Ups & downs
Some call it the ”rocket-and-feather theory.” That’s when it appears prices at the gas pump shoot up at the speed of a rocket, but drop at the speed of a feather.
A Tribune Chronicle analysis that compared the rise and fall of the average price of gasoline in northeast Ohio to the price of crude over 12 months indicates the rocket-and-feather theory might hold some weight.
By tracking the percentage of change in prices from the previous week for both gasoline and crude oil, the Tribune Chronicle analysis indicated the average northeast Ohio gas price increased at a greater rate than the price of crude 27 out of 52 weeks last year.
By comparison, the price of gasoline dropped more significantly than crude prices 20 of 52 weeks.
On five occasions, the data indicate the price of gasoline and crude were changing at the same pace.
Jeff Lenard, vice president of communications for the National Association of Convenience Stores, last week acknowledged that the newspaper’s study findings show the rocket-and-feather theory may not be just a myth. Still, he was quick to offer solid reasons for it, attributing the ups and downs to issues like supply and demand, competition among stations, distributor costs or refinery issues.
The NACS trade association represents more than 2,200 retail and 1,600 supplier companies. Convenience stores account for about 80 percent of America’s retail gasoline sales.
Michael Green, national spokesman for AAA auto club, also said many factors other than just the price of crude drive the price of gasoline. In fact, only about 66 percent of the price at the gas pumps is based on the price of crude oil, Green said.
Some of those include refinery issues, basic supply and demand, or even competition among gas stations.
”Even if oil prices go up or down, it doesn’t always have an effect on gas prices. Gas prices are traded on their own market,” Green said.
He noted last week’s near-zero temperatures, for example, probably prompted motorists to drive less, leading to lower prices. Likewise, increased driving in summer and on holidays will increase prices due to the basic economics of supply and demand.
Other issues that affect supply and demand could include things as simple as pipeline breaks or maintenance work temporarily shutting down a refinery.
The Tribune Chronicle’s analysis pinpointed a significant jump of 11 percent in gas prices the week of July 31 last year, notably the same week the price of crude had dropped.
Green said the spike that week was due to a leak in the Embridge Canadian pipeline that feeds Midwestern refineries. The pipeline had to be shut down for repair, leading to a sudden increase in gas prices due to supply limits.
That type of fluctuation often leads motorists to complain at the speed in which gas prices rise. That, Green said, can be attributed to trading on the “futures market.”
”Gas, just like oil, is sold on the futures market, so if traders believe there is an event that will affect the price, they will begin factoring it in immediately to the price,” Green said.
”It’s all based on the expectation of where they believe the price will be in the future. It’s all about anticipating where you think supply and demand is going to be,” he said.
Lenard also pointed out that big oil companies own very few gas stations, with companies like BP, Shell or Sunoco on average owning just “a dozen or two.” He also noted that about half of the nation’s gas stations are backed by major brands like BP, Shell or Sunoco. The rest are nonbranded stations free to purchase gasoline on the open market.
When supplies are plentiful, those stations often can keep prices lower at the pumps.
In times of limited supply, however, those stations may be harder pressed to purchase gasoline and may be forced to raise prices.
Both Green and Lenard said there may be times when competitive markets allow retailers to raise prices, but they said those times are rare.
”It could even be that local distributors might just keep it (prices) higher. Their goal is to sell gas at a price to get people to their store,” Green said.
If they can do that while still keeping their prices a little higher, just like any business, they will, he said.
But Lenard and Green, along with an independent owner of several branded gas stations who asked not to be identified because he was not authorized by his brand to speak publicly, said it is a misnomer that gas stations drive up their prices to increase profits.
Rather, each of the three maintained gas profits are intentionally kept low to lure motorists to their business and into their stores.
”Most retailers don’t make their money at the pumps,” Lenard said, estimating gasoline profit margin typically is around 1 percent.
”Their (gas station operators’) primary motivation is to get you to come in and buy a cup of coffee and a doughnut. They are everyday trying to find a middle ground, and they are trying to make money just like any other business is trying to do,” Green said.
The local gas station owner said operating a business is about being competitive.
”It’s a business. You are selling a product,” the local gas station owner said. ”If you were a baker and the cost of flour shot up, would you keep your bread at the same price?”
But no matter how high or low, Americans love to drive, leading all three to the same conclusion: gasoline prices will always be a point of contention for the motoring public.
”At the end of the day though, we are left with the fact that no matter how we get to the final cost, gasoline prices remain very high. The average U.S. household spent $4,116 on gasoline in 2012, which is 8.2 percent of average household income.
”That is a large percentage for most families, especially those that are low income and have less money to spend. That is money that cannot be saved or spent or anything else, so motorists are very interested in whether prices are going up or down,” Green said.
Lenard echoed that.
”When consumers and drivers are happy, retailers are happy. When prices are climbing, no one is happy,” Lenard said. ”No one writes a song about the price of eggs or milk. They write songs about the price of gas.”
Ups & downs
For more than 85 years, the steeple at the First Unitarian Church on Elm Street has been part of the local skyline in the Wick Park neighborhood on the North Side of Youngstown.
Tuesday, it was lifted into the sky, then down, as crews removed the steeple from the top of church. It will be stored until a decision can be made if it should be repaired or replaced.
Crews from Brock Builders Construction Co. spent the better part of a week getting the steeple ready to be removed.
Once a giant crane began lifting on Tuesday, the entire process took no more than five minutes.
The steeple was lowered to the ground before it was prepared to be transported to the CASTLO Industrial Park, where it will be stored.
The Rev. Matt Alspaugh, pastor of the church, said the steeple has fallen into disrepair and was on the verge of becoming structurally unsound.
The cost for removing the steeple was about $30,000 and came from an endowment, Alspaugh said. Estimates of getting a new steeple range as high as $250,000, he said.
”We’ve made no decision as to what we’re going to do yet,” Alspaugh said.
In the meantime, the construction company will cap the hole made by the removal of the steeple, Alspaugh said.
The church building was constructed in 1925, he said.