[Vision2020] Gas prices

[Kenneth Marcy]

On Friday, August 19, 2011 11:43:03 AM Andy Boyd wrote:
> I am curious if anyone can answer this about gas prices:
> Why when the price of oil per barrel goes up we see an immediate increase
> in price at the pump but when the price of the barrel goes down the price
> of gas drops ever so slowly and may never get back down to where it was
> before the increase? Thanks,

The one-word answer is greed.

The slightly longer answer is that a small number (seven comes to mind) of 
companies control most of the market for petroleum. The longer prices are 
higher, the more money they make, so after they get the price high, they 
leisurely linger longer there to pump their revenue tanks fuller as they pump 
our wallets emptier. Perhaps the appropriate term is siphonomics.

These companies are referred to in various ways: as a cartel, with various 
implications, and as an oligopoly by economics students studying for quizzes. 
Here is a link to a Wikipedia article explaining why the number seven is of 
historical interest when discussing the petroleum oligopoly:

http://en.wikipedia.org/wiki/Seven_Sisters_%28oil_companies%29 


Ken