Every day, I record the prices at the eight gas stations that I pass en route to work. Once at my destination, I enter those prices into a web site (www.louisvillegasprices.com). I have been doing this for some years. During that time, I have noticed some patterns that I would like to share with you.
The overall trend is 7-14 days of slowly falling, interspersed by lightning price spikes.
In a falling phase, prices generally go down by 1-2 pennies per day. During a falling phase there is diversity in price among the eight stations I pass.
During a spike, the price rises by 15 to 40c. The petrol sitting in the underground tank is suddenly worth more than it was last night. At the end of the spike, everyone is selling at exactly the same price, except for a few stations that lower their prices by exactly penny – presumably this is what they call “competition”.
Here in Louisville, the price also spikes at Derby, The Car show, the Quartet Convention… basically, if the circus is coming to town, prices spike. Apparently they never saw it coming. Again.
I am less bothered by price than I am by volatility, which seems to be getting worse. Some stations have installed LED price signs, presumably so that they can jerk the price around more quickly and more often.
I believe in a free market. I don’t believe that price controls will solve anything, but it is axiomatic to anyone outside of the Petrochemical industry that something is rotten in the States of the Union.
At first I thought that one method to stop them bouncing the price around would be to mandate that they only set their price when they get a delivery (which I am told is every 2-7 days). However, they would simply take a small delivery every day, set their price as before… and nothing would change.
In the short term, one solution is to prevent the stations changing their prices by more than 5c per day. How Congress might choose to enforce that without violating free-market principles is a challenge.
In the medium term, Repealing the Federal Gas Tax and getting the states to agree to repeal their gas taxes would be a start. Auto manufacturers should also be manufacturing smaller more fuel-efficient vehicles instead of marketing SUVs and Trucks. One way to encourage this is to suspend the car-tax breaks on those vehicles (unless they are purchase by a business) and moved those tax breaks to vehicles that make over 40MPG. It’s time we admitted the obvious – SUVs are not trucks, they are passenger vehicles, and not all Trucks are business vehicles.
In the long term, we need to be drilling for oil and building refineries and power stations. Environmentalists will complain; if they want to save the Earth, let them limit or ration their electricity and gasoline. At some point, we will have to make a choice between the environment and progress; we cannot have both. That choice should be made on a State by State basis.
Just a few thoughts.