John Patrick
Assistant Editor
The inconsistent nature of gas prices has lead to much speculation about the driving forces behind the fluctuations.
While most people attribute high gas prices to high oil prices, Automobile Club Spokesman Paul Gonzales tells a different story.
“Gas prices are mostly dependent on demand and perceived supply, not oil prices,” Gonzales said.
It is the relationship between gas and oil prices that exists in peoples’ minds, according to Gonzales, that allows the gasoline industry to continue to sell gas at high prices long after the price of oil drops.
“The cost of driving is up 33 percent from last year,” Gonzales said.
“(But) the demand is already flat,” he added.
Gasoline has a curious quality that allows it to be priced at $2.32 per gallon at the station around the corner from your apartment, while another station of the same name, just two blocks away from the first, is selling gas for $2.42 per gallon. On top of this, prices in general might rise two to three times in a single day.
Though a twist on the basic economics of a free market might explain the reasons for inflated gas prices overall, what is accountable for the local inconsistencies might be surprising.
California law requires that special blends of gasoline be used for both summer and winter, explained Jack Kyser, chief economist for the Los Angeles County Economic Development Corporation.
When refineries switch from summer production to winter production, there can be local price hikes depending on from where each station receives its gas.
As for the year round differences between prices, Kyser said that could be chalked up to who is supplying a station with gas as well.
“In many cases, (gas stations) are using independent suppliers,” Kyser said.
This of course means that if you shell out the extra cash for a company’s signature blend, such as Chevron’s Techron, there is no guarantee that you are actually receiving what you thought you were paying for.
“You may not be getting that special blend,” Kyser said.
“But most types of gas are basically the same,” Kyser added.
But this is only speculation on the driving factors behind the pricing of gas, which is a closely-guarded secret.
“We have been asking for this forever,” Gonzales said regarding information on how oil companies price gasoline. “Only the oil companies know, and they won’t disclose it to anyone.”
With the price crunch on, many consumers are looking for ways to save money on their daily commute.
“The best way to save money is to carpool,” Gonzales said. “This can cut costs in half. A vanpool can save even more.”
Another way for consumers to save money, according to Gonzales, is to simply conserve gasoline, which would cause monetary savings in a couple of ways.
The simple act of conserving gas would cause consumers to spend less money because visits to the pump would become less frequent.
If enough drivers would develop conservation habits, this would drive demand and supply closer together, thus forcing oil companies to lower the price of gas to remain competitive.
“If all Californians saved two gallons of gasoline a week, we could bring demand closer to supply,” Gonzales said.
John Patrick can be reached at jpatrick@ulv.edu.
John Patrick
