Why does gas still cost so much?

October 14, 2008 6:08:26 PM PDT
Some people feel helpless regarding gas prices. Others, like Joshua Phillips, say the way the oil industry reacts to supply in demand does not make sense.

"I find it frustrating," Phillips said. "That we can see something as simple math; the price went down with the oil, then the price should go down at the pump. Who's the people getting hurt? It's us."

Last year, when the price of crude oil hit $80 per barrel, Bay Area gas prices rose $3.07, according to the American Automotive Association. The price of crude Tuesday was $81 per barrel and gas prices averaged $3.70.

The difference can be explained by the rocket and feather effect, Antonia Juhasz said. Juhasz is the author of "The Tyranny of Oil," and calls the current situation "price fluctuations.

"When the price of oil goes up, then the price of gasoline goes up like a rocket," Juhasz said.

Then companies know that consumers expect the price of fuel to rise.

"When the price of oil goes down, the price of gasoline feathers slowly down so they can take advantage of your conception that the price should be high," she said.

According to oil industry analysts, when the price of crude oil falls, it takes about three weeks for those prices to be reflected at the pump.

A select few oil companies own all the refining capability in the state, and that allows them to control the flow and price of gasoline.

If crude stays around $80, prices at the pump will continue to fall, possibly to around $3 per gallon, according to director of the University of California Energy Institute Severin Borenstein. That could save the average two-car family about $15 per week.


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