What's your view? Click here to add your comment to this story.

Crude oil prices have plunged 17 percent this month and are now flirting with $50 a barrel, but gasoline prices are drifting downward at a more leisurely pace.

Although pump prices have fallen in recent weeks, the national average for unleaded regular gasoline is just 5.4 percent less than it was at the beginning of the year. In the Greenville metropolitan area, average prices have dropped 8.2 percent from Jan. 1 through Friday, according to AAA Carolinas.

A mild winter in the Northeast and growing inventories are behind much of the decline in crude prices. And Nicholas Rigas, director of the South Carolina Institute of Energy Studies at Clemson University, has a simple explanation why falling gasoline prices lag behind the decline in crude oil futures.

"There's a lot of money to be had by slowing down the drop in the price of gasoline, and there's a lot of money to be had to speed it up when oil goes up," he said.

Advertisement

Tom Crosby, spokesman for AAA Carolinas, said observers are correct when they say prices rise more quickly than they fall.

"When the price drops at the barrelhead, it takes two to three weeks to hit us here," he said, because the oil must be refined and distributed and that takes time.

He said that if station owners have gasoline in a storage tank at one price and the futures price drops, they continue to sell the gas for the higher price. But if they have gasoline in a storage facility that cost less than their next load will cost, they immediately start increasing the price.

"They're slow to lower prices and fast to rise them," Crosby said, adding that people in the oil industry, as in any business, have to make money to survive.

Rigas estimates that gasoline prices at the pump should trail the price of crude oil by two or three weeks because the price on delivery shows when the price should change.

"As it goes up, prices should not go up the next day," he said. "If they're trending downward, the price at the pump should trend downward over the next couple of weeks, trailing the crude prices."

Rigas said he's studied the pricing phenomenon and can't find a reason that prices need to rise immediately before the price of the gas being sold goes up.

He said, however, that the big money made in the oil business does not flow to the station owners. The big winners usually are the refiners, he said, and the same companies that produce the oil often own the refineries. In addition, the big oil companies also own stations where the gasoline is sold.

Crosby said congressional concern over the price of gasoline is behind the effort to reduce some of the tax breaks now enjoyed by the big oil companies in this country. The U.S. House of Representatives voted to eliminate billions of dollars in tax breaks and force the renegotiation of flawed drilling leases. The Senate still has to vote on the issue.

What does the future hold as far as prices are concerned?

Victor Shum, an analyst with Purvin & Gertz in Singapore, told The Associated Press that "in the short term, market sentiment is overwhelmingly bearish, and it's possible for the price to go lower than $50. A lot is based on OPEC's plans to cut production. If OPEC maintains supply discipline and sticks to production cuts, the oil market will gain."

Rigas said he expects prices to reverse because worldwide demand for oil continues to be strong. He also believes that OPEC will cut production because it is in the best interests of the oil-producing countries to support prices.

Gasoline prices will follow crude oil prices, the experts said. Distribution costs, whether the gas is bought independently or through an oil company, state taxes and station profits are among the reasons gas prices vary throughout the country.

When a driver buys a dollar's worth of gas, that dollar ends up being split in lots of directions -- on average 20 percent goes to taxes, 11 percent to distribution and marketing, 10 percent to refining and 59 percent to crude oil costs, according to the U.S. Department of Energy.