Gas Prices Not Rising As Fast As Oil Prices?

• August 6, 2008

An interesting tid-bit of information from a letter by economist Don Boudreaux to the New York Post in response to this article in which an analyst claims that American drivers are “getting hosed” because gas prices haven’t dropped as fast as oil prices:

You favorably quote an analyst’s assertion that “motorists are getting hosed” because prices at the pump have not fallen enough recently to reflect the latest fall in oil prices (“Oil Drop Brings No Relief to the Pump,” August 3).
Despite your seemingly supportive accompanying graph, this assertion is questionable.
First, according to the figures in your own graph, oil prices today are 55 percent higher than in late September of 2007 (the starting date in your graph), while gasoline prices today are 57.7 percent higher. As evidence of hosing goes, these figures are very weak indeed.
Second, if we take a longer time horizon, evidence of hosing disappears completely. In 2004, for example, a gallon of gasoline retailed for about $2.00 while a barrel of oil sold for about $33. Today, oil’s price is higher by 275 percent while gasoline’s price is higher by only 100 percent.
Sincerely,
Donald J. Boudreaux

Funny how public perception, as created by the media, often doesn’t line up at all with reality.

Tags: Domestic Issues, Politics

http://Array Jacque Denise

the soaring oil prices affects all from food to our daily needs, hope that the candidates do something about it. i know that this is not the only problem also the war in Iraq, it made US near to the terrorist.. but i guess that our candidates made a better plan about this as i heard it in their video in pollclash and talking about their plans and making US safe for that
Modern Demagogue

Bourdreaux’s response is just as flawed as the initial claim motorists are being hosed.

Comparing a $2 to $4 jump in pump prices, to a $33 to $120 jump in crude, is comparing apples to oranges. You would need to dissect the cost of that gallon at the pump. How much is for operating costs, refining, transportation, etc.. Perhaps only a dollar of it or less came directly from the cost of the oil. Say its $0.50. Transportation and refining costs haven’t increased significantly, so the cost of the actual oil is responsible for the price difference. A jump from $0.50 to $2.50 for the underlying oil would certainly qualify the statement about the consumer being hosed.
http://magyartruth.blogspot.com/ Chief RZ

Exactly. That is what 100-1 financial welfare to the Democrats buys them. Communist since the 1920s–the NYT.

public perception, as created by the media, often doesn’t line up at all with reality

Simple supply and demand, simple a concept as free competition. The market will determine the price. The social-democrats have been trying to limit supply of oil from the USA since 1970. If the voters re-elect them, they will be voting for communism–the deliberate limiting of supplies of: oil, water and food. The next thing will be controlling demand.
docdave

Does anyone realize that the futures price is not the actual price refineries pay for their oil? Many companies have long term agreements to purchase oil at a fixed price which can be much lower than the futures speculative price. You can see a similar thing in utility companies that offer deals of fixed monthly costs over a specified period to both residential and commercial customers.
AJP

Seems the media also ignores the fact that fuel-pump gas prices went from a national average of $1.50/gal to $2.25/gal in the first 6 years of President Bush’s presidency, and woe to us, in the first 18months of a democratic congress, fuel pump prices went up another $2/gal.

I put the blame squarely on the head of Pelosi et al for the swift rise of fuel prices. It took her leadership a quarter of the time to raise prices almost 3 times what it took a Republican Congress to manage!!!!!
NHF

It is interesting how you can prove almost anything with the “right” data: get a slice of data that supports your theory, extrapolate it and there you go!

I can prove to you that in 3 years we’ll have a new ice age (compare last summer and winter temperatures and see how temperature is falling), if you do not pay attention!

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Gas Prices Not Rising As Fast As Oil Prices?

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