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Are We Getting Gouged at the Gas Pump?

By Stefan Scholl

Real Estate Broker/Owner with Buyer's Broker of Northern Michigan, LLC

May 24, 2007 03:28 PM

Are we getting gouged at the gas pump? I certainly have my suspicions. It almost goes without saying that around Memorial Day of every year, gas prices spike in Michigan, just in time for the busy summer driving season.

I have been following the gasoline futures (Miny Gasoline Rbob) for at least six months now, and up until very recently, retail gas prices in Petoskey, Michigan have tracked the futures price very closely, averaging seventy cents a gallon more than the futures price.

With the futures closing at $2.36/gallon today, I would have expected the price of gas to be around $3.06/gallon locally. Why then is the price at the pump fifty cents more than that?

A couple of weeks ago, while the futures prices for gas were climbing, the retail price was skyrocketing. Now AAA is reporting that Michigan's average gas price of $3.50/gallon is second only to Illinois at $3.51/gallon. In the meantime, as soon as it looks as if prices may begin to dip, word surfaces of another refinery "outage" for maintenance, or whatever other excuse the oil companies can think of to keep prices high.

I don't think you can blame the gas station owners. From everything I've read, they make only pennies per gallon. One Wisconsin gas station owner is so upset with gas prices, he closed his station for a day in protest.

Are there any solutions? I have concluded that the only way to bring down the price of gas is to reduce demand. I, for one, plan to start riding my bike to work on days when it is feasible. If twenty or thirty million other people do the same thing, we may be on to something.

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Nalliah Thayabharan

Expert Building Inspections Ltd - Markham, ON

Home Inspector - Commercial Building Inspector Toronto

Hi Stefan!

I wish I could help you out but I have been wondering the same thing, I am sure someone will be able to help us out.

Nalliah Thayabharan

Commercial and Residential Building Inspector

Expert Building Inspections Ltd

May 24, 2007 03:39 PM

Patrick Harfst

Realty Executives - Phoenix AZ - Gilbert, AZ

Gov't taxes are a much larger chunk of the retail price than whatever the oil companies make. Gov't does nothing, and the oil companies do everything along the production line. You want gas prices to come down? Lobby for a rollback of the gas taxes. I actually am okay with higher prices, as this stimulates conservation, alternate production sources, and sensible driving habits.

May 24, 2007 03:42 PM

Roger Stensland

Keller Williams Realty Puget Sound - Maple Valley, WA

Let's Move!

I learned that, to my surprise, we import about 10% of our refined gasoline because we don't have the capacity to refine enough in this country. Partially because we haven't built a refinery for about 31 years and because these refineries in other countries aren't properly equipped to make all the different blends required by the various cities and states in this country. We need to let congress know that we need to build more refineries in this country. It doesn't make sense that with the price of crude oil being significantly less than the same time last year, that the price at the pump is higher. The people in government that have gotten in the way need a good beating.

May 24, 2007 03:49 PM

Cindy Richter

Interior Motiv Home Staging - Flower Mound, TX

IRIS Dallas, TX Home Stager

Just seeing the phot gets me all riled up! My next car is a hybrid!

May 24, 2007 03:53 PM

Michelle Way

AVALAR Pro Realty - Jackson, MS

ABR, GRI, WCR

I am pulling out my old Jr. High School Moped SMILE

May 24, 2007 03:57 PM

Patrick Harfst

Realty Executives - Phoenix AZ - Gilbert, AZ

I'd like to see gov't subsidies on things like sugar, cotton, and tobacco done away with, and taxes on retail gas reduced. When it comes to dealing with gov't, it seems the best course (if we could just do it) would be to Starve The Beast. Short of that happening, let's move to the FairTax... check it out at www.FairTax.org

May 24, 2007 03:58 PM

Linda Sanderson

Coldwell Banker Solano Pacific - Benicia, CA

Well now, if I could carry my client on my bicycle to show property I would be right along side of you Stefan, but in the meantime I am filling my monster tank, holds 42 gals and its raping me financially. The good side of this vehicle is on touyr day when as many as 8 of us can pile in my truck to tour together. That helps some. Better than driving 2 or 3 other cars..........

May 24, 2007 04:04 PM

Fred Pickard

Fred Pickard Innovations Realty Inc - Hershey, PA

Hershey, PA

Stefan,

Locally we're seeing about $3.09 on average.

I sometimes wonder why the FTC would look at real estate commissions, but not at oil company profits.

Oh yeh, they contribute oodles of cash to reelection campaigns.

May 24, 2007 10:17 PM

Mary McGraw

GLREA - Rockford, MI

2015: Solar Energy Is Still A Simple Machine!

Good points from everyone here. I am in agreement that the government involvement and taxes is much of the problem and because there is good revenue they are not very motivated to help with a solution.

My boss is driving a Prius -- came home from a trip last week with an average 58 miles/gal. I keep telling me he's teasing me with it! He has a couple for sale and I have vowed to have one by the end of the year!

Good topic for discussion Stefan.

May 25, 2007 04:57 AM

Terry Haugen STAGE it RIGHT! 321-956-2495

Stage it Right! - Melbourne, FL

Its pure political and nothing but political. The game is, jack the prices way up, we bitch. Bring them down a little, we're happy, jack them up again higher, we bitch, bring them down a little we're happy. Pretty soon it will be $4 per gallon and we'll be happy because it was $4.29.

Terry Haugen - STAGE it RIGHT!

May 25, 2007 06:20 AM

Gary Smith

Agent Marketing Today - Commerce Township, MI

Stefan, good article, I'm sure someone in the government decided the best course was to limit production!

May 25, 2007 11:41 AM

Anonymous

Janel VanDyke

Great topic. The most insulting fact is that besides just one or two other states, Michigan's gas prices are the highest in the nation. My husband is a truck driver and he called from Pennsilvania and told me the unleaded prices for the day and there was a 61 cents difference. I understand you point about taxing from the governement. But The government does need revenue to run the programs it does provide. And personally I would like to see some road improvements. There is a road by our home that we can't take our children down in their bike trailor anymore because there are too many holes. Okay that was getting off point. I agree that if our industry it going to be "checked" for what prices are being charged, then why not the oil/gas industry? I just can't wait for the Volt and other alternatives to become affordable. And as for people changing their driving habits, we did that a long time ago to help the environment, and the prices are still hurting us. I cant' bike everywhere with two boys both under the age of two.

Sep 18, 2008 06:55 AM

#12

Stefan Scholl

Buyer's Broker of Northern Michigan, LLC - Petoskey, MI

Northern Michigan Real Estate

Thanks for your comment, Janel. We are really getting hammered now. Just watching CNBC this morning, it appears as though wholesale gas prices are running at about $2.66/gallon. Yet we are paying $4.08 at the pump (everyone in town charges the same price!). This is a spread of approximately $1.42/gallon between the wholesale and retail prices. My research tells me that approximately $.60/gallon is state and federal taxes, leaving gas stations with a profit margin of approximately $.80/gallon. The gas stations profit margin has historically been in the $.10/gallon range. What is going on here!

Sep 22, 2008 02:31 AM