More Speculation on Gasoline Prices

You know gasoline prices must be getting out of hand when the federal government promises to “look into it”. But don’t hold your breath. The government has investigated collusion in gasoline pricing six times since 1990 and has found no evidence to support it.

But it’s not only that gasoline prices are high, it’s that over the past week prices have fluctuated as much as 4.5 cents over night. And to many people, that just doesn’t make sense.

We all understand that gasoline prices are heavily influenced by crude oil prices, as shown in the graph below. And we’ve all been told that oil prices are at near record levels because of political instability in the Middle East and North Africa.

 

We’ve also been told that recent flooding on the Mississippi River in Tennessee has caused refineries in that area to shut down, causing gasoline shortages.

But a closer examination of the unrest in the Middle East and North Africa reveals that the countries where the protests are occurring export about 1.9 million barrels of oil per day, or about 11 per cent of the region’s total, an amount that Saudi Arabia can more than accommodate merely by opening the taps a quarter of a turn.

And according to Reuters, there are concerns that refineries may have to shut down, but as of Thursday, May 12, none have done so.

One has to wonder what is really behind the price increases. And one has to really wonder hard about paying $1.32 per litre Monday and $1.36 per litre Tuesday when Tuesday’s gas was in the service station’s storage tank on Monday with Monday’s gas.

The government’s investigation will probably take several months. Meanwhile, there’s plenty of time for speculation.