inflation

gas prices

I’m an avid reader of cnn.com and wsj.com, and amongst all the news about the world coming to an end because a few big banks made some bad bets, I also noticed that the price of crude oil has also plummeted from $140+ per barrel to now around $70 per barrel.  Hmmmmm, that’s about 50%.

I live in L.A., and I drive a Prius, so I care about gas prices.  Also, this is important to me as I need to be sure the furniture I sell on visiondecor.com can be shipped out at a controlled cost.  I remember paying at the highest about $4.35 per gallon (87 octane).  And now I see it around $3.29 per gallon.  Hmmmm, that’s about a 24% drop.

That’s nice that it dropped, we are all saving money.  But that is no where near 50%!  It’d be nice if we all can save a few hundred bucks a month if it dropped 50%, or my company can ship you the furniture you by at 50% off costs.

But let me get this straight.  When oil went from $80 per barrel to $140 per barrel which is less than double, gas prices went from under $2 per gallon almost $4.5 per gallon.  80% increase in cost, and we get our prices jacked up over 110%, and now that cost has fallen by half, we get a measly 24% price cut?

Something is wrong here.

This is not to mention that the DEMAND for gas has gone down.  For the first time in many years, the American public has drove less.  So falling demand, falling costs won’t bring back the prices we’d love to see?

Well, we can wait a bit longer to see if gas prices come down before the people start rioting that the economy is falling apart, people are losing their jobs, but they still need to pay an arm and a leg for gas?

Let me set it straight.  Oil companies just lied.  They lied when they said they needed to raise gas prices because the cost of oil went up.  But that wasn’t the entire reason.  Because the average consumer doesn’t realize that gas needs to be refined from oil.  It’s the fact that refinerie capacity in the US has peaked.  Even if we brought in all the oil in the world to the US as $10 per barrel, we would not be able to turn it from oil to gas fast enough for the gas prices to go down because of our still high demand on gas compared to the supply the refineries can churn out the gas.  So to put some reason behind the nonsense, is that Oil companies lied and used whatever reason that made sense to raise gas prices on your daily driving life, but now is in a pickle because it is hard explain away the reason they used to raise prices doesn’t apply when their cost has gone down.

So the lesson is be truthful and upfront to your customers.  This applies to all businesses, large and small.  Maybe if customers and investors really knew what was going on, we wouldn’t be angry at the oil companies and the banks that failed causing this panic in the markets.

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