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Thursday, April 13, 2006

Gas Prices: What Will the Market Bear?

Today we are watching how gas prices are monopolizing the news. On the WSET website there are two articles about rising gas prices and their effects. Gas Prices Continue Quick Climb Toward Record Highs and High Gas Prices Causing Problems for School Field Trips are two stories, both related to either the effects of the high prices or the reasons behind the increases. And in the Richmond Times is this, Surprise! Gas prices going up.

Often in the WSET articles there is a reference to Virginia Gas Prices.Com, which is also on our Lynchburg Links site. After monitoring this site for a quite awhile, we have noticed that the lowest prices usually given to two particular gas stations are generally wrong, and you can throw them out of the mix. They are usually listed as 10 cents or more below the going price, but once you arrive at the gas station you will find that is not the case. Virginia Gas Prices.Com relies on consumer reporting, and these two gas stations owned by the same company are for some reason reported lower than their actual prices.

In the Richmond Times Dispatch article they are reporting the that we can expect 25 cent higher prices than last year.

They report:

The main reason consumers will pay on average a quarter more for gasoline this summer "is the world oil market continues to be very stretched to meet demand," Caruso said.

Caruso said that 19 cents of the 25-cent increase can be attributed to higher crude oil prices.
Gasoline prices should start dropping in the second half of the year, unless something unexpected happens to disrupt supplies, he said.

I hate to be pessimistic, but something unexpected will happen. We are going to have a crisis perhaps in the Mid East, or with Venezuela, and of course do not rule out how hurricanes come into play.

Market prices appear to me to depend on three real factors: supply, demand, and the gouge factor. The gouge factor is related to how the petroleum industry can capitalize on us, and there is always a reason to present justification. What will really control the price of gas is consumption. It is the fine line that provides a tipping point in the petroleum industries formula for making profits. They want to keep us just on the edge of the tipping point, by what is called: what will the market bear.

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