The Finch Formerly Known As Gold

13 October 2005

Who's gouging you?

William Sargent identifies the culprits at The Truth About Cars:

[I]f high gas prices were solely and inexorably linked to the price of oil, why are there still enough cheap plastic toys to keep your local Dollar Store in business? Why have disposable diapers, polyester pillows, Tupperware, hula hoops, toy dump trucks and other petroleum-based products not jumped to three times the price, too? Because they're not subject to the same political and economic pressures affecting gasoline.

When voters elect the latest gladhander to their municipal and state governments, the chemical makeup of the gas down at their local pump is not usually high on their list of priorities. BUT if you're an agricultural activist who wants to sell corn to the government to produce Ethanol, or an environmentalist who believes you possess the magic formula for reducing baby-killing smog in western cities, well, that's a different story. These groups are extremely effective at lobbying government at the state and local level to create a "boutique" gasoline formula to further their cause. As a result, Missouri gas isn’t good enough to burn in California, whose gas cannot legally be sold in New York City or parts of Arizona.

Which, of course, you already knew.

But there's one more factor:

Back when gas was $2.00 a gallon, industry experts speculated that speculation was adding five to seven cents to a gallon of gas. In the wake of hurricanes, the "investor effect" has been both more volatile and more pronounced. Basically, some heavily moneyed folks are betting against The Truth About Oil; they’re making a short-term gamble that the price of oil will keep going up. Because this strategy has been successful in recent years, more commodities investors are doing it, which inflates the demand (and price) of oil (and gas).

Can you say "bubble"? Sargent believes it's about to burst:

Fellow enthusiasts and SUV salesmen fear not: gasoline will be cheap again within a year or two. The price will return to the $1.00-$1.50 range, just like it was back in December of '02.

Suits me. My lawn mower doesn't much like that $2.75 stuff.

Posted at 4:20 PM to Family Joules