Gas Price Math
September 4, 2008 · By Shane Edwards
As much as people like to say gas companies buy petroleum months in advance, which is why gas prices drop so slowly, the fact is they seem to spike in lock step with oil advances.
So when I read stuff like this:
The post-Labour Day season, combined with falling crude — valued at just over $109 a barrel yesterday, down from its record $147.27 on July 11 — will likely lead to more savings for drivers, he said.
I have to do a little mental math. That’s nearly a one third drop in price per barrel.
33%.
I filled up my gas tank yesterday for $1.41 a liter in Vancouver.
Peak price this summer was $1.50 a liter.
That’s a 7% drop.
33%>7% = profit. Big time.
Ouch - $1.41/L..that’s gotta hurt. But I’m not in favour of regulating gas prices, so I’d leave it to the free market. It hurts, but it helps to drive some badly-needed changes. Try driving in Britain or continental Europe - they’ve been paying more than that for a long time.
If your going to star throwing accusations around about being ripped off by “oil companies,” you might want to consider a longer time horizon and not just your simple observations of a 7% drop.
For example, according to the Energy Information Agency (US Government department) between 2006 and 2008 crude oil rose 9.5 percent and gasoline rose only 8.9. Even more pronounced, within the last year crude rose 65 percent and gasoline rose by 30!! So, over a longer frame horizon - when you let the market do its job - the gasoline prices rise by !less! than crude prices. So, the opposite of falling by a lower proportion is perfectly natural.