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Oil prices have dropped back near pre-crisis levels as shipping resumes through the Strait of Hormuz, but gasoline prices at the pump have been slower to fall, The New York Times reports.
President Donald Trump has accused gas retailers of price gouging and urged them to lower prices quickly, echoing similar criticism made by former President Joe Biden during the 2022 energy price spike.
Experts say there is some truth to the complaint. Gas station profit margins have roughly doubled over the past decade, from about 20 cents to 40 cents per gallon, due to a combination of higher operating costs, such as wages, insurance and rent, and increased profitability. Large chains like Wawa and Buc-ee’s benefit from economies of scale, allowing them to earn higher margins than independent stations.
Price volatility also helps retailers. When wholesale prices fluctuate rapidly, consumers are less certain about what gasoline should cost, giving stations more room to keep prices elevated after their costs decline. Several companies, including Casey’s, Murphy Oil and Sunoco, have acknowledged to investors that recent volatility boosted their fuel profits.
Another factor is sophisticated pricing software. Many gas retailers use algorithms that analyze competitors’ prices and market conditions.
Researchers have found that these systems can lead to higher prices by reducing aggressive price competition, even without explicit collusion. Kalibrate, a major provider of fuel pricing software, is facing lawsuits alleging its platform enables coordinated pricing among gas stations. California, which recently strengthened laws addressing algorithmic price coordination, has become a key battleground for these claims.
While the legal cases could take years to resolve, industry analysts expect gasoline prices to settle at a higher baseline than before recent price spikes, even as crude oil prices decline.
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