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more on Prices Fuel a Rebellion / Drivers Tired of Paying More for Premium Gasoline Switch to Regular
From: David Farber <dave () farber net>
Date: Sun, 7 Aug 2005 21:15:13 -0400
Begin forwarded message: From: Joe Pistritto <jcp () jcphome com> Date: August 7, 2005 8:25:57 PM EDT To: dave () farber net Cc: jwarren () well comSubject: 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 () farber net> To: "Ip Ip" <ip () v2 listbox com> Sent: Sunday, August 07, 2005 3:47 PMSubject: [IP] Prices Fuel a Rebellion / Drivers Tired of Paying More for Premium Gasoline Switch to Regular
Begin forwarded message: From: Jim Warren <jwarren () well com> Date: August 7, 2005 6:06:23 PM EDT To: dave () farber netSubject: Re: [IP] Prices Fuel a Rebellion / Drivers Tired of Paying More for Premium Gasoline Switch to RegularHas 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 ------------------------------------- You are subscribed as jcp () jcphome com To manage your subscription, go to http://v2.listbox.com/member/?listname=ipArchives at: http://www.interesting-people.org/archives/interesting- people/
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