Dealer Costs Keep Gasoline Prices Up, Lundberg Says

Although crude oil prices dropped $13 a barrel in the past year, motorists are paying nearly 2 cents more per gallon at the pump because of staggering dealer costs, oil expert Dan Lundberg said Sunday.

“Crude has crashed to as low as $16 a barrel, and a year ago it was $29, yet the overall prices for all grades of gasoline at the pump is higher by 1.8 cents a gallon since last February,” Lundberg said.

The public has been mistakenly led to believe falling crude prices were a sign prices would drop at the pump, Lundberg said.

“The expectation of crashing prices at the nation’s pumps is based on a generally accepted fallacy that . . . every dollar-a-barrel drop in the price of crude should translate to a cut of 2 1/2 cents at the pump,” Lundberg said.

“By that token, a fall of $10 a barrel should have brought the prices down 25 cents a gallon to an average of about 95 cents a gallon with regular gasoline down into the 70s.”

Far from a price war, however, the decline in pump prices has been moderate, Lundberg said. The overall price for all grades of gasoline has fallen since December by just over a nickel a gallon to a national average of $1.15.64, down 3.47 cents since Jan. 24, according to Lundberg’s 50-state survey of 10,385 stations.

The two-week survey showed the price of regular leaded averaged $1.0275, down 3.90 cents a gallon, regular unleaded was $1.0973, down 3.96 cents, and premium unleaded was $1.2421 cents, down 3.37 cents.

Lundberg said station rentals, insurance and other inflationary expenses increased dealers’ operating costs.

“While dealers seem to have taken quite a windfall in profits, the money is being used to correct the difference in the operating costs,” he said. “The costs of operating have burgeoned.”

The average station today cannot generate enough volume to offset the rental costs, he said, noting dealers have had an average $10,000 insurance premium increase since 1984 in addition to other operating cost hikes.