Gasoline prices shot up like a rocket last week, but have been floating back down slowly as though there were being held up by a large parachute.
The increase in price was blamed on a fire at a refinery, but Iowa Department of Agriculture fuels analyst, Harold Hommes, says it wasn’t a long-term issue.
“That was a fairly brief flare up if you will, it was actually a fire at the BP Whiting refinery. But that put a scare into the wholesale markets,” Hommes says. That wholesale product is what is what is sold to retailers that they eventually sell to you. “We went on Monday of last week — an average for your baseline 87 octane E-10 product — we were at that time on $1.62 on wholesale prices. By late in the week it had jumped to $2.04. Obviously over a 40 cent spike in a matter of four to five days,” Hommes explains. “But those levels have pretty much retreated, we are back now in the high 160’s, 170’s for that same product.”
While the wholesale cost drop back, retail gas prices didn’t follow along. They were for example, down three cents a gallon in the central Iowa area. “You know compared to 30 cents over the last few days fall (in wholesale price), that’s probably not a corresponding decrease at retail. But, I do think it’s coming, it’s just there’s always a bit of a delay — a lag if you will,” according to Hommes.
There are roughly 48 cents of state and federal taxes added to the wholesale cost of gasoline along with a few cents in transportation costs, which added to the wholesale cost of $1.70 a gallon would add up to around to roughly $2.20 a gallon. Retailers add in some money for profit, with Casey’s Convenience stores reporting for example, they target 16.9 cents a gallon. That would bring the retail price to around $2.37 a gallon. The latest fuel survey showed gas averaged $2.70 a gallon across the state, so there’s around 30 cents in profit. The $2.70 figure is an average, as prices are lower in some areas, so the profit would be lower.
Hommes wouldn’t speculate on whether retailers are keeping prices up and enjoying some extra profit. “You know, we’ll see how much longer it goes, I think that the end is near, within one to two weeks and those numbers would start falling off significantly,” Hommes says. He says the end of summer will put some pressure on gas prices to drop.
“We will also be shifting shortly in another two to three weeks to winter blends, which are traditionally cheaper. And that’s going to cause additional pressure at the pump. So, I am pretty confident that in the next week or two that we are going to see additional retracement on those values at retail,” Hommes says. Gas prices overall this week were 63 cents lower than last year at this time.