The average price of gasoline in the U.S. 20 years ago was $1.28/gallon, in 20 years ago dollars. That would be ~$2.40 in today’s dollars. On March 17 of this year we hit a record high average price of $1.73, and prices, as well as inventories have dropped since then, until the last few weeks. Gasoline prices fluctuate, more so than prices for many consumer goods. That is a result of their being ore closely tied to true market conditions. Nevertheless, I can think of few other consumer goods, with the obvious exception of electronics, that have steadily become cheaper and cheaper over the last 20 years. Bought a concert ticket or a pack of cigarettes lately?
As I said, every season there are accidents that oil companies use to justify increased prices. They also say that increased demand means that they have to charge more for their product. I’m not a conspiracy theorist, but the accidents seem a little too convenient when they seem to happen at regular intervals. (No, I’m not suggesting that the oil companies cause them.)
Oil companies have been making gasoline for over a hundred years. You’d think that after all that time, they’d grasp that demand for gasoline goes up in the summer and the demand for fuel oil goes up in the winter. And they would know that accidents happen. They should have had enough time after a century to ensure that they have enough fuel for seasonal variations and for accidents. That way, the prices should not fluctuate much.
Maybe it isn’t price-fixing per se, but it seems as if there is collusion to manipulate the markets.
From the drilling rig to the gas pump, we don’t maintain much in the way of excess capacity. We can’t - an idle drilling rig will eat your lunch quickly. When facilities go down, as Kinder Morgan’s did recently, there’s only stopgap measures, such as moving as many tank trucks as possible to the affected area, available.
The industry has been hammered so hard in the last couple of decadess that the domestic infrastructure is really not up to the task as it is.
The prices fluctuate for many reasons, and nobody controls them. Some groups, such as OPEC, attempt to influence them, but their grip on the tiller is slippery at best, and often nonexistent.
Almost all drilling and production of both oil and natural gas in the U.S. is done by independents, names you’ve never heard of, who have neither long enough legs to attempt to manipulate markets, nor any influence with any political entity.
Food has also gotten cheaper, or so I understand. Gas is cheaper, in part, because technology has enabled refineries to get a lot more out of a barrel of crude. In developement right now is a new method to efficiently utilize “dirty” crude from the southern San Juaquin Valley (Bakersfield).
Prices are “fixed” in a way. The prevailing price in an area mentioned by Johnny L.A is established by manual surveys. I think the law forbids communication between oil companies regarding prices, not matching them. My info in this side of the business (retail sales) is pretty antiquated.
I do know, though, that prices would be a lot higher if they could get away with it. Oil companies are scared to death of price wars.
I’m no apologist for “Big Oil”, but I must admit that the cost of gas is one of my lesser worries. Auto insurance costs me more.
Of course we’d like to see the best profit margin we can manage. Can you think of a business that doesn’t operate on that principle? Or a business that enjoys price wars?
OTOH, we don’t want $35 barrels of oil, because we know that will slow the economy. But when it goes there, we can’t do a thing about it.
Ringo, I didn’t say “only” oil companies. I know little of the inner workings of oil, and even less about that of other companies. Executives can even get into legal trouble if they don’t maximize earnings.
Gas prices are more closely watched than most other products, as evidenced right here. And the effects of a price war are much more immediate, and can be more costly to the oil company. That’s why they generally brush up against the law when they establish their pricing policies.
I’ve read somewhere that $35/BBL oil is a myth, perpetrated by Big Oil. You’ve probably heard that too, being a Texas Oil Man and all.
