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ThatDaveGuy69 -> RE: WTF is Going On With Gas Prices? (10/31/2008 8:00:31 AM)
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CS: As much as we might like, gas prices being within a few cents of each other up and down the block is not any sort of conspiracy. Gasoline - the finished product - is a fungible commodity. So if the supply is high in northern IL and low in southern IL, it can be moved around to where it is needed. So the independent gas stations can play the field and get pretty much the same product from several wholesalers. Obviously, company stations (BP/Amoco, Exxon/Mobil, etc.) don't have that option. But the gat station biz is very market-driven. I have 4 different brands of gas station within a few blocks of me so in order to stay competitive they all need to be within a few cents of each other. If gas drop by 5-cents at the Speedway, everyone goes there to fill up. (This happened 2 weeks ago - the placed was mobbed! It looked like 1973!) So the DeltaSonic Carwash/Gas Station drops by 3 or 4 cents to keep even, or by 6 or 7 cents if they want to 1-up Speedway. But then the Citgo guy sees this and all the business he's loosing so he has to lower his price. And on it goes. That's really just Econ 101 - no big deal.
What really gets me is that if oil prices go up $10/barrel today, gas will go up by at least a nickel tomorrow - even though that higher-priced oil isn't even on a ship yet. But when oil prices began to drop, gas prices stayed high for a couple of weeks. Now THAT seems suspicious. Not to mention the insanely huge profits being reported by the oil companies. If it truly costs them more to buy the oil - and all the other costs involved in refining remain pretty much the same - how is it possible for the profit margin to go through the roof? So if a barrel of oil goes from $90 to $100, that's roughly a 10% increase in price. So shouldn't the increase in the price of gas be 10%? Say from $2.35 to $2.58? Instead, Gas prices exceed $4. Isn't that price gouging? I realize we have a completely ineffectual Congress as far as questioning the oil execs, but couldn't some enterprising young States Attorney somewhere make a criminal case out of this?
Just be careful not to blame the gas station - no matter the price they only make a few pennies per gallon. They make more money selling a Pepsi than they do selling a gallon of gas. Which is pretty much why you don't see a gas station that only sells gas...
One last point: I was glad to hear McCain finally out Ethanol for the myth that it is. Ethanol delivers about 25% less energy than the same amount of gasoline. So you have to burn about 25% more Ethanol to do the same work/travel as far. The only reason it costs the same is because of huge govrnment subsidies. We have ADM, Cargill, etc. to thank for that. And let's not forget that if you divert some percentage of corn into Ethanol, the price of nearly every food product goes up - supply & demand at work again. Corn, or more precisely corn syrup, is in something like 80% of all foods found in your grocery store. Again, we can thank the huge agri-business giants for stamping out the use of sugar and replacing it with HFCS. It's amazing how intertwined everything is...
~Dave
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