Why don’t fuel prices change as quickly as crude oil prices?
The cost of crude oil is a major component in the price of diesel fuel, gasoline, and heating oil. But there are other factors that affect retail fuel prices. Prices are determined by demand and supply in our market economy. Fuel demand is affected mainly by economic conditions, and for heating oil, the weather. Supplies come from refinery production, imports, and stocks (inventories.) Suppliers price their products based on actual and expected demand relative to available and expected supplies over the short and longer term. Since stocks are the main buffer between short term demand and supply, stock levels are a major factor in fuel pricing. Reductions in fuel supply, especially when demand is high, can cause prices to increase and to remain high even if crude oil prices drop. On the other hand, even if crude oil prices are increasing, retail fuel prices may not increase as much, or may even fall, if existing and expected fuel supplies are high relative to demand. The rise and fall o
