Coronavirus Impact: Plunging Oil Prices Does Not Mean Gas Prices Will Plunge As Well
MIAMI (CBSMiami/CNN) -- The price of crude oil has plummeted into negative territory, but don't expect gas prices at the pumps to get cheaper as a result.
There are some unique conditions driving oil prices below $0 for the first time ever. And more importantly, crude oil prices only have an indirect impact on the retail price for a gallon of gasoline.
The huge drop in US gasoline consumption in recent weeks due to stay-at-home orders during the COVID-19 outbreak has pushed down both oil and gasoline prices, since there is excess supply of both. And the space needed to store that excess supply is running short, which is part of what led to the negative oil price.
The average price of a gallon of gas in Florida is $1.82, according to AAA. The daily average is 60 cents less than two months, and 93 cents less than this time last year.
So gas is cheap but it's hardly less than $0.
Crude is not the best predictor of retail gasoline price. Instead, wholesale gasoline prices determine what gas stations will pay for gasoline. And gasoline futures did not have the same wild swing Monday, closing down only a few cents at about 67 cents a gallon. That's actually close to twice the price they were trading at just last week.
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"Wholesale gasoline futures and oil futures are definitely linked, but they don't necessarily reflect each other on any given day," said Jeff Lenard, spokesman for the National Association of Convenience Stores.
And even wholesale gasoline futures don't fully determine the price that a gas station will pay for their product. Most have contracts that determine the price, albeit with future prices factored into that.
Once you've factored in the cost of wholesale gasoline, there are all the other costs that go into the price you pay at the pump including transportation, marketing, refining costs, federal and state gas taxes and profit margins for station owners.
So unfortunately, even though you could buy a whole barrel of crude oil for nothing on Monday, a single gallon of gas will still cost you something.
(©2020 CBS Broadcasting Inc. All Rights Reserved. Cable News Network, Inc., a Time Warner Company, contributed to this report.)
