Oil prices topped $70 a barrel on Monday, thanks to the latest developments in the Middle East. Higher gas prices seem sure to follow. Columnist davidlaz explains why gas prices always seem to go up really fast and come down again really slowly.
And if you’re like me, you’ll probably ask yourself: Why is it that gas prices always seem to go up really fast whenever there’s turmoil in the oil market and come down again really, really slowly?
“Price gouging isn’t really a technical term,” she said. “So it’s not like there is a way to define it empirically and say yes, we’ve crossed it, or no, we haven’t.” Another factor is that people still have to drive every day, which means it’s difficult for consumers to signal their displeasure by cutting demand for higher-priced petrol. That reduces economic pressure for price cuts.Stephen Brown, an economist at the University of Nevada, Las Vegas, and senior editor of the academic journal Energy Policy, said that dubious pump prices “are likely the result of tacit collusion” and that “the sellers are likely taking advantage of consumers.
“They’re not trying to gouge people,” he said. “They’re just responding to what’s going on in the marketplace.”“When something interrupts the supply chain, there can be an instant reaction,” he said. “It can then take a significant amount of time to deal with that uncertainty and get things back on track.”
A gallon of regular gasoline was going for an average of $3.61 on Monday in Los Angeles, one cent lower than a week ago and 16 cents lower than a month before, according to the Automobile Club of Southern California.The statewide average was $3.55 on Monday, two cents lower than last week and 18 cents lower than last month.
Moreover, nearly a quarter of the world’s oil moves through the narrow Strait of Hormuz, which is in Iran’s backyard. A military conflict in the region would almost certainly disrupt global supplies.
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