Gasoline Prices Lag Behind Oil Market Adjustments as Algorithms and Antitrust Scrutiny Shape Industry Dynamics
Oil prices fell nearly to their level before fighting blocked off the Persian Gulf four months ago as tankers resumed passage through the Strait of Hormuz, but gasoline prices at the pump have not declined as quickly. The discrepancy has reignited debates over price gouging, with President Trump urging retailers to lower prices, while industry analysts point to structural factors like algorithmic pricing and market consolidation.
Why Gas Prices Lag Behind Oil Market Adjustments
The gap between wholesale and retail gasoline prices has widened over the past decade, from around 20 cents a gallon to about 40 cents, according to data collected by Dow Jones’s Oil Price Information Service. Tom Kloza, chief energy adviser for Gulf Oil, attributed the trend to “inflation, but it’s also opportunity,” noting that large chains like Wawa and Buc-ee’s benefit from economies of scale to secure cheaper fuel. Independent store owners make up more than half the industry.
Gasoline retailers also maintain higher margins during periods of volatility, as seen in 2022 when prices topped $5 per gallon. Casey’s General Stores reported a margin of 46.9 cents per gallon on fuel in the quarter that ended April 30, up 9.3 cents from the same quarter last year. “It was just a little bit more volatile on the way up relative to the experience we’ve had in the past, and that enabled us to capture a bit more margin than we might have otherwise,” said Darren Rebelez, the company’s chief executive.
How Algorithmic Pricing Affects Retail Gas Prices
Digital pricing tools have transformed how retailers set gasoline prices, with platforms like Kalibrate—which says 15 of the top 20 fuel retailers in the United States use its services—analyzing market trends. Daniel Ershov, an economist at University College London, studied the use of algorithmic pricing services and found that the use of such services pushed up prices even in superficially competitive markets. “The difference now is you have much more sophisticated algorithms that learn stuff a lot faster and incorporate a lot more information,” said Mr. Ershov.
Legal action against Kalibrate highlights growing concerns. A lawsuit filed last month claims the company “provides the central nervous system for a conspiracy to extinguish retail price competition among gas stations,” citing California’s high gasoline prices and a state statute tweaked last year to clarify that pricing algorithms that share data across firms qualify as illegal coordination. “When you step back, it’s kind of absurd to say, ‘Oh, if you only did the common scheme 90 percent of the time, there was no agreement at all?’ That’s not how antitrust is supposed to work,” said John Mark Newman, a law professor at the University of Memphis.
What the Future Holds for Gas Prices
Despite recent declines, experts predict that the relatively low gas prices of early 2026 aren’t coming back. Bobby Griffin, managing director of specialty retail at Raymond James, noted that “You get these big spikes, it resets, but it usually resets back to a level that is above where it was before the spike.”
American antitrust watchdogs haven’t followed suit with an inquiry, but the California case could set a precedent. “I think this one pretty clearly reflects some lessons learned from how those previous cases have gone,” said Mr. Newman. However, legal challenges may delay outcomes for years, leaving consumers to navigate a market shaped by both technological innovation and regulatory uncertainty.