dictated by the market but are instead set by that chain or those chains. In this report, they showed graph after graph of spikes in the local market set by SuperAmerica, followed closely on other lines by similar spikes by the other chains in the MSP area. When SA sets the price, either higher or lower, it makes the market palatable for a price increase or hostile thus causing a price decrease. Regardless, prices here and possibly around the region don't go by the price of oil but by what SuperAmerica says it is.
And if so, that blows, that absolutely bleepin' blows. Because the news I see and hear doesn't match the reality I see whenever I drive by the signs at the stations. And it should. Luckily, SA and the other gas stations are now showing prices back down around $2.60, and assuming more refineries don't spontaneously "shut down," they may get cut even further because oil companies are switching to cheaper gasoline blends for the fall. Nevertheless, we have to recognize that, at least around here, the price of a barrel of oil means nothing when we fill up our gas tank.
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