Over a (Gasoline) Barrel

I ran across this little chart yesterday and found it quite interesting....on many fronts. Wholesale gas prices have fallen off a cliff since Katrina, back to pre-Katrina levels. With the petroleum infrastructure in New Orleans a mess, this didn't seem to make sense.

But then I ran across this:


Demand has fallen off the cliff. Whether this is due to supply interruptions or due to conservation (or more likely both) is yet to be known. But one thing is clear. Gas prices at the pump haven't changed...not one bit.

Anyone remember how long it took for gas prices at the to go up? I think the only thing limiting the speed of the price increase was the speed with which the gas stations could get their minimum wage convenience store clerks out to change the signs. I've always wondered why gas was always $X.99.99 per gallon. Now I know. Fewer numbers to have to change, making it all the easier to change that price.

Ok, well, now wholesale gasoline prices have fallen back. How long will it take for gas to go back to pre-Katrina levels?

The Big Picture makes the point that consumers are somewhat at fault. By not shopping price and stimulating competition, oil companies, distributors, and station owners are quick to take advantage of prices in their favor, while sluggish to reduce prices.

I think this is nonsense. Gasoline is an essential consumer product. I can't easily decide I'm not going to drive, given how our economic engine is structured. And believe it or not, gasoline distributors know they have me over a barrel. So when wholesale prices drop, do all the stations owners rush out to lower prices? Hell no. There's a tacit understanding (read, monopolistic collusion) that prices will go down ever so slowly....if at all.

If ever there was a case for regulatory intervention in the "free market" it's in energy. Anything the government can do to make prices fair, tax windfall profits,and reduce petroleum use is OK by me.

Charts via The Big Picture