The Prices at the Pump Go Up and Down
September 30, 2008
I'd like to try something I was discussing with a colleague this morning. With pump prices dropping significantly in the last few weeks and some large overnight price drops experienced in some larger markets, I'm going to pose the same questions that were asked/yelled when prices went up. But instead of rise or go up, I'll simply substitute drop or dropped to reflect the current situation.
Here goes:
- Why should gasoline prices drop just because crude oil prices dropped?
- Why did gasoline prices drop today because crude oil prices dropped? Doesn't it take 30-60 days for that crude to be refined?
- If it's the same gasoline that was in the storage tank yesterday, how could you drop the price at the pump?
- Why should Canadian pump prices also drop just because American wholesale prices dropped?
Gas prices go up and down for a number of reasons that have been answered here, here and here. But by asking the same questions on the way down that were asked on the way up, it becomes obvious that the markets and local competition have a big influence over the price at the pump. Problem is, those questions don't get asked. Except when the price goes back up again.
In other words, if I understand that my pant size willl go up when I consume more doughnuts and hamburgers, shouldn't I also be able to figure out the path to a smaller pant size?
Photo Credit: Kazze