Secret oil industry conspiracy


...to lower prices?
Pejman Yousefzadeh pokes holes in the oil industry conspiracy myths. Emphasis added.

Needless to say (you'd think), the arguments alleging oil company manipulation of the market value for gasoline are fundamentally flawed. According to these arguments, oil companies have the power in the first place casually to adjust the market value of gasoline with the same degree of impunity that you and I have in determining what we want to have for lunch. Of course, even those who are minimally knowledgeable about economics know that the primary influence on the market value of gasoline is the law of supply and demand. As the USA Today report linked above suggests, the end of summer means reduced driving needs which in turn reduce the demand for gasoline. The report also points out that gasoline use in the first eight months of this year is up by less than the amount considered typical. This reduced demand helps push down prices.

Additionally, supply is increased because "federal requirements for clean air, summer-blend gasoline end next month, making gasoline cheaper to refine and import." The Reuters story linked above reports a further reduction of demand fears with speculators and observers betting that there will not be any political conflicts with Iran in the near term that will reduce supply.

All of these facts notwithstanding, we will continue to be plagued by myths that gas prices are somehow capriciously and artificially set by businesspeople bound and determined to rob consumers of their hard-earned dollars so these self-same capitalists can line their filthy pockets. But the merest bit of Googling brings up excellent rejoinders demolishing these myths.

Higher gas prices in the summer caused by evil oil barons has to be one of the most pernicious myths around. Competition helps keep prices down. As soon as someone starts making a profit with a high price, someone else will undersell them to get more market share.

— NeoWayland

Posted: Sun - September 10, 2006 at 05:41 PM  Tag


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