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Earlier this week on the business news, I heard that North American gas prices would be going down. I gassed up yesterday morning and the price (several cents more than my last fill, 2 weeks ago) was $1.14.9/litre ($4.34.9/US gallon). My friend called last evening and said that all gas prices had risen to
$1.24.9/litre – this is an increase of 37.9 cents per US gallon, a whopping big increase. I unfortunately don’t know much about the world’s economy and know that the trouble in Libya may be having an effect on prices, but this is getting completely out of hand. Has anyone else noticed a big jump in prices where they live? Can somebody kindly explain why this is happening?
I dont know but its getting so expensive to drive! and to live!
“Can somebody kindly explain why this is happening?”
Unfortunately, that’s something no one can really do. Gasoline prices are very difficult to explain or predict, even more so than other commodities. There are so many market forces acting at the same time that at any time you can come up with multiple theories both for and against the current trend.
Situation in Tripoli brings prices up vs. down depending on whether your theory is unstable now vs. expecting stability soon. Hurricane Irene brings prices up vs. down because of stockpiling and emergency services mobilizing vs. potential demand destruction in the areas hit. There are probably dozens of other theories you could come up with at any time.
The reason why gas prices are going up is for the most important reason in sales.
Supply and demand.
In other words, you pay the most money possible for everything you buy. Your ipod that cost you $150, cost apple to make, market, sell, etc etc about $1.75. The reason they charge you so much is because “you will pay for it”
Same is the cost of apples, manicures, and light bulbs.
They charge you the absolute maximum you would pay for it.
Same is with gas, until people refuse to pay these prices, they will continue to increase.
The concept “inflated price” is an oxymoron. If someone will pay the price, it cannot be inflated.
Look at house prices in Manhattan. you can buy something 76 times the size for a 53rd of the price in Kentucky. The reason it is so expensive, is because someone will buy it! (and when people stop buying houses, the prices drop, as we are seeing over the last 3 years)
is it still going up or its down now? time to move to israel and forget driving cars!!!!!
Yacr, it would seem that gas prices are not completely decided by supply and demand. Historical data will show stability in prices even with changes to those factors, and instability in spite of unchanged supply and demand. Obviously demand is going nowhere but up and supplies in the ground are being depleted rather quickly, yet somehow gasoline remains affordable. If it were truly free market I would charge ten times the price.
because the oil companies who have a monopoly want even more money, supply is up & demand is down, figure it out yourself
squeak: So why, then, does the OPEC cartel have to take action to artificially raise prices at times?
Gas prices are going up because Obama wants to do something with the oil companies. (Read the NY Times Wed edition)
Tums, it would seem your question answers itself. The prices are controlled by artificial means both before and after the oil is pulled out of the ground. Not like in the 70s where it was actually regulated, which resulted in shortage, but through more sophisticated mechanisms.
squeak: I was trying to understand your point that the free market would allow 10 times the price. If that be the case, why would OPEC not take advantage of the higher price the market would bear.
Due to pressure from the West for cheap oil.
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