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Why Does Ohio Have Such Erratic Gas Prices?

Ohio gas prices have jumped 35 cents a gallon in the last month, but are still two cents lower than what Ohio drivers were paying a year ago. So why are Ohio gas prices so up-and-down? Pump prices at Dorsey’s gas station and grocery in Malvern can and sometimes do change a couple of times in a week, and the same thing is happening all over the region. “I’ve seen a difference between [Minerva] and Alliance, $3.29, you come to Minerva its $3.59; then you drive back up to Alliance and its $3.59 up there. I’ve seen it jump 30 cents in a day … and why?â€? asked Dean Holland of Northeast Ohio. Paul Mills, a market economist at Kent State University, is seeing the trend all over the country. “While it used to be a very rare occurrence to see a swing in gasoline prices of 20 cents or more, it’s become much more common place," Mills said. "Last year here were ten times the number of incidents, across the country, where gas prices changed by more than twenty cents a gallon.â€? [caption id="attachment_67339" align="aligncenter" width="592"] Comparing Columbus gas prices (blue) to the national average (red) and Kansas City (green). Credit: GasBuddy.com[/caption] Supply and Demand Mills said part of the reason is how oil companies now manage supplies. Most have followed the lead of manufacturers and big box retailers that keep just enough inventory to meet anticipated demand. And sometimes the gas wholesalers don’t anticipate that demand very well. Holland, who once worked in the oil fields himself, thinks there may be other reasons supply falls short. “They create their own shortage," Holland said. "Either through not pumping the oil, or in the refineries. If they built one or two more refineries it would be more readily available, and should be cheaper.â€? Mills said the refinery issue does figure in, especially in this region. He points to one refinery where recent upgrade projects disrupted fuel output. “With fewer refineries and older refineries," Mills says, "Work that was done in one of the closest refineries, the one in Whiting, Indiana, caused the supply of gas to fluctuate a lot.â€? Winter Weather But, Mills also says to not overlook the effect of this wild winter. “That volatility we see in the weather makes people’s use of gasoline less predictable," Mills said. "So, the kids are home from school, the school buses aren’t running, or people cancel airline flights and take their cars to go on a trip. And so all that unpredictability leads to this volatility in prices that we see.â€? Mills says both the weather and refinery problems help explain why price swings have been greater in Ohio, Indiana and Michigan than anywhere else in the country. Industry analyst Patrick DeHaan of the national fuel price tracker GasBuddy.com says the real reason for price fluctuations may be less dramatic than gas stations plotting to hurt the public. “I’d say a big part of it is a monkey-see-monkey-do approach," DeHaan said. "And stations do this to keep volume coming to their station. And then when both stations are to a point where they just can’t take any more losses, then you see another priced spike. And the behavior continues on.â€? DeHann tracks daily prices at ten thousand gas stations nationwide. He agrees, the ping-ponging price movement is worse in our region than in the rest of the country. But he and economist Paul Mills both say the end of winter and normal economic fluctuations may help, prices smooth out later in the year.