Have Gasoline Prices Bottomed Out?

The statewide dip in gasoline prices may have finally bottomed out — for the moment, at least.

The plunging global price of oil might have sparked the downward trend, but it’s the retail market forces that sank them even further, and are now responsible for an inevitable spike.

Both the national and statewide average price of regular gasoline sat around $2.70 per a gallon near the end of last November, according to GasBuddy.com.

It has dropped by about 50 cents per gallon since then, while the average in Indianapolis has experienced a greater fall, dipping by more than 80 cents. By Monday, those prices started to go up. By Tuesday afternoon, Indy’s average had risen about 20 cents in two days.

“It’s because essentially prices dropped further than in other areas,” said Gas Buddy Senior Petroleum Analyst, Patrick DeHaan.

He says Indiana’s gasoline retailers have pushed the price of gas down in an effort to compete with one another, and they’ve pushed deeper than others across the country.  

“Generally, competition everywhere else in the country sees slower, less competitive declines that leave a station at a level of profitability,” he said. 

It happens all the time. Retailers undercut competition by lowering the price two or three cents per day. Other retailers follow suit, and when they’ve all reached a certain point of pain, a station or two cries uncle, and the price of gas rebounds.

DeHaan says that cycle usually takes about a week and a half, but that’s when oil prices are stable.

“Obviously it takes days and days and days for stations to erode their margin, especially when crude oil prices are falling in parallel," DeHann said. "And that’s why we didn’t see a price increase for over a month and a half.”

DeHaan says now that the price of oil seems to have stabilized between 50 to 60 dollars per barrel; Hoosiers can expect prices closer to the national average.