Sunday, June 3, 2012

Gasoline Price Gouging

Seattle Area Diverges

 ~ What is going on with Seattle gasoline prices?

There are many factors that go into the price of gasoline, its movement is complicated, and it is very hard to predict.

Not so hard is to inspect the historical data:

Seattle gasoline prices go up even as oil prices fall

Why does it diverge from the national average price so abruptly starting a month ago?

The biggest component of gasoline prices by far is the cost of crude oil. Even accounting for the tiresome time lag from when oil prices decline to when the pump price does, this makes no sense. Oil has plunged more than $20 a barrel in recent months, and yet our gasoline prices have gone up.

Lest you think that this is just another random anomaly, take a look at a longer time scale:

Seattle gasoline prices versus national average and oil prices over 8 years

Gasoline prices fell last fall even as oil prices climbed, but there hasn't been a time in at least 8 years that the spread between Seattle and national prices has been so wide or so puzzling. It is also unusual to see the crude oil price line on the graph cross below that of the gasoline price.

We're paying too much.

The unreasonably high cost here is not readily explained by any fundamentals, even including the (largely preventable) problems at our in-state refineries. Perhaps this is why Governor Chris Gregoire has directed Department of Commerce head Rogers Weed to investigate.

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