Gasoline

Thorntons Gasoline Prices

Given all my other problems, my concern over the cost of filling up my car once a week is near the bottom. Still, this pair of photos made me curious enough to do a little Googling.

U. S. Regular All Formulations Retail Gasoline Prices

Never mind the confusing title on this graph (How can it be a graph of the price of Regular gasoline if it also includes high-test / super / premium or whatever you call it?), let's just pretend that the EIA (U. S. Energy Information Administration) knows what they are talking about.

So gasoline cost just over one dollar a gallon for most of the 1990's, then it started going up until it hit $4 a gallon back around 2008. For the last 15 years the price has been bouncing up and down, sometimes rather violently.

U.S. domestic demand for gasoline from 1990 to 2018

This seemed a little odd to me. I suspect the demand for gasoline is fairly constant, a zillion people drive to work every day. So why would the price bounce around so much? I suspect it is because the oil business is running on very thin margins*. Yes, they are still making what looks like a ton of money because of the volume of oil, but they are also spending a ton of money on exploration and drilling. What would probably help stabilise the price of gasoline is if we expanded the number and capacity of the tank farms we use to store gasoline and oil. But that would require spending money on things that don't actually increase production.

The way  things are, if there is any kind of hiccup in the production, transport, refining, or distribution of gasoline, it is going to create a pinch in the supply and that is going to result in a price spike. I suspect all these large fluctuations we see in the price of gasoline is all on the retail side, that is, after it leaves the refinery. (Update: now that I think about it a little more, the retail side might exacerbate these price swings, but they probably start on the production side.)

* I read a post not too long ago (can't remember where) about how the cost saving measures and improved efficiency (that businesses have been striving to implement) have reduced the robustness of our supply chains. When everything runs smoothly, it's great, but it also means that anytime there is a glitch the whole machine is liable to crash to a halt. So the large fluctuations in the price of gasoline might just be those efficiency chickens coming home to roost.