Gas Prices Rise Quickly But Come Down Slowly

The following is from an article in today’s paper. See Newsday 8/6/08 Gas prices not falling as fast as crude.

“From a peak of $147 a barrel last month, crude oil has fallen by 19 percent -- but not gasoline.

The local average gas price has fallen by less than 5 percent from its high of $4.346 a gallon on July 8 -- and 6 percent nationally.

So, why do gas prices go up like a rocket as crude oil is rising, but parachute slowly downward when its basic raw material is plummeting.”

Why is that? The article went on to quote various experts from the petroleum industry, all of them had nothing but excuses when trying to explain away the inequity. From the previous run-ups in gasoline prices, we have certainly learned that once the prices reach a certain psychological threshold like when it passed the $3 mark, there is no reduction in prices no matter how much the price in crude retreats. Now that they have us psychologically past the $4 mark, this is where we will stay, for now. Prices may retreat a little but not enough to realize any real savings. Besides, gasoline was already costing too much money when it was priced at $3, let alone $4. Lately I have seen prices at $3.99 a gallon which psychologically seems like a bargain so they have us where they want us.

Exxon-Mobil recently posted its highest quarterly profit ever, $11.8 billion ($11,800,000,000*) dollars. They made this much money in 3 MONTHS, that is $98 million ($98,000,000*) a day. Who are the Americans who are still buying this overpriced gasoline? Has anyone ever seen the Exxon or Mobil stations have the cheapest price on the block? Yet somehow, they continue to rake it in. See post 6/4/08 Fight Back! Buy the Cheapest Gasoline You Can Find. We have no one to blame but ourselves for continuing to patronize these over-priced stations.

It is true that Americans have drastically reduced gasoline consumption in response to the high gasoline prices and that this lower demand has led to the retreat in price per barrel of crude oil. Sadly, this did nothing to prevent Exxon-Mobil from increasing their profits. Oh well.

*I will be writing out numbers with the requisite zeros going forward because the shorthand of million, billion, and trillion does nothing to make people realize just how huge those numbers are. We need to realize just how huge those numbers are.