Memo To Gas Price Conspiracy Theorists: It's The Oil Prices

Any time rising gas prices become a story, and the media loves to make it a story, the gas price conspiracy theorists come out of the closet. It’s a conspiracy, we’re told. It’s Big Oil cranking up prices to take windfall profits!

You almost get the idea that gas station owners, after their secret meetings, are rising prices just to screw customers (no doubt while twirling their mustaches).

But what if I told you that gas prices grow and decline consistently in line with oil prices? And that the margin refiners and gas retailers make on a gallon of gas doesn’t really change all that much as prices go up and down?

Put simply, higher gas prices do not mean bigger profits for “Big Oil.” If anything, they probably mean smaller profits as sales volume declines.

What this illustrates is that the solution for higher gas prices is oil supply. When something happens to make oil prices go up – such as production disruptions, transportation problems or government interference – gas prices go up too.

We can’t do much about some disruptions. We’ll always have storms that take offshore drilling rigs off line. We’ll always have natural disasters that halt oil production. We’ll always have international tensions which impact oil’s global market, and thus prices here in America.

One thing we can do is make sure the government stays out of the way of oil exploration, development, production and refining. That’s the part we can control.