09 October, 2008

Day after debate, gas prices plunge

Senator Obama remarked during the debate that we've been paying $3.80/gallon for gasoline lately. Actually we'd been paying somewhere in the $3.40/gallon range here in Hattiesburg but I don't mind.

The very next day, gas prices plunged around here. I don't know about the rest of the nation, but the price at a local BP station fell from $3.29/gallon to $2.97/gallon. That was a 10% drop in one day, and it follows on the heels of steadily sliding prices in the wake of Hurricane Ike.

As I stood there filling the tank, I congratulated myself for having bought only half a tank a week and a half ago. Had I filled my tank then, I'd have spent more than $2 more. Yep, nearly broke the bank there!

My self-congratulation didn't last long. Arriving home and looking at the paper, I learned that Kash King was selling gasoline at $2.75/gallon. In the space of two months, gas prices in the area have fallen about 30%. Even the stock market has lost only 20% of its value over the same time period.

And you thought no one could find a silver lining in the cloud of a bear market! ;-)


Clemens said...

Hmmm. We've been paying $3.95 here when we could find a station that had it. Now it has gone down to $3.75 just this evening.

Why is gas so cheap out your way?

jack perry said...

I have no idea.

Unfortunately, the stock market has since tanked. Oh well, thank goodness I'm a long-term investor. Unless those jokers in Congress decide to dismantle das Kapital, I'm not worried.

Brandon said...

Gas prices are a bit of a bugbear to figure out. Oil companies set their prices, then sell to refineries, which then sell to distributors, which then sell to retailers, which then sell to us. So gas prices in any given area are an entirely accidental result of supply and demand in the local network (plus things like transportation costs and taxes).

jack perry said...

I agree with you on the facts. What amuses me is that the oil companies have been protesting to anyone who will listen (a rather small number) that the one biggest factor in the price of gasoline is the price of oil, which they can't control. I agree with them that they can't entirely control it in a market that, like oil, approaches what economists call a perfect competition. The price of oil fell last week below $80/barrel, so the drop in my area isn't that surprising.

I do find it curious that gasoline in Clemens' area is still so high. Twenty to thirty cents wouldn't surprise me. Half a dollar wouldn't surprise me if he lived in one of those states that highly regulates gasoline, like California, say. But he doesn't.

Maybe it's a consequence of the local retailers having run out of gasoline, and needing to maintain prices high to prevent another shortage?

Since last week, the price of gas at all local retailers has fallen further and now lies in the $2.70-2.80 range. If it falls much further I'll contemplate pouring gasoline into my kids' cereal instead of milk. ;-)

Brandon said...

My guess is that it is some quirk at the distributor level; it usually seems to be. But it's all just extraordinarily confusing.

Clemens said...

The explanation we got from the governor was that so many stations out here in the mountains are independent so the big companies weren't giving them priority for gas, which caused a shortage which caused a run on the stations which caused prices to go up.

The Washington Post OTOH said it was because most of our gas comes from one lone pipeline that wasn't back up to full service.

Personally, I don't really believe either story. It has finally just this last week started going down a bit. The scary part was not the high price, but the fact that many stations were running out! As I commented on my blog several times.

jack perry said...

That's true; it's understandable when stations run out of gas because of some obvious problem in supply, like a hurricane in the Gulf of Mexico. It would be worrisome when it happens for no apparent reason at all.