Quite simply, businesses most of the time will charge what they think they can get without pushing their customers to competitors.
Gasoline prices are not regulated by the government, except by North Carolina in cases of gouging, such as we saw in other parts of the state last summer when gas prices hit $4 and above. (It has to be pretty egregious, though, for the government to step in. For instance, some stations in Asheville were charging $6 when the going rate was about $4.15 there. The same was true in Charlotte.)
The price is what the market will bear and what the station owner thinks is reasonable to make a profit. Gas prices can vary by location and often there is a wide difference across North Carolina. Prices are often highest in the mountains, according to the daily survey of average prices by the AAA. You can access that online at http://www.fuelgaugereport.com/sbsavg.asp. AAA gives average prices for each market. You can look up just about any market in the U.S.
Gasoline prices are affected by the price of oil. That has risen recently to above $72 a barrel, and gasoline prices have risen to more than $2.50 a gallon in most places. The benchmark for oil prices is the futures contract for light sweet crude on the New York Mercantile Exchange (NYMEX). Each contract is for 1,000 barrels.
But gasoline prices don’t always follow the crude oil price.
There are also gasoline futures traded on the NYMEX. Those contracts are for 42,000 gallons delivered at New York Harbor. Additonally gasoline production — and its price — are affected by the capacity of refineries here and abroad. Some refineries on the Gulf Coast earlier this year were taken down for maintenance. That reduced production. Many of the refineries are in Texas and Louisiana and are at risk for tropical storms. Those events can also affect prices.
Transportation costs also figure into the equation as well as state regulations such as California’s emission standards, which are higher than elsewhere.
It was argued that last summer speculators drove the price of oil up, despite a decline in demand. Many experts in business and government agree with that assessment as at least part of the reason for the spike in oil prices.
Date posted: August 12, 2009
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