Q&A – What’s Really Behind Instant Gas Price Increases

Today’s entry - I take no joy in calling you wrong. My local gas station went from $2.29 / gal in the morning to $2.59 / gal last night!

Bottom Line: I received this note on back of my explanation of what could happen with gas prices based on the immediate reaction in the oil markets after the Saudi Arabian oil field attack. I explained that based on Monday’s trading activity, the average cycle to purchase gas by gas stations, and the percentage of gas prices that are determined by the commodity itself, the high end of the related price increases would be about 18 cents per gallon. And that’s if those prices were to hold, which they haven’t. Oil prices have backed off their Monday highs by about 6%, that would project to a price increase that’d be closer to about 12 cents per gallon.

There are two reasons I presented that story in the first place. The first was the dearth of accurate analysis being provided about the potential impact at the pump to you. The second reason was meant to help inform and protect against gas station operators taking advantage of the news cycle to unnecessarily raise prices. Just like what appears to have happened in the one cited above. 

Most news outlets are quick to report stories that appear to have a direct consumer impact. The problem is that most lack credible analysts providing empirical information. Take, for example, the impact of the Trump tax cuts to you or the partial government shutdown to the economy, gas prices are a different version of a similar thing. Often, outside marketing firms producing loose estimates are cited and consumer expectations are set. This type of news reporting can unintentionally hurt consumers. 

Prices in Florida are up an average of eight cents to $2.46 statewide since last Friday.

Submit your question by one of these methods. 

Email: brianmudd@iheartmedia.com

Twitter: @brianmuddradio

Facebook: Brian Mudd https://www.facebook.com/brian.mudd1

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