Who’s to blame for gas prices? You know who

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Gas prices across the United States
State-by-state look at prices at the pump.

"It's simple economics," says Severin Borenstein, director of the University of California Energy Institute. "They understand that putting more supply on the market drives the price down."

Bob Slaughter, president of the National Petrochemical and Refiners Association, blames high gas prices on high oil prices "which are frankly out of our control" — not decisions by refiners to hold back on gas. But he also says, "There is no law that says you can make people in an industry invest and expand capacity."

Why wouldn't other refiners simply ramp up their own output and claim a bigger slice of unmet demand?

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That has become harder to do, as big refiners have built up market muscle through mergers. The top five now control more than half of U.S. refining capacity, and the top 10 account for three-quarters, according to an AP review of federal data. Most are petroleum powerhouses like ConocoPhillips Co., Exxon Mobil Corp. and BP PLC, which influence prices with operations across the supply chain, from drilling to pumping gas into cars.

"Your refining business — because the market is more concentrated, you have far more control — is going to be more profitable," says Tyson Slocum, an energy expert with the consumer group Public Citizen.

There's another way to fatten your take: Once prices are up, you can keep them there.

An examination of gasoline prices relative to those of oil shows this tendency: Gas prices shoot up along with oil's — but sputter down slowly, lagging behind drops in crude prices.

The AP analysis looked at weekly federal pricing data since September 1999. It found that a gallon of retail gas rose an average of 6 cents for a 10-cent rise in oil, but dropped only 4 cents for a 10-cent decline in oil — suggesting that gas temporarily resisted downward shifts more strongly than oil.

Economists call the phenomenon "downward sticky" prices. "When costs go down, there's a margin there that people are happy to hold on to as long as they can," says economist Richard Gilbert at the University of California, Berkeley.

Slaughter, of the refining group, suggests that "downward sticky" prices are more illusion than reality, perhaps reflecting "a human tendency to notice higher prices quicker than it notices lower prices."

However, refining groups also suggest that gas stations may be offsetting losses they suffered earlier, when their margins were squeezed by the spiking cost of wholesale gas.

On the other hand, gas stations — backed by some market studies — say their skinny margins are hard to pad.

"It's tough, because people are yelling at you all the time, but we really don't make that much of a profit," said Laura Milner, manager of an independent Falmouth station selling regular unleaded Mobil that day for $3.24 a gallon.

Then who would pocket "downward sticky" profits? Economists suspect it's more likely the businesses that set wholesale prices charged to gas stations: the refiners.

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