Vic Rasheed, executive director of the Service Station Dealers of America, was incorrectly quoted yesterday in a report about gasoline prices as saying that it can take refineries as long as six weeks to use up inventories of crude oil.The comment should have been attributed to Ed Murphy, chief statistician at the American Petroleum Institute.
Gasoline prices in the Washington area have started to tumble, in some cases by as much as 12 cents a gallon in the past month, but the decline still lags behind plummeting world crude-oil prices.
A survey of 40 service stations yesterday shows that regular unleaded gasoline is selling at an average of $1.12 in the District, where taxes are higher and retail competition is greater than in the suburbs. This compares with an average price throughout the area of almost $1.20 in December.
Gas stations in Maryland are now charging an average of $1.09 a gallon, while in Northern Virginia, the average price for unleaded is $1.11, according to the survey.
And in what may be the first shots in a general price war, a few stations around the Capital Beltway are cutting prices below $1 a gallon to lure customers.
"Everybody's cutting each other's throat," said Charles Beaulieu, who operates a Shell service station in Fairfax City and is still selling unleaded gas for $1.13. "I know dealers who are losing money because of the low-balling."
For now, however, the price competition has been relatively tame both here and around the country, despite the dramatic drop in crude-oil prices, which have fallen from $30 to $15 per barrel on the spot market since December. A survey by the Tulsa-based Oil & Gas Journal shows that as of Feb. 12, the national average for self-service unleaded gasoline at the pump was a little less than $1.09 per gallon, down about 5 cents since January, but only 1 cent less than a year ago.
Analysts and oil industry officials said retail prices fall more slowly than crude prices because it takes time for the fall in crude to work its way from oil fields to the street. But some consumer groups have charged that major companies simply are not passing on their savings to customers and are keeping hefty profits for themselves.
Prices "are starting to come down, but they still have a long way to catch up with what's happened in the crude market," said Ben Brockwell, editor of Oil Price Information Service, an industry trade journal.
As Brockwell and other analysts explain it, retail gasoline prices should eventually fall in line with crude prices over the long haul. But in the short term, they said, retail markets have increasingly taken on a life of their own and operate independently of short-term oscillations in the crude market.
"The connection that always existed between crude oil prices and gasoline prices has been broken," said Vic Rasheed, executive director of the Service Station Dealers of America, a trade group.
In the most recent oil-price plunge, industry officials are quick to point out that while spot prices have dropped dramatically, the average price that refineries are paying for crude has fallen more gradually.
Rasheed and other officials also say that it can take refineries as long as six weeks to use up inventories of crude that they purchased at much higher prices. Thus, they say, the fall in crude can't be passed on immediately to dealers and wholesalers.
"The gasoline market is so intensely competitive that no refiner in his right mind can charge a higher price than he has to," said Carole Edwards, a spokeswoman for Mobil. "But it takes a few weeks to a couple of months for . . .[the drop in crude prices] to be felt."
But some local station operators and consumer leaders blame major oil companies, however, for not passing on their lower costs fast enough.
"Even 99 cents is only about an 8-cent decline from where prices were," said Ed Rothschild, an official of the Washington-based Citizen Labor Energy Coalition. He estimated that consumers could be paying 25 cents less a gallon than they did in December if the full savings were being passed on.
In this area, the rate of state and local taxes, lower levels of competition, and other factors have led to even higher prices than in many other areas of the country, according to analysts and surveys.
The Oil and Gas Journal weekly survey, for example, shows that the price of unleaded gasoline averged $1.14 in the District last week, compared with the nation's average of $1.09.
Part of this discrepancy can be accounted for by differences in gasoline taxes from state to state, according to analysts. In addition to the 9-cent federal tax on gasoline, the District has a 15.5-cent-a-gallon sales tax on retail gasoline, compared with a national state averge of 12.4 cents, according to the American Petroleum Institute. Maryland's state tax is 13.5 cents, while Virginia's is 11 cents, although Fairfax County has its own 2 percent gasoline tax as well.
Part of the reason for the differences also lies with the laws of supply and demand governing the Washington-area gasoline market.
On the one hand, the number of service stations has fallen precipitously in the last decade as a result of high costs and low profit margins. In the District, 152 service stations are now open, compared with more than 350 only five years ago, said Roy Littlefield, an official for the local service-station trade group. In addition, a number of major companies have left the area or been absorbed into other operations as a result of mergers and other changes in the oil industry.
In addition, say analysts, a relatively high percentage of the gasoline sold in the area -- as much as 70 percent, according to some estimates -- is sold by major oil companies directly to service-station operators, and not by independent "jobbers" or middlemen.
This is significant because the prices these companies charge dealers is higher than the price charged by middlemen, who face more competition, according to analysts.
U. T. Brown, who operates several Shell and independent stations in Northern Virginia, said he charges consumers 10 cents less a gallon at his Todd Service Stations, where he buys from independent wholesalers, than at the Shell stations, where he buys directly from the oil company.
The lower gasoline prices have lead to notable customer reactions, station operators said. At the Steuart Service Center in Oxon Hill, business has doubled since the price for leaded gasoline was dropped to 96 cents a gallon earlier this month, owner Stanley E. Parker Jr. said.
Anthony Irving, 24, filled the tank of his 1975 silver Datsun 280Z with 12 gallons of leaded gasoline at the station Monday, and the pump price totaled less than $12. "It's definitely been a long time since you could get more gas than dollars," he said.