There's One, Only!

What's causing the gas prices to go up.

To put it bluntly, YOU! That is, if you're one of the countless people that heard "$5.00 a gallon gas by the weekend!" and immediately ran out and filled up your car, truck, gas cans and whatever bottles you could find at the bargain price of $3.50 per gallon. That massive increase in demand at the same time as a decrease in supply just drove the prices through the roof.

What many people don't realize is that at the huge gasoline supplier level, buying gasoline is just like using e-bay. Basically, it's like there's a huge bucket of gasoline out there that all the big gas companies want to buy. When the supply get's low, there's not enough gas for everyone to get what they want, so the bidding war starts. No one want's to run out of gas, because you can't make any money when you don't have anything to sell.

And now, add to this the problem of people panicking and buying up all the gas they can get for themselves. Then the gas stations need more gas from their suppliers, who in turn need more gas from the refineries. More demand.

So gas prices will go up until one of a couple of things happen. Either people stop panic buying, and end the artificial demand increase allowing gas reserves to build back up to normal levels. Or the refineries come back online and everyone feels real stupid about buying up all the $3.50 gas they could get now that the price is down to $2.50 again.

It's all a matter of supply and demand.

(By the way, the only ones making any real money on gas are the state and local governments. The taxes on gas are many times what any person or corporation at any level of the gas supply chain make. With the possible exception of the very beginning of the whole process. But their profits are a matter of everyone trying to outbid each other to get the gas or oil. But again, that is perfectly normal supply and demand. Artificially induced shortages in supply are another matter, and not the underlying cause here.)

Posted by GEBIV at September 2, 2005 09:31 PM | TrackBack