More Thoughts on Gas Prices
January 14th, 2006 | by Craig |Maybe it’s time for a category about gas prices.
In my last post about the petroleum industry, I left some readers unconvinced that gas prices aren’t controlled by a cabal of oil execs.
As many will gladly tell you, I’m not the sharpest tool in the shed, but if the price of gas were truly being controlled by a sinister cabal, and further, if I were in charge of that cabal, I would have cranked gas prices up to about $3.00/gallon starting about December 20th, and left them there until about a week ago. After all, that’s when everyone is travelling for the holidays, right?
But, prices dipped in the middle of December, and are just now beginning to climb, when most people are done with their holiday traveling.
So now, explain to me how this is a cabal.
I’m listening.
Today’s word: fungible.
There will be a quiz later.
6 Responses to “More Thoughts on Gas Prices”
By Jay on Jan 14, 2006 | Reply
Fungible is one of my favorite words! I first learned it in accounting classes.
By Chad on Jan 14, 2006 | Reply
It happens nearly every year, Craig. Go back and look at average gas prices over the last ten years or so — in January and February prices dip and come June, July and August they spike.
When you can explain why they do that, I’ll start believing that they’re not controlled by a cabal of sinister oil execs.
By Craig on Jan 14, 2006 | Reply
And in the last 10 years, there have been increasing regulations on special blends of oxygenated gasoline, and oil companies have had to deal with that.
Plus, demand is higher in the summer when kids get out of school and everyone goes on vacation. That’s a pretty simple supply and demand question, there.
Again, I ask, why didn’t they jump the price up to $3 or even $5 per gallon at the end of December when everyone was flying or driving?
By Chad on Jan 15, 2006 | Reply
But you said it yourself:
So yes, we’re now in a normal supply-and-demand valley. But what about the years when we aren’t — like last year? The thing that you point out isn’t unusual — it’s the norm. But not always, and not nearly as often as it used to be.
It seems to me that the evidence that it doesn’t happen as reliably as it used to is a sign that someone is monkeying with it. Sure, I’ll concede that turning over gasoline content regulation is bad for America — but then, I’m a Democrat, and that wouldn’t be much out of character.
I want to leave a huge caveat on this. I pay attention to gas prices because I’ve had to in the past. I remember on more than a few occasions since being in Seattle (been here for ten years) that I’ve been disappointed that the Jan-Feb market correction didn’t happen. I don’t have hard gasoline price facts in front of me, just my recollection of trends.
And if I recall this fact correctly, the last new refinery in the US came on line 31 years ago. Strangling capacity raises prices, and that’s another rule just as tried and true as supply and demand.
By Craig on Jan 16, 2006 | Reply
I’m working on a reply, Chad. I’m intrigued by your observation, and I’ve got a couple of Excel files with average gas prices that I’m looking at.
It’s a “mountain” of data, but I’m trudging through it.
And, I do think that you’re correct on the point of new refineries, but I suspect that it is more a function of “collective behavior” than an outright conspiracy.