The variance of gas prices is, not surprisingly,always major news here in SoCal.
We are essentially a captive market. There is no real transportation infrastructure in place to support anything but people driving in cars everywhere. So our demand is pretty much constant, or was until recently.
The routine here is that about 5 minutes after, let’s say, a landslide damages a Shell refinery, the price of gas goes up, sharply. Not just at shell stations, at all the stations. The news will respew some bullshit about affecting overall supply in the region, blah blah blah. Admittedly, this is basic economics. Demand remains unaltered, and supply has theoretically been reduced, the price goes up. One could even see how a refinery might sell processing capacity to a competitor to account for other brands following suit. One might even commend the companies on a short spike early, in order to smooth out potential problems down the road that might lead to even sharper spikes.
Then, a few weeks later, when the impact of the problem is actually felt in the supply chain, the price goes up sharply again. The news respews bullshit about how that Shell refinery landslide a few weeks ago has affected supply in the region, blah blah blah. Wasn’t the earlier spike supposed to mitigate the effects of that?
Also, when supply goes down, isn’t the price increase supposed to cover expected losses in revenue? Wouldn’t one expect to see the profit margins thin out just a tad, temporarily? But you don’t see it happen. Profits keep skyrocketing.
And it’s not just limited to local phenomena. We had a number of of price hikes just after Katrina and Rita. Pretty much anytime anything happens anywhere, the gas price jumps here multiple times.
About 2 months ago, though, funny thing. The average price around here topped $3.00 a gallon. It’s a purely psychological thing, but there was certainly something jarring about seeing your final price for a tank triple the number of gallons you put in. Suddenly my morning commute got real easy. Fewer vehicles overall, and hardly an SUV to be seen, whereas they clogged the roads even up to about $2.90/gal. How they were getting around now, or what so many people had been doing before that they could suddenly do without, is beyond me, but it takes me about half the time to get to work now. About the same time, Congress announced probes into price gouging, and Whaddaya know, prices began to drop. The cheapest station on my route to work now charges $2.65. Hey, the market does have an effect!
The biggest hurricane ever recorded, Wilma, has ripped through the Gulf in the intervening time btw, and prices here barely bubbled. Hmmmm…
Of course, with market forces and perhaps government pressure driving prices downard, we surely could expect to see a thinning of the profit margins, right? Investors looking warily at oil company stocks with a lack of enthusiasm? Anyone actually see that happening right now? :rolleyes:
Anyone who says gas prices have been at fair market value in the past year or two needs to get their head out of the sand.