LI gas prices badly lag oil's decline

Gasoline prices on Long Island fell by 5 cents a gallon in the past week -- or about 1.2 percent -- lagging a 15.5 percent decline in crude oil futures over the same period.

Regular averaged $4.014 per gallon in Nassau and Suffolk Wednesday morning, the AAA said, down from $4.064 a week earlier. Crude oil settled Tuesday evening at about $79 a barrel, down from $93.79 a week earlier.

Linda Rafield, senior oil analyst based in Manhattan for energy information provider Platts, said it takes time for futures prices for crude oil to work their way through the system to retail prices at the pumps. "Futures markets move much faster than cash markets," she said.

Dominick Chirichella, a senior partner at the Energy Management Institute in New York, which trades and also educates and publishes data on energy topics, said the national average for gasoline, now just under $3.64 a gallon, should be at about $3.10 based on oil's decline, but it probably will be weeks before consumers see big declines at the pumps.

He said "retailers are sticky on the downside," trying to recoup losses they experienced as wholesale gasoline prices rose, adding that the stations were prevented by competition from raising pump prices as quickly.

Kevin Beyer, president of the Long Island Gasoline Retailers Association, offered the same explanation. "Everybody is trying to make back some of the profits they lost, and we lost a lot," he said.

While the trend for oil and refined product prices clearly is down, the wholesale gasoline market has been volatile. "Everyone is skittish," Beyer said.

The retailer who drops prices and then tries to raise them again if wholesale prices rise might be prevented from doing so by a competitor who dropped his price but doesn't want to -- or doesn't have to -- raise it yet. "Everyone is afraid of losing their volume," he said.

Wednesday, for example, gasoline futures rose on the New York Mercantile Exchange in what Bloomberg News said was the biggest jump in four weeks -- 4.3 percent after the U.S. Energy Department said inventories fell for the first time in a month. Crude oil futures increased by $3.59 to $82.89 per barrel. It was just shy of $100 as recently as July 26.

Tom Kloza, chief oil analyst for the Oil Price Information Service in Wall, N.J., which conducts the price survey for the AAA, noted that despite prices more than $1 higher than a year ago, demand is trailing a year ago by only about 3 percent. "It's not as though you need to lower your price to pump up demand," he said.

With Bloomberg News