If the price for a barrel has dropped then why are gas prices still so high?

by Kirk Mason (mason@wsbt.com)

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Even though oil prices drop, commuters might not see a change in the price at the pump for months. (WSBT photo)

By Tiffany Griffin

Story Created: Jul 21, 2008 at 9:51 AM EST

Story Updated: Jul 21, 2008 at 4:13 PM EST

Last week, crude oil prices dropped about $17 per barrel. At one point, prices hit more than $145 per barrel leading up to Fourth of July.

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Matthew Widman of Mishawaka wants to know, “If the price for a barrel has dropped then why are gas prices still so high?”

All you have to do is look at the signs at local gas stations. So far gas prices are not coming down.

IU South Bend economics professor Grant Black says crude oil makes up about 72 percent of the price you pay at the pump. So Black says at some point drivers should seem some relief.

Notre Dame economics professor Tom Gresik estimates a $15 drop per barrel could save drivers about 25 cents per gallon. But we don't see the changes yet, Gresik says, because oil doesn't come straight out of the ground into your car.

Gresik says first oil goes to refineries, than to pipelines before being sold to local terminals. He says it can take up to two months or even longer to feel the full impact of a crude oil price drop.

Gresik also stresses it's important to not get too excited about a crude oil price drop. That's because world events are so unpredictable, prices could surge back up before local drivers would notice any change at the pump.

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