Speaking of the price of oil….
When a barrel of Oil was trading at US$140, basic unleaded self-serve gasoline was going for about $1.309/litre at my local Shell station. Yesterday morning, with Oil at US$113, it was selling for $1.259.
A 19.3% drop in the price of Oil generates a 3.8% dip in the retail price of gas. As we always suspected, the prices are linked only on the way up.
And another thing: when you buy Premium gas at a station that features the single filling hose, assuming the prior customer pumped Regular gas, how much Regular are you getting before the Premium flows into the tank? Three litres? Certainly more than zero. If it were three litres, this would mean that most Premium buyers are spending $0.36 more per fillup than they’re getting in “value”.
Has this topic never crossed the mind of an enterprising class action lawsuit lawyer?
And another, another thing: why is Premium gas just 6.3% more expensive than Regular in New York State (for 92 or 93 octane), but 9.5% more expensive in Toronto (for 91 octane)? Canada has its own oil reserves and refineries, after all, so it can’t be the “smaller market argument” that we hear when U.S. Magazine and Book publishers try to justify the cover price differentials between a publication sold in Seattle versus Richmond, B.C.
MRM
Pricing of gasoline seems to have more to do with market forces than the actual price of oil. Because the consumer does not organize and “shop” for a better price, the gas station price does not have to come down. Why are prices different in different cities or areas in the golden horseshoe?
If the consumer could be mobilized to avoid a certain brand station (ie Petro-can, shell, Esso) until the price improves, I think we would see a change in price (even if oil price was up, down, or sideways). People have promoted a don’t buy gas on a certain day (ie Tuesday this week) – so what – they buy the day before, after or theat day with less wait time. The consumer should buy according to service and price and use their heads.
Economic theory is based upon a “reasonable” person making a proper decision. Instead, we complain about the price, buy the gas where ever and still drive foolishly, consuming more gas than we need to.
We should “speak with our feet”.
Reards
Gee, and I could ask “why is VISA still charging me 18% when Bernanke’s only charging two?”