Update: I thought for a moment I had been hallucinating earlier today when I noticed the price of gasoline had jumped 20 cents per gallon during the night. But nope. I saw it.
Then I noticed a competing convenience store chain had kept its prices the same as the day before, $2.79 per gallon of unleaded gasoline. Lo and behold, the two stations I noticed the big jump had rolled the price back to $2.79 during the day, and then dropped the per-gallon price a penny more by the end of the day.
Could there have been, shall we say, a gasoline pump trial balloon sent aloft this morning?
***
A mystery of economics has been made even more mysterious as of this very morning.
While completing an errand a few minutes ago, I noticed the price of regular unleaded gasoline jumped 20 cents per gallon overnight.
It’s still under $3, but it’s now at $2.99 at one local gasoline station. It’s a local chain, so I’m betting I’ll see a similar spike at other corner gasoline stations later this morning when I trudge off to work.
The mystery is this: I keep reading stories in the media about the plummeting price of crude oil and the accompanying decline of gasoline — which is a product of aforementioned crude oil. Then I witness this upward spike in prices here in West Texas, which supposedly is one of the centers of the domestic oil production boom that I thought was helping drive the price of energy down.
What in the world am I missing here?
I get the supply-and-demand drivers that fuel the economy.
News reports keep telling us that our supply is outstripping our demand. Production is up, demand is down. Thus, prices are supposed to come down. Isn’t that how capitalism works? It’s kind of basic.
Now the price of gasoline here in Amarillo, Texas, has shot back up — by a lot!
It’ll take some time for the price to trickle back down. That’s how it works. What jumps up quickly comes down at a snail’s pace.
I’ll be waiting and watching.
I guess we need to get ready for more mysterious gasoline price incidents.
It would seem that the glut of crude oil has been caused by fracking companies, in an example of unmitigated greed, producing all that they can until the market was flooded.
Well, it would seem, that this hasn’t gone unnoticed by the Saudis. Rather than cut production to prop up oil prices, they have decided to maintain production at the current levels. Their plan is to cause oil prices to drop to a level that makes fracking financially unsuitable. They have declared that this could go on for one or two years.
It appears that OPEC, who has been very effective in manipulating the market, has decided to get rid of a portion of the competition. Considering the uproar in some sectors about the environmental impact of fracking on our water supply, this might be a good thing.
It might not be.
I think that the Saudis would like to keep the US under their thumbs. If they are successful at running some of the competitors out of business, it will allow them to maintain their stranglehold on the price of oil and ultimately the world economy.
One or two years of this should yield some interesting price observations concerning gasoline.