Why Gas Won't Get Cheaper

(3 of 3)

Remember, too, that energy spending is not so crucial to the economy as it once was. It was 14% of GDP in 1981, compared with 7% today. "We can take these kinds of prices," says S&P's Wyss. "Relative to income, they're not that high." A gallon of gasoline, after all, is still about the same price as a gallon of bottled water. He calculates that the average person would need to work 42 min. to earn the money for a week's commute; back in the 1970s, it was 102 min. "That explains why we're still buying SUVs," he says. Once oil gets to, say, $100 a barrel, "it starts to get more difficult."

•Crude-oil prices fell below $50 a barrel last week. Why didn't the price at the pump drop?

Although world oil prices react instantly to the headlines, any rise or fall in crude oil takes a while, sometimes months, to show up at the pump. When refiners buy the crude they process into gasoline, they usually do so on long-term contracts. That means their cost is locked in from 30 days to six months at a time. Refiners can't quickly adjust their raw-material costs, so those who own retail gasoline businesses, which are less profitable than refineries, continue to pass the cost along to the consumer as long as they can. Rogers cautions patience. "It takes a while for [a price drop] to work its way through the system," he says. "This will get to you eventually." •

To view a collection of our past coverage of the oil industry, visit time.com/oil