Why Gas Prices Don’t Always Match Oil Prices

An analyst from the Oil Price Information Service says it’s not always a one to one relationship – there are other factors contributing to the price of gas.

By Lucia BenavidesAugust 26, 2015 1:41 pm| ,

All across the nation, people have been enjoying cheaper gas prices. In Texas, according to gasbuddy.com, the cheapest gas can be found at a corner store in Fort Worth for $1.94 a gallon. In fact, lot of stations in the state are selling gas under two dollars, including Angleton, Alvaro, Hickory Creek and Temple.

A barrel of West Texas crude is selling at $39 these days, the lowest it’s been since 2009. But how closely do those two numbers – the price of gas and the price of oil – follow each other? Denton Cinquegrana, chief analyst at the Oil Price Information Service, says that in general, the two do indeed follow each other.

“If prices were going up over the course of the last month, you could expect to see higher gas prices,” he says. “But it’s not [necessarily] a one to one relationship where crude oil is down a dollar a barrel and gasoline should be down a dollar a barrel.”

The reason behind that seemingly illogical reality is that there’s more to it than just the price of crude oil versus the price of gas, Cinquegrana says. The way supply and demand works is that if you have refineries that are not operating at their peak, you may also have cheaper crude oil prices. But because there’s less capacity operating at the time, you may have higher gas prices, since there’s not as much gasoline coming out of the refinery.

But as many drivers know, gas prices are less than universal. In fact, they differ even within Texas; where in Angleton, you can find gas for under two dollars, in Houston, some places are selling it for over three dollars. That’s because there’s a lot that goes into how gasoline is priced on the street level, Cinquegrana says.

“A lot of that has to do with taxes, property values,” he says. “These guys have to pay rent on their property. That station in Houston might have a lot higher rent price … [than] the other station that’s well below two dollars a gallon.”

And if the price of crude oil were to fall below $39 – Cinquegrana doesn’t estimate it to get lower than the mid 30s – gas prices are likely to reach below or around two dollars all over the country.

“Obviously there’s nothing you can predict,” he says.