Monday, September 26, 2011

Crude Oil versus Gasoline prices

An Anonymous reader asked in my last post on Gold and Silver, why does there appear to be such a lag in the drop in price of Crude Oil versus the cost of gasoline at the pump? I said I would check it out and report back if I found anything relevant. So this morning I have posted 2 charts. One is on Crude Oil prices over the past 2 years and the other tracks Gasoline prices over the same period. Here are the charts:

There does appear to be a longer lag time most recently as gasoline prices should be lower. I can't explain it so as my reader suggested, maybe the Oil companies are trying to gut us to improve their profits as he suggested. Another possibility is that because demand has dropped significantly with the slowdown in world GDP, the Gasoline available today was produced using higher priced Oil and that it will take more time to use this Oil up, hence the lag in Gasoline prices. You wouldn't lower the prices of something you paid higher for until you sold it and then might drop your price of that product. The same is most likely true for Gasoline as well. The real gouging may take place on the front end when Oil prices rise rapidly. They most likely feel justified to raise prices then as everyone knows Oil prices were going up, hence the rise in the cost of Gasoline. It's a psychological game played with Consumers the losers. You can bet on that.

Thanks Anonymous for the question.

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