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Gas prices falling by pennies while price of oil drops by dollars

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Posted at 5:35 PM, Jul 07, 2022
and last updated 2022-07-07 20:35:26-04

SAN DIEGO (KGTV) — While the price of oil has dropped significantly, currently sitting around $100 per barrel since the peak in March, price decreases for gasoline have fallen much more slowly. Thursday, the average cost for a gallon of regular in San Diego County is $6.15, down just 14 cents over the last month, despite 22 consecutive days of decreases.

“A lot of Americans have been seeing the price of oil plummet, but the price at their price station is only inching down," said Patrick De Haan of GasBuddy, one of the country's leading experts when it comes to analyzing gas prices. De Haan says at the station he visits in Chicago, gas prices have dropped 20 cents, compared to a $1 drop in the wholesale price.

De Haan says stations are not price gouging. “Price gouging is when you’re in excess of anyone else. I don’t view the opportunity that stations are taking right now, I don’t view that as price gouging. They are lowering prices. They’re just doing it at a slower pace.”

He explains that counterintuitively, station owners actually make less or lose money during rapid price hikes. That's because no station wants to be the first in the area to pass those hikes to customers for fear of driving them to competitiors. He says gas prices increases usually lag 2-5 days, meaning station owners make less profit or take a loss during that time. They then try to make it up when the price begins to decrease. “When prices start to fall, stations are trying to capture lost margin for when prices went up. And that’s why stations do pass along the decreases, but they take their time in doing so.”

De Haan says oil companies are increasing supply by refining more oil, which has helped start to bring prices down, albeit incrementally. He expects the trend to continue, with gas prices decreasing slightly each day for the next week or two, and potentially beyond. However, he says the global volatility makes it difficult to project much beyond that. “I’m hopeful that there will be more breathing room in the form of more oil production and more supply by the end of the year that could help bring prices down.”

However, De Haan says he does not expect prices to dip below $5 per gallon in San Diego before the end of 2022.