Video: Why are prices at the pump still high?

By Anchor
updated 1/17/2007 7:42:29 PM ET 2007-01-18T00:42:29

In Indianapolis Wednesday, the magic number was $1.85. Finally, some relief at the pump after a year of high prices.

The question is: Should lower prices be coming more quickly than they are, given the falling price of crude oil?

From Feb. 28 to April 28, 2006, oil prices shot up from $61.41 to $71.88, an increase of more than 17 percent. And the average gas price soared, too, up 31 percent from $2.24 to $2.93.

But  from Nov. 13, 2006, to Jan. 13, 2007, oil has plummeted more than $7, from $58.58 per barrel to $51.46. And gasoline? It's down just a penny in that same time frame, to $2.22.

"The oil prices go down, but we're still paying more money," says one customer. "I don't understand it!"

"The oil is going down and the gas prices are staying still," observes another.

Part of the reason for all this is the gas you buy at the pump. It was paid for by the gas station owner weeks ago, when oil prices were higher. No surprise, the owner is stilltrying to make their money back.

They may also figure — being human, after all — "what's the rush?" Analysts say they cut prices only as quickly as the competition down the street.

"They all watch each other and figure out when they're going to move and they all try to be as slow as possible on the way down," says independent energy trader Eric Bolling.

Oil industry officials say that's not gouging and that the market for gas is among the most competitive in the country, with razor-thin profits that come more from the convenience storesthan the pump.

"There are a lot of rumors, a lot of conspiracy theories and so on," says John Felmy, chief economist with the American Petroleum Institute. "All those are just simply nonsense."

Where oil and gas prices go from here depends on whether OPEC cuts production and on how cold this winter gets.

But even if oil becomes a bargainagain, there's a good chance that, at the pump, the rest of us will have to wait.

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