Why Do Gas Prices Jump So High Seemingly Overnight?

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gasThe price of a gallon of regular gas will jump 17 cents on Friday, to about $3.26, on the New Jersey Turnpike and the Garden State Parkway.

It’s hard not to think you’re being gouged at the pump when you see the prices go up that fast, and in some cases, you are. Aside from that, though, the buying and selling of gasoline is a complicated business based on anticipation as much as reality, reports CBS 2′s Don Dahler.

Drivers in the Tri-State are growing increasingly frustrated with growingly expensive gas, and are trying to find ways to avoid the pumped up prices.

“Within a month it went from $3.30 to $4.00,” Long Island City resident Philip Klugman said. “To me, it’s a little ridiculous.”

“I’m filling up now, because I’m sure they’re going to boost their prices up,” Sayreville resident Scott Pimentel told CBS 2′s Hazel Sanchez. “I don’t need to refill, but I’m topping it off.”

The turmoil in the Middle East is a big reason for the spike in oil prices, but the oil that sells for $100 a barrel still has to be refined, so many are wondering why the prices went up overnight.

It’s true that investors will speculate on whether world or natural events will push up the cost of crude oil – eventually leading to higher gas prices – but service station owners also raise and lower their prices based on what it’s going to cost them to replace the fuel that customers are buying today.

“These are businessmen who are buying their supply every day, every other day, and it’s replacement cost,” Beth Heinsohn, of Oil Price Information Service, said. “They have to have enough money, literally, to buy the next tanker load that they sell to customers.”
That oil that made the gasoline that customers are putting into their cars today may have only cost $85 a barrel, but the oil that makes the fuel that will replace it will cost a lot more. Customers, then, are paying more now to cover the station owner’s cost in the future.

“For example, between Monday and yesterday, wholesale prices – the cost at which these guys buy their material – went up across the country 11 to 18 cents,” Heinsohn said.

Station owners didn’t pass that full increase along to customers, because they play the averages, knowing that when the price of oil comes back down, their prices will stay up long enough to make up the difference.

{CBS Local/Matzav.com}


3 COMMENTS

  1. While the 17 cents jump may sound high, the gas stations on the NJ Turnpike and GSP can only change prices once a week, unlike other stations that can change prices daily (or is that hourly?).

  2. The stations pay cash every time they buy?isnt there credit for 30 days ,what is she saying that they need to pay for the next tanker, bolony

  3. Rod,You and I agree on many tihgns but, here we part company.I’ve worked with both sectors my orogins are nculear, as you know, but I’ve worked with BP, SHell and Exxon and frankly seen little difference in the cultures. Engineering-led, and, compared to the inate hazards of what they do, spectacularly good records.Take an example that you addressed in a recent thread pipeline safety. The reality is, trutium leaks pose a tiny, tiny risk. One that doesn’t stand up to examination. But, in reality, given the energy we shove down them, neither do pipelines. I used to work about 500 metres from a pumping station run by our UK Pipelines Agency, that moved aviation fuel from refineries to Heathrow airport. I can honestly say it never caused a moment’s concern (even when we realised we were about to the primary data-centre for the UK’s biggest energy retailer on a site adjoining Heathrow’s tankfarm).Our argument isn’t with gas. To a very large degree, gas and nuclear are natural partners gas generation plant is low-fixed cost,, high marginal cost. It’s fast responding. Nuclear, even in newer designs is high fixed cost, negligible marginal cost and, alhtough capable of load following, isn’t ever going to do balancing and peaking load. Gas can readily be run in Carbon Capture mode I’ve worked on a plant that would be identical to the front end og a gas-fired CCS plant.And gas can do what nuclear can’t provide transport fuels at low(ish) carbon impact, and low cost. I’ve run an LPG fuelled car (technically barely distuinguishable from a CNG system). I’ve been trying, for three years, to come up with a viable, competitive way of doing three miles each way most days from my local train station in an EV all I’ve been able to make work is a 1KW electric bicycle (officially illegal under local EU legislation).Compare that with coal, or renewables, and there’s nothing like that synergy.Let’s be honest the obstacles for nuclear are in our own ability to demonstrate safety (an argument already won, on any rational basis), and economics. That latter depends on showing consistent, rapid build more than anything else. And in markets rigged to support renewables. Gas, assuming some reasonablly low carbon tax, isn’t the issue. Reply

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