Gas Prices Keep Going Up, And Nobody Can Say Why

Last week’s gas price report from AAA showed that gas prices went up to a 28-month high.

This was in spite of the following three factors:

  • The price of a barrel of oil has fallen
  • Demand for gas has fallen
  • Supply for gas has risen

Any one of these factors is usually enough to bring prices down or, at the very least allow them to remain steady, and when all three factors are in play is usually when prices go down.

But, that’s not happening.

I think that there is more at play here.  I think oil companies are getting a jump on the spring season by raising prices now.  Traditionally prices start to ramp up in preparation for the summer driving season, but even though we’re still in winter, that trend apparently has kicked off.

Maybe this will mean that we won’t see a big rise in prices around Memorial Day, which is when they often peak, but I’m not holding my breath.

I think there’s a different reason for the price increase.  I believe that oil companies will continue to raise prices as much as they can get away with until it actually starts affecting the economy.  The oil companies know that as long as the economy keeps getting better that they have some wiggle room in which to raise prices.

They’re probably going to continue to test the limits until they decide that there’s a ceiling at which consumers will start ‘cutting back’ significantly.  Until they find that ceiling, prepare to be manipulated and for higher prices at the pump.

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4 thoughts on “Gas Prices Keep Going Up, And Nobody Can Say Why

  1. I actually just wrote a post on this.

    The problem with gas prices is oil prices. But the problem with oil prices is that it is profitable to borrow at extremely low rates, buy oil, then write covered calls each month on your holdings.

    That trade allows for 1) protection against a falling dollar

    2) the ability to buy a commodity and generate revenue from it greater than the cost to borrow capital in the first place.

  2. It is mostly due to the unrest in the middle east! The markets like predictability. Right now we do not know how things will change which could impact our supply of oil.

  3. The cheapest price we saw when out and about today was $3.66 a gallon for unleaded. This is in California which is higher than most parts of the country.

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