I’ve been saying from the start that the meteoric rise in gasoline prices we have been dealing with are like re-living the early 1970’s all over again. I haven’t bought the whole “supply and demand” excuse from the start and I still don’t.

There is no “shortage",” just as there was no shortage back in the early 1970’s. I didn’t know for sure who was to blame back in the 1970’s, and I don’t know who to blame now to be honest. Was it the producers (OPEC) cutting back to drive up the price? Or maybe the speculators trading oil futures up to ridiculous levels on rumors of wars, or the possibility of hurricanes and other natural disasters.

By the way, unless you are a high-level government official, a Wall Street Fat Cat or an OPEC official, you do not know what really caused the price of oil to increase so dramatically either, but I’m always open to hear the theories and speculation of others, with one caveat. Keep it civil or your words will never see the light of day on this site.

Anyway, that really wasn’t what I intended to talk about. I really wanted to talk about the possibility that we are being shafted by the gas station operators or perhaps their suppliers. Here’s what I’m getting at:

As we all know, as soon as we hear about the price of oil going up, we start to see it reflected almost immediately in the prices we pay for gasoline, heating oil, propane and other related products. Naturally, some of us ask why it is that prices come down so much slower than they go up.

If I’m not mistaken, a common reason that’s offered by the retailers is that they have tanks full of product that they paid a high price for, and they have to hit their profit margin in order to stay in business. Therefore, they can’t sell that existing inventory to us at a significantly lower prices than they had to pay for it, which pretty much makes sense to me.

If that’s true, shouldn’t it work the other was as well? When we get word of an oil price hike, how is it that we see a rise in gas prices almost immediately? Aren’t those same tanks full with product that they have paid a lot less for than the current rate? Shouldn’t the prices remain relatively stable, since they are selling us gasoline that they paid a lower price for when compared to the current price?

This is something I’ve been contemplating for a while, but what prompted me to write about it was this particular news item from Yahoo! Finance News today. Go ahead and read it and then see if you see anything wrong with the big picture.

Did you see it?

If not, I’d like you to take note of this particular statement from the article: “The price of crude oil has tumbled 54 percent from its peak of $147.27 reached in mid-July.”

Are you starting to see where I am going with this?

Check this article out from CNN Money from just a couple of days ago.

Here is the key statement from that article: “Gas is down 22% from a month ago and nearly 30% from July’s peak price of $4.114 a gallon.”

I think you know where I am coming from now, don’t you?

If oil is down 50% from its peak of $147.27 in July when we were paying the peak price for gasoline of $4.114, why is gasoline down only 30% from July’s peak? Shouldn’t gasoline prices be 54% lower now than they were in July? If so, we would be paying $2.057 per gallon for gas. I don’t know how much gasoline is going for where you live, but where I live it is currently around $2.95 a gallon. The math tells us something fishy is going on.

How does this make sense? They’ve been telling us from the start that this whole crisis was a supply and demand issue with regard to oil, and since there was not enough supply to meet the demand, the prices had to go up. Well, oil is down 54% from its high. Why isn’t gasoline also down that much?

It’s things like this that really convince me that there’s a lot going on behind the scenes that we will probably never know about that really stinks badly.

Welcome back!

Tags: gasoline prices, high, low, oil prices, peak