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Why Drivers Are Unlikely to Get a Break Soon From High Gas Prices Saefong, Myra P . Barron's (Online) ; New York (Apr 7, 2022).

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FULL TEXT Oil executives said this past week that their companies don't set prices for oil or gasoline, even as U.S. drivers last

month paid record-high prices per gallon at the pump.

The rise in the cost for gasoline came amid a spike in crude-oil prices to their highest in nearly 14 years. But

market experts say that while there may be some cases where consumers have been overcharged for the fuel,

there is a reasonable explanation for the climb.

"The chief reason driving retail gasoline prices to a record high in March was Russia's invasion of Ukraine, against

a tight global oil market," says Brian Milne, editor, product manager at DTN.

"Oil demand has recovered quickly from the pandemic lockdowns, outpacing supply growth, with the invasion of

Ukraine and the subsequent sanctions on Russian oil exports heightening concern over supply disruptions and

shortages, he says."

That's of little comfort for U.S. drivers who paid an average of $4.353 a gallon for gasoline on March 11, the

highest price on record, according to GasBuddy.

On April 6, oil company executives , including Exxon Mobil (ticker: XOM), were grilled by lawmakers at a House

subcommittee meeting titled " Gouged at the Gas Station: Big Oil and America's Pain at the Pump ."

"No single company sets the price of oil or gasoline," Exxon Mobil CEO Darren Woods said in his opening statement

. "The market establishes the price" based on available supply, and demand for that supply.

The hearing came as many oil companies have turned hefty profits amid the surge in oil prices.

Prices for fuel generally "lag on increases and decreases" in the oil price by anywhere from two to four days, says

Patrick De Haan, head of petroleum analysis at GasBuddy, and there is some "truth to the 'rocket' and 'feather'

prices," given that prices can "rocket" up, then slowly decline.

But the last thing gasoline stations want to do is cut their price significantly, only for wholesale prices to go up by

much more, he says.

In 2021, crude prices accounted for nearly 54% of the average retail price per gallon for gasoline, according to the

Energy Information Administration. So, it makes sense that the more than 60% rise in U.S. oil prices as of April 7,

from the same time a year ago, would lead to a spike in gasoline prices at the pump. At an average $4.142 for

gasoline on April 7, prices are 44% higher than a year ago, GasBuddy data show.

But that doesn't translate into big profits from gasoline sales for oil companies. In a recent report, Jeff Lenard, vice

president of strategic industry initiatives at the National Association of Convenience Stores, or NACS, says that

only around 39% of the country's 145,000 fueling outlets carry branded fuel from one of the five major oil

companies, and only about 0.1% of U.S. fueling outlets are actually owned by a major oil company.

The markup on a gallon of gas averages 30 cents, and after expenses such as credit card fees, retailers have "net

profits of around 10 cents a gallon," Lenard says.

U.S. drivers consume roughly nine million barrels of gasoline a day. Multiplying that by 365 days in a year and by

42 gallons in a barrel at the roughly 10 cent-per-gallon retail net profit adds up to $14 billion in estimated annual

profits from gasoline sales in the nation—for all 145,000 fuel retailers, says Lenard.

"Claims of price gouging along the gasoline supply chain are disingenuous, looking to scapegoat an industry that

is under extraordinary regulatory oversight to distract from the inflationary pressures harming American

consumers," says DTN's Milne.

Why Drivers Are Unlikely to Get a Break Soon From High Gas Prices

Credit: By Myra P. Saefong DETAILS

Subject: Gasoline prices; Retail stores; Corporate profits; Crude oil prices; Credit card fees

Business indexing term: Subject: Gasoline prices Retail stores Corporate profits Credit card fees; Corporation:

Exxon Mobil Corp

Location: United States--US; Ukraine

Company / organization: Name: Exxon Mobil Corp; NAICS: 211120, 457110; Name: National Association of

Convenience Stores; NAICS: 813910; Name: GasBuddy; NAICS: 513210

Publication title: Barron's (Online); New York

Publication year: 2022

Publication date: Apr 7, 2022

Section: Barrons Magazine

Publisher: Dow Jones &Company Inc

Place of publication: New York

Country of publication: United States, New York

Publication subject: Business And Economics

Source type: Trade Journal

Language of publication: English

Document type: News

ProQuest document ID: 2647545036

Document URL: https://www.proquest.com/trade-journals/why-drivers-are-unlikely-get-break-soon-

high-gas/docview/2647545036/se-2?accountid=7036

Copyright: Copyright 2022 Dow Jones &Company, Inc. All Rights Reserved.

Last updated: 2022-06-23

Database: Research Library

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