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Passing Thoughts

Gas Prices, WTF

Gas prices in Ohio, particularly central Ohio, display a pattern. They go down steadily over a period of 5 to 9 days (sometimes shorter or longer) and then, for no apparent reason, jump up by about 10% or more. As the following graph illustrates, this short-term pattern is not related to the price of crude oil, nor is it a phenomenon common to the entire country.

Graph displaying the price of regular gasoline for Colorado Springs, Columbus, and the US average, as well as crude oil price, over the period 2010-10-06 to 2011-01-07. Graph by GasBuddy.com

My mom tells me that on the news, they've been saying for several days now that prices were going to go up, due to reduced production. But if that information has been known, then why have prices steadily gone down for the last week before jumping up today?

I actually have a quite plausible theory to explain this short-term pattern. Seeing gas prices steadily go down over a period of time, drivers get accustomed to that trend. In order to save money, they put off getting gas for as long as possible, to allow the price to drop further before they have to buy. Then, when gas prices jump up, drivers know from experience that the slow downward trend will resume after the jump. As a result, the strategy of procrastination is employed all the time; unless drivers know exactly when prices are going to jump, they simply refuel their cars when the fuel tanks get low. In this way, demand for gasoline is held essentially constant.

Unlucky drivers who find themselves with an empty tank just after a price jump have few options. They can't even shop around for the best price, because they might run out of gas in the endeavor. Besides, the price of gas tends to jump up all around Columbus at the same time. (Isn't that racketeering, and therefore, illegal?) By the way, these price jumps have become essentially unpredictable in recent years; they can occur on any day of the week.

So, apparently, these gas price jumps have no real reason besides controlling consumer behavior. Every now and then, a price hike is rationalized by reduced production or holiday travel, but that doesn't explain the price jumps that come before or after it. Of course, some catastrophic event, like a refinery destroyed in an earthquake, might be a somewhat valid reason to raise gas prices for a while. But these industry-shattering disasters simply don't occur four times a month.

Perhaps there is a practical reason for this pattern, as hypothesized above. But that doesn't make the behavior excusable. Imagine if your favorite restaurant, which you patronize about once a week, decided the cost of your favorite dish should fluctuate from one day to the next. Your meal might cost $6 on Tuesday, but if you wait until Wednesday instead, you have to pay $10. Is that acceptable? I don't imagine such a business would stay open very long. But the gas stations around here are all in it together, essentially removing consumer choice from the equation.

Gas prices in other large cities away from Ohio don't show these sawtooth patterns. They usually have their day-to-day ups and downs, some cities more than others, but the pattern of consistently large jumps punctuating periods of gradual decline is unique to Ohio and surrounding states and possibly strongest in Columbus.

Every time the price goes up, it's like a "fuck you" from Big Oil. It happens almost regularly, but not predictably. One of these days, someone's going to snap, and the results won't be pretty.

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