The price of gasoline and diesel fuel has dropped dramatically over the past few months.
Yet, the price of engine oil and transmission fluid hasn’t.
I just swapped out a Honda transmission which required DWI Honda transmission fluid at $8.80 a quart while looking across the street at a gas station where gas is selling at $2.12 per gallon.
What’s up with that?
Tester
Perhaps tranny fluid stays in the delivery pipeline longer? Perhaps you’re using tranny fluid that was bottled when the price of oil was a lot higher?
No.
Both are petroleum products and oil/transmission fluid are less refined.
So why the higher cost for a simple straight weight oil?
Tester
The price of WTI relative to the price of transmission fluid may be comparable to the price of live poultry to the price of chicken noodle soup…
Just think of how much more gas and motor oil is sold compared to quarts of transmission fluid. Volume always effects price .
I just went to Wally World today, and I didn’t see a drop in motor oil prices today.
Everybody uses motor oil.
Tester
???
Where are you?
Gasoline is selling for about .60-.80 more than it was 3 months ago.
My price for motor oil and transmission fluids across the board is about .20-.30 lower than it was at the beginning of the year.
But WHEN they were refined MATTERS! Gasoline and diesel doesn’t spend a year or two in a plastic bottle on the shelf. The price of oil when the tranny fluid was refined might have been far higher than the price of oil when your gasoline was refined.
Besides, they don’t have to put gasoline in millions of little plastic bottles and have distributors drive them to the stores in delivery trucks and stock the shelves. The delivery system for motor fuels is far more direct with far fewer in-between guys.
Per quart the price of oil dropped from sbout $0.60/qt to $0.30/qt. So that quart of Honda tranny fluid might have seen a $0.30/qt drop. As RK said, like the raw chicken in the can on chicken noodle soup.
The price of plain old Wal Mart branded motor oil is about 2.78 a quart here and it’s been right at that price for ages it seems even though gasoline has zinged back forth from 3.50 a gallon down to a 1.70 and back up to the current of 2.13.
A gallon of conventional motor oil costs around $14 or so, depending on brand and where you buy it.
A barrel of crude trades at roughly $55…which is 42 gallons.
This means that less than 10% of the end cost of motor oil represents crude acquisiton costs. (Possibly slightly more, because I believe that “lubricant-grade” crude is a higher-quality product that sells at a premium–but I’m the first to admit I know almost zilch about making motor oil.)
So, looking at oil prices and expecting that to effect W-M’s retail prices…is a lot like me looking at corn prices and wondering why my local bar isn’t cutting me a deal on shots of Beam!
“Gasoline is selling for about .60-.80 more than it was 3 months ago.”
Yes, gas is up…but crude is down…which pretty much means somebody is making a KILLING in the refinery business!
I paid $4.50 a gallon for kerosene today. The station I normally go to converted to summer racing gas. The second location has a tank just for kero. The price has been the same for the past couple years. I suspect the product in the tank was the higher priced stuff. Maybe when its re-supplied it will be cheaper. Might be the same for oil where there is more in the inventory pipeline and takes a while.
Why is oil still about the same price? Because they can.
Here in the Atlanta, GA area, gas prices are down again to around $2.11/gal for 87 octane. And guys, we use a bunch more gasoline than motor oil. I burn 12 gallons a week of gas, but use 1.25 gallons of motor oil every 3 months.
Most motor oil is sold to repair shops, and the shops probably buy a lot more from a supplier than just motor oil. It is a small part of the purchase, and the shop is not likely to change vendors to save a few cents on motor oil. The cost of motor oil is controlled by the largest segment of the market, and retail price follows from that.
Unlike fresh meat and produce, oil inventory isn’t sold from dated lots with the price based on day to day commodity market price.
An old friend owned a full service gas station when the early 70s gas crisis hit and somehow he stayed ahead of the game buying inventory and increasing his selling price immediately when the market price increased. Of course quite a few independent stations went broke when they bought into a decline. Pricing must be based on making a profit on current inventory and anticipating future costs and price changes (cuts) or you find yourself spending your profits to pay the increase in replacement inventory.
^When you sell something (esp something in a market as competitive as retail fuel sales), it’s irrelevant how much you paid for it. You sell it at market value, or very near…or it doesn’t sell. “What I paid for it” is what’s commonly known as a “sunk cost.”
So, if a gas station owner bought a tanker of gasoline–and the dropped price dropped in half overnight–he’d have to sell at or near the market price, or be stuck with it forever! (Consider the opposite case, where gas prices double overnight: do you really think Joe Gasoline isn’t going to take advantage of that fact?)
People make this mistake ALL THE TIME: “Well, I bought ACME Widgets at $30/share, so I’ll wait until it gets back to $30 to sell.” What you paid is a historical footnote, and (unless you can turn back time) shouldn’t influence what you sell it for.
@meanjoe75fan, gasoline sells at market price. Gas station owners have to sell at the price others nearby are selling it for or they won’t sell much irregardless of what they paid for it. I’ve seen lots of instances where one station is full of cars with some waiting and the station next door has one car or maybe two with gas prices more than 5 cts a gallon more. It’s the way things work.
Exactly
There is one station in my area . . . the prices are always AT LEAST 30 cents higher than any other station in the area. At certain times, the difference might have been 50 cents
It does some business, but the other stations do much better
I think the owner is too busy snorting cocaine, if he hasn’t gotten the message yet. Maybe he’s super wealthy, and doesn’t care if this particular station doesn’t do much business
In any case, I go out of my way to avoid it, because it’s a rip off, plain and simple
I was working an evening shift and watching CNN when Katrina struck about 2,000 miles distant. Gulf coast refineries were shut down as a precaution. On my way home the gas stations that I passed had or were in the process of raising prices about 30%. The refineries were operational 3 or 4 days later. When the price of fuel had not dropped 2 weeks later some oil company talking head was on the news explaining that fuel prices take 3 to 4 weeks to adjust. Apparently that only applies to adjusting down. It took 3 to 4 hours for them to adjust up!