[R]etail regular gasoline should be no more than $3.25 a gallon when WTI is $85 a barrel. Let's see if gas prices get there, including in Grand Rapids, where they shouldn't be so high right now.It looks like the prices of gasoline and crude oil are equilibrating, both nationally and locally. From Reuters yesterday.
U.S. gasoline prices drop for second week in a row
Oil prices, which account for about 65 percent of the cost of making gasoline, traded up $2.50 on the New York Mercantile Exchange to settle at $87.88 a barrel on Monday.According to the handy graph of the relationship between crude prices and retail regular gas prices that Stuart Staniford at Early Warning has provided, a price of about $88/barrel for oil should translate into a $3.40/gallon at the pump for unleaded regular.
So what are gas prices doing?
U.S. retail gasoline prices fell 7 cents over the last week to $3.60 a gallon as of Monday, the second consecutive drop this month, the U.S. Energy Department said.Still a bit high, but they're falling as oil prices rise. I wouldn't be surprised if oil rises to the low 90s and gas falls to just below $3.50. I could live with that, and so could the U.S. economy.
As for what's happening locally, ask the Detroit Free Press.
Gas prices down 5 cents in state
AAA Michigan said gasoline prices are down 5 cents per gallon over the last week, to a statewide average of $3.69.Still high, but that was last week. Sunday, the price at the corner station was $3.65. When I filled up last night (Monday evening), it had dropped to $3.59/gallon. Good thing I waited. If these lower prices hold up, then AAA Michigan will have another price drop to report next week.
The auto club said Monday that the average is about 92 cents per gallon higher than last year at this time.
News isn't quite as good if one drives a diesel vehicle. From the Reuters article.
Diesel prices fell 6.2 cents week-on-week to $3.84 a gallon, though that was still up 85.6 cents from a year ago, the department said.Diesel demand is much less price-elastic than gasoline demand, so expect it to remain more expensive than gasoline. Also, higher prices of diesel are more likely to be passed on to consumer goods as part of the cost of transportation. As for what diesel should cost at the pump for a given oil price, I may have to ask Stuart Staniford that one. He does respond to his commenters.