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dehaan-archiefbeheer.nl

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About De Haan

De Haan offers a complete range of record management services, from digitizing to storage and destruction.

De Haan Headquarter Location

Edisonweg 18

Alblasserdam, 2952,

Netherlands

+31 78 6920222

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Latest De Haan News

Why gasoline prices remain high even as crude oil prices fall

Apr 11, 2022

The Washington Post Close Analysis Interpretation of the news based on evidence, including data, as well as anticipating how events might unfold based on past events Why gasoline prices remain high even as crude oil prices fall Loading... A customer pumps gas in Morrow, Ga., in May 2021. (Dustin Chambers for The Washington Post) When the cost of crude oil soared to new highs in early March with the Russian invasion of Ukraine, prices at the gasoline pump followed. They climbed 17 percent in a little over a week. But when crude prices eased — they’re now down more than 20 percent from their March high — pump prices eased somewhat but have remained elevated. This pattern is so common, especially with gas prices, that economists have a pet name for it: rockets and feathers . When crude prices jump, pump prices tend to rise like a rocket. But when crude prices fall, pump prices tend to descend gently, like a feather. This widely documented phenomenon helps explain why gasoline has remained stubbornly expensive even as crude gets cheaper, and why gas stations tend to pocket fatter profits when prices are falling than when they’re rising. Advertisement Economists and policymakers offer myriad reasons for what fuels the rockets and lightens the feathers, from corporate greed to collusion, but the strongest force may simply be consumer interest. Drivers shop more carefully — and force stations to compete — when prices are rising, said Clemson economist and gas-price expert Matthew Lewis. When drivers pull up to a gas station and see a higher price than they expect, they think they can get a better price somewhere else, Lewis said. They don’t realize West Texas Intermediate spot prices are driving up gasoline costs everywhere, so they’ll check a couple more stations’ prices before pumping. But if that same person pulls up and sees a lower price than expected, they’re likely to assume they’re getting a good deal — they have no idea that crude prices are falling even more than the price they’re paying. They pump gas immediately, no search needed. Advertisement This pattern is borne out in Lewis’s analysis of Internet traffic to the price-comparison platform GasBuddy, published in the Journal of Industrial Economics. People flock to the site when prices are rising but virtually ignore it as they fall. With pump prices now at $4.15, nearly double their 2020 average of around $2.18 a gallon, and at all-time highs (before accounting for inflation), Americans are unusually sensitive to price changes. When gas prices are this much higher than what drivers have been paying recently, drivers are more likely to cut back on driving and hunt for better prices, according to additional research by Lewis and his collaborators. On the other side of the transaction, stations tend to make most of their profit when prices are falling like a feather. When prices are skyrocketing, station owners earn less, and may lose money in the hypercompetitive environment spawned by expensive gasoline. Advertisement On average, stations enjoyed far higher profit margins in 2020 when prices were lower than they did in 2022 as prices hit record highs. At the height of pandemic closures in 2020, customers weren’t buying much gasoline, but stations were pocketing 87 cents for every $2.07 gallon sold, according to data provided to The Washington Post by the Oil Price Information Service (OPIS), a Dow Jones company. By late March, stations were charging $4.24 a gallon but making only 36 cents on each gallon. Many neighborhood stations buy wholesale gas once every three to five days, said Patrick De Haan, GasBuddy’s head of petroleum analysis. When prices rise quickly, the stations that refill their tanks first are hit with the high prices, but they can’t pass that on to customers since an across-the-street competitor may have a few days of supplies at the older price. As a result, many stations lose money on gasoline sales as prices rise. If they raised prices before their competitors did, they would lose legions of newly price-conscious customers — customers who also walk into the convenience store and buy some high-margin Slim Jims and energy drinks. It takes a few days for stations to pass on their higher costs, De Haan said. Advertisement “After about Day Three or Day Four, stations are starting to push the big increases along,” De Haan said. “Meanwhile, that means they’ve been underwater now for 72 to 96 hours. So stations are behind. They’re losing their shirt.” Stations can make up for those losses by being slow to lower pump prices as crude prices fall. And if prices fall low enough, stations can make a killing. “The biggest myth is that retailers love it when the price goes up, because they make so much money,” said Tom Kloza, global head of energy analysis at OPIS. “The reality is they love it when the price collapses.” When crude prices fall, pump prices can be propped up by “tacit collusion,” said Lewis of Clemson. That sounds shady, but it’s a completely legal process in which station owners — without communicating with each other through any means other than the price signs towering over their pumps — independently realize they will all benefit if prices remain high, so nobody wants to be the first to lower them. Advertisement “Let’s be honest,” De Haan said, “gas stations are a for-profit business. They’re not looking to put themselves out of business by losing money on the way up and then shooting themselves in the foot by lowering their price too fast on the way down.” But if retailers don’t make money when prices are rising, who does? Economists say that while refiners may see some temporary benefits, they’re squeezed by the same forces that crush retail profit margins. So, in the end, everything comes back to the companies and countries that actually extract the oil. “Anybody who’s producing oil is making boatloads of money right now,” said University of California at Berkeley economist Severin Borenstein, a godfather of rockets-and-feathers research. “That doesn’t mean oil producers are doing anything anticompetitive,” he clarified later, “just that they are the lucky beneficiaries of a disrupted market that is driving the market price way above their production costs.” Advertisement When the oil industry gets lucky and prices rise, executives reap the benefits, according to an Energy Journal analysis of pay at 78 U.S. energy companies by University of Michigan economist Catherine Hausman and UC Berkeley economist Lucas Davis. Executives tend to get substantial raises when oil prices climb, even though prices are generally driven by geopolitical forces and other factors outside their control, Hausman said. And when prices fall, executive pay doesn’t budge. Other than oil producers and executives, credit card companies may be the biggest beneficiaries of high oil prices, Kloza said. They take a percentage of whatever the customer pays at the pump, so their cut soars alongside gas prices, yet they don’t have to invest any additional time or resources in the transaction. Within a few weeks or months, gasoline prices will catch up with pump prices as gas stations push each other’s prices down in a slow, steady battle for customers. But even as crude prices fall, they remain relatively high in historical terms, making it unlikely that pump prices will fall to pre-pandemic levels in the near future, experts say.

  • Where is De Haan's headquarters?

    De Haan's headquarters is located at Edisonweg 18, Alblasserdam.

  • What is De Haan's latest funding round?

    De Haan's latest funding round is Acquired.

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