Why Gas Prices Sometimes Remain Sticky While Petroleum Costs Drop

Many drivers have come to feel helpless in the face of gas prices, and there are often good reasons for that kind of resignation and passivity. Few drivers can hope to do much to take the sting out of rising gas prices other than cutting back on unnecessary driving and planning to buy a more efficient vehicle. Among those who pay close attention to world energy markets, though, the negative feelings are often even more pointed. As many have discovered, gas prices often stay high for a long time after the costs of petroleum have dropped, sometimes even seeming to rise in response.

That can seem like a situation designed to take advantage of the little guy, but there is typically more to the picture than seems obvious at first. As one informed source points out, current petroleum prices often reflect relatively little of the actual cost of producing and delivering a gallon of gasoline. As a result, it can be entirely reasonable for gas prices to remain high for a long time after petroleum prices have dropped, and even for movements of opposite kinds to occasionally crop up as well.

One important reason for this is that refinery capacity often contributes most of all to just how much a given quantity of gasoline actually costs. With most refineries costing billions of dollars to build and quite a bit of money to keep running, these investments are never to be neglected. Even should petroleum prices drop significantly, it can be the case that the costs associated with refining this raw material into gasoline do not do the same. In some cases, in fact, these latter costs might just rise even while petroleum prices are dropping.

Another factor that sometimes goes overlooked is that refiners are not normally buying on the spot markets. Instead of paying whatever the current asking price for petroleum might be, they will typically have longer-term contracts designed to smooth pricing instabilities. As a result, the cost of refining a gallon of gasoline and delivering it to customers might drop a good deal more slowly than the activity on world petroleum markets might suggest.