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Good Question: Why Are Gas Prices Rising When Oil Is Falling?

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(credit: CBS) Jason DeRusha
Jason DeRusha filed his first report for WCCO-TV on April Fool's D...
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MINNEAPOLIS (WCCO) – Even veterans of the local gas business admit — something strange is going on. The price of crude oil is as low as it’s been since October 2011. While the price of oil is dropping, the national average gasoline price is falling, but in Minnesota our prices are going up and up and up.

Why are gas prices rising when the price of oil is falling?

“My guess is just greed,” wrote Eric Trinkner on Facebook.

The last time oil was this low was last October, and gas was around $3.44 a gallon.

“Yes, every morning on the national news it says gas has fallen – here in the Fergus Falls area gas has gone up 23 cents per gallon in the last week,” said Jill Marie Gagner.

“Whatever the answer is will be BS – just another way to screw the American citizens … They do it because they can – why else,” wrote Karla Milner.

The numbers are pretty surprising. Last week: AAA put Twin Cities gas prices at $3.46, just below the national average of $3.54. But while the nation dropped to $3.50. We jumped big time to $3.72.

“Oil is going down — what’s going on with gas prices going up?” asked Patrick DeHaan, the senior petroleum analyst with GasBuddy.com.

“There’s one roadblock in the way of having a direct relationship between oil and gas prices and that is the refinery,” DeHaan said. “If something happens at the refining level, prices of gasoline could go up if supply of gasoline is tight.”

He pointed to a Texas refinery that just went on line, and shortly thereafter was taken offline because of problems with the equipment. That’s affecting supplies in the middle part of the United States. So while the national average is down, the Midwest is paying higher prices.

Closer to here, Three Chicago-area refineries have been at least partially offline: Exxon’s refinery in Joliet has an equipment malfunction, Marathon’s refinery in Robinson and Citgo in Lemont both have been shut down for repairs.

“The refinery problem is always the excuse, and people feel skeptical like maybe something else is going on,” said WCCO reporter Jason DeRusha.

“A lot of times refineries are tight lipped about refining operations. So be skeptical,” said DeHaan.

In Ohio, a local TV station reported on the Ohio Petroleum Council, saying that the prices are likely a case of someone in the system trying to make a larger profit, whether that’s oil companies, refineries, or large gas station chains.

According to DeHaan, wholesale prices are starting to drop finally in the Midwest, down 13 cents a gallon over the past four days, which should mean the price at the pump will soon follow. He studied a recent case in California where wholesale prices went up 22 cents in 18 days, but it took 22 days for the price to drop that same amount, a lag of four days.

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