Is Your Gas Station Price Gouging?

Friday, 4/22/22, the nearby crude oil futures closed at $102.07 per barrel. Nearby unleaded gasoline futures closed at $3.286 per gallon.  The gas price is 3.22% of the crude oil price. 2020 thru today, the price of crude is up 70%, but the price of unleaded gas is up 89%. Is this price gouging?

CL=NYMEX June WTI Crude Oil Nearest Futures Historical Price - left axis

RB=NYMEX June RBOB Unleaded Gas Nearest Futures Historical Price -right axis

Ratio x 100 = RB/CL x 100 scaling factor - right axis

Data source: barchart.com

One answer may be found in the ratio of gasoline to oil prices. Until 2022, the ratio looked pretty steady- in the high 2s. This year, the ratio is now above 3%. There may be many reasons for the expansion of this ratio-supply chain, demand and other characteristics-but history may tell a simpler story.

For nearly 20 years the ratio hovered in the 2% to 4% range. The huge 2008-09 rally in crude oil above $140 barely budged the ratio, holding stubbornly close to 3%. In the ensuing crude oil decline, the ratio also held around the 3% range. Only in the price declines of 2016 and the major collapse of 2020 did gas prices stay high with the ratio expanding to above 4% and a spectacular 5%+ (when crude oil went negative), respectively.

Historically, a 3%+ ratio persisted about 40% of all days since 2000. 

Unleaded Gas/Crude Oil Price Ratio 

Frequency Distribution Since 12/31/2000

Today's 3.22% ratio is normal. Admittedly, RB is the wholesale unleaded gas price, but, according to these numbers, your gas station is not price gouging.

Why "cherry pick" these time periods? They are not cherry picked. My free barchart.com account only offered prices starting 2000, and excel formatting worked best with the 12/31 start dates. My spreadsheet is available upon request.

Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@outlook.com to follow this blog and for additional information. 

© 2022 George Rahal