Crude oil prices are down a lot, so why are retail gasoline prices only down a little?

NEWVILLE, CUMBERLAND CO., Pa. (WHTM) -- A year ago, paying more than $4.50 per gallon for regular 87-octane unleaded gas -- never mind the $5.00-plus prices common in recent weeks -- would have been unimaginable.

Now folks we met were excited -- relatively, at least -- to pay less than $4.50 a gallon: $4.49, to be precise, at Saylor's Market Fuel here, the cheapest gas abc27 could find (using resources such as GasBuddy) in our 10 counties Wednesday.

What drives retail gas prices?

"The price of crude oil is the primary determinant of the price we pay at the pump," said Stephanie Wissman, executive director of the American Petroleum Institute (API) Pennsylvania, which advocates for the oil industry.

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West Texas Intermediate crude oil prices dropped below the key $100-per-barrel mark, helping to drive average national 87-octane unleaded gas prices down to $4.78 a gallon, according to U.S. Energy Information Administration figures. But last time WTI crude prices surged to nearly the identical degree they did this year -- to more than $120 per barrel -- and then dropped below $100, 87-octane unleaded dropped the same day to $3.47 per gallon.

Wissman said factors in addition to the price of crude include "a persistent global supply crunch, workforce constraints, increasing geopolitical instability in eastern Europe, the economic rebound following the initial stages of the pandemic and policy uncertainty from Washington."

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Another determinant of retail gas prices is the cost of refining crude oil into gasoline, which is higher now than in the past, leading to higher refining margins, or "crack spreads," in industry parlance.

"The refineries [are] at their capacity," Wissman said. "They're at or near capacity."

API advocates policies that would permit more domestic oil production. Environmentalists counter that greater investments in alternative energy, such as wind and solar power, would do just as much to reduce oil prices -- by reducing demand for oil -- with healthier environmental consequences.

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