4 Factors That Rule Pump Prices – And Why We’re Watching
Looking for a good way to date yourself? Tell people that you remember when gas cost less than $1 per gallon. Your $20 bill could fill the tank, purchase a snack, and get change. In the past decade, however, gas prices have fluctuated, often wildly.
At ARG, we keep a close eye on pump prices, and apply our insights to our customers’ advantage. Filling up a Honda Accord’s 17-gallon tank, a difference of 5 cents in gas will mean 85 cents more or less on the fill-up. Not a big deal, right? For someone buying 12,200 gallons, it’s a different story. That’s $610 of savings, and flexibility and size make all the difference.
Understanding Ups and Downs
In 2005, the cost of a gallon shot from about $1.85 to over $3. In the summer of 2008, a gallon sold for over $4. Experts predict another tumultuous year in 2014. It’s certainly a roller coaster ride – but what determines these price highs and lows? How can one really anticipate what they’ll pay at the pump?
The simple answer is: there is no simple answer. Prices change day by day. These are the top reasons we’re tuned in to:
1. Domestic Crises
When something happens to disrupt supply in bulk fuel delivery at home, prices surge. This is exactly what American markets witnessed following Hurricane Katrina. The storm battered the Gulf region, where almost half of the gas produced domestically is refined and where the Strategic Reserve is stored. Prices flew past $3 – which doesn’t seem quite so bad now.
2. International Events
Economic and security hiccups elsewhere in the world often affect prices. If, for instance, a report comes out tomorrow that China’s economy is throwing on the brakes, the price of oil comes down in the US, because global demand will decrease substantially. Conversely, when economies are churning along and third-world countries becomes more industrialized, demand – and prices – rise.
3. Financial Speculation
Fraud does not drive prices higher. Speculation, which is perfectly legal, does. In 2011, Goldman Sachs reported that the “speculation premium” was $27 per barrel of crude (which was running about $114 at that time). According to a consumer advocacy group, Public Citizen’s Energy Program, this translates into $0.70 cents per gallon tacked on courtesy of speculators.
Some speculation may be necessary to hedge against real threats (e.g. Iran threatening to close the Strait of Hormuz), but many argue that speculators’ influence on prices is equivalent to market manipulation.
4. Seasonal ChangesRefineries have to comply with the Clean Air Act and produce a gas that doesn’t evaporate as easily in warm weather. This, unfortunately, is 5 to 15 cents per gallon more expensive to make. Refineries start producing the lighter blend on April 1, and retailers have to start selling it on June 1.
Nothing says summer like backyard barbeques, car trips, and higher gas prices. Increased demand typically pushes the cost per gallon up. People, hitting the road for vacation, are more willing to pay $4, give or take, than they are in winter so they can get to their destinations.
A Responsive Bulk Fuel Delivery Service
Gas prices calculations are complex, and a variety of factors play into the number we see when we fill up. ARG aims to make bulk fuel delivery as simple as possible for our customers. For the customers we handle 100 percent exclusively (that is, we physically maintain the inventory at their stations and deliver on an as-needed basis to ensure they have product to sell), we flex our people and our equipment to take advantage of pricing changes.
We adjust the times that we pick up loads to take advantage of lower prices. Say, for instance, that we know the market is going up 5 cents per gallon at midnight. We make sure to pick up that night so we save our customers that money. If, on the other hand, we find out the price is going down 5 cents at midnight, we’ll hold off on the pick-up until the next morning.
We can’t control the price of gas – but we can help you get you the best price possible.