[IP] more on Prices Fuel a Rebellion / Drivers Tired of Paying More for Premium Gasoline Switch to Regular
Begin forwarded message:
From: Joe Pistritto <jcp@xxxxxxxxxxx>
Date: August 7, 2005 8:25:57 PM EDT
To: dave@xxxxxxxxxx
Cc: jwarren@xxxxxxxx
Subject: Re: [IP] Prices Fuel a Rebellion / Drivers Tired of Paying
More for Premium Gasoline Switch to Regular
While we might all think there's a conspiracy there, there is
something rational about that effect. I've actually noticed this
effect as far back as 1973, and somewhere along the way I read about
some research that was actually done into the effect, becuase so many
people had the same observation you had.
Its the same reason that stocks go down faster than they go up, in
general.
Its psychology. If you own a gas station and hear that prices are
going up upstream of you, you immediately start worrying about being
able to *replace* the fuel you're selling today. (remember, the gas
station owner has to pay for the fuel immediately when its delivered
to him, not when it's later sold to motorists). What's more, the
retail margin on gasoline is not large. (its roughly the difference
between whatever your local Costco sells gas at and the price you
notice at your local station. Costco sells fuel at cost to get
people to drive to their stores. Clever that.) And your local gas
station probably has higher fixed costs relative to volume than
Costco does, so that probably overstates the case. Here in the Bay
Area, it seems to be about 10 cents/gallon, maybe 15. Or about 3-4%
at current prices. Margins are higher on midgrade and premium.
So there's a natural bias to panic a bit and bump prices on the
expectation of a higher bill coming soon. On the flip side, he's
already budgeted for the current fuel price in his next fillup from
his supplier, if the price is going down, he doesnt have a problem
and can reduce prices as his deliveries drop in price. Since gas
stations are pretty competitive with each other in the same market,
he can't retain too high a price for long or he'll lose volume pretty
quickly.
(similarly, investors tend to worry about being "stuck with" a stock
going down more than the worry about "missing" one going up, so the
sell order comes more quickly and with greater urgency than the buy).
Because it's free market doesnt mean it has to have symmetrical
response to an impulse function (price information in this case).
Unfortunate, but true.
No conspiracy required.
-jcp-
----- Original Message ----- From: "David Farber" <dave@xxxxxxxxxx>
To: "Ip Ip" <ip@xxxxxxxxxxxxxx>
Sent: Sunday, August 07, 2005 3:47 PM
Subject: [IP] Prices Fuel a Rebellion / Drivers Tired of Paying More
for Premium Gasoline Switch to Regular
Begin forwarded message:
From: Jim Warren <jwarren@xxxxxxxx>
Date: August 7, 2005 6:06:23 PM EDT
To: dave@xxxxxxxxxx
Subject: Re: [IP] Prices Fuel a Rebellion / Drivers Tired of
Paying More for Premium Gasoline Switch to Regular
Has everyone else noticed that -- when unrefined/raw crude oil
barrel- prices increase, there is a near-INSTANT increase in retail
pump- prices for the finished, refined product ... but when crude-
oil barrel-prices decrease ... gee gollie gosh ... it seems to
take WEEKS for the retail prices to similarly subside.
That's called "free enterprise" and "marketplace competition" ...
cartel-style!
--jim
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