Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 11, 1992 TAG: 9201110082
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
WHERE, OH WHERE HAS CHEAP GASOLINE GONE?
The price of oil has dropped sharply this winter, but that doesn't mean consumers will get much relief when they fill their tanks or heat their homes.Crude oil has fallen about $6 per 42-gallon barrel since late October and wholesale prices for gasoline and home heating oil fell by about 11 cents to 13 cents a gallon from late fall to early winter. Oil traders say the price is plunging on perceptions that a global glut is building.
But if you think that will make fuel a lot cheaper for consumers, critics of the oil industry say, don't hold your breath.
They point out that retail prices of gasoline and home heating oil have not been keeping pace with the sharp drops in wholesale prices in recent months.
Gasoline prices have been falling steadily at the pump since November, albeit more slowly than in the commodities markets, where large contracts for energy supplies are bought and sold.
In the heating oil market, though, wholesale prices fell sharply in November and December, while the price to consumers barely budged.
In Western Virginia, street prices of gasoline and home heating oil have been moving downward because of suppliers' anticipation that Iraq would return to the world oil market, said Terry Phelps, chairman of Petroleum Marketers in Roanoke. However, prices turned upward slightly Friday, he said.
Although December temperatures were about 15 degrees colder than a year ago, "people are watching their pennies in homes and in driving" and inventories of heating oil are adequate, Phelps said.
But Edwin S. Rothschild, energy policy director for Washington-based Citizen Action consumer group, said retail fuel prices are quick to rise and slow to fall.
"Some English economist called it rockets on the way up and feathers on the way down," Rothschild said.
He asserted many consumers are victims of "non-competitive markets," where a few big players can control prices.
Oil companies, which categorically deny allegations they gouge consumers when supplies are tight, also deny they gouge when supplies are plentiful.
The industry's trade group, the American Petroleum Institute, recently published a study indicating the rises in petroleum product prices proceed at the same pace as the declines.
"It can work both ways," said John Lichtblau, chairman of the Petroleum Industry Research Foundation in New York.
He said most home heating oil bills probably have been lower than usual this winter because the weather has been mild.
Theodore R. Eck, chief economist for Amoco Corp., said retail prices will always lag wholesale prices. "They don't go up as fast and they don't go down as fast," he said from Amoco's headquarters in Chicago.
But Rothschild, using the most recent federal data available for home heating oil prices, alleged that residential consumers were overcharged by $34 million between Nov. 4 and Dec. 16.
During that period, wholesale prices for the fuel fell about 13 cents a gallon, from 71.5 cents to 58.4 cents, while retail prices held steady, at $1.007 per gallon.
That increased the profit margins of heating oil dealers from 30 cents a gallon to 43 cents a gallon, he said.
"Consumers ought to be getting the benefit of lower wholesale prices, just like they pay higher prices," Rothschild said. "I don't think it's fair."
Gasoline prices have been falling at the pump, but rather slowly, said Mike Doyle, editor of Computer Petroleum Corp., of St. Paul, Minn., which tracks thousands of petroleum prices.
Since Nov. 19, the pump price of self-serve regular unleaded has dropped 4.6 cents, to $1.097 per gallon, according to a nationwide survey Doyle performed this week for the American Automobile Association.
But wholesale prices fell a little more than 11 cents during that period, Doyle said.
Doyle predicted that gasoline prices will keep dropping, but he believes dealers were careful to delay the price reductions until after the holiday travel season was over.
"There are cynical analysts, myself included from time to time, who would suggest they are able to hold the biggest part of their retail cut until everybody got back from Grandma's house for the holidays," he said.
Business editor George Kegley contributed to this story.