Quote:
Originally Posted by GoinAllTheWay
I think the theme of this thread is that gas prices are driven by a hell of a lot more than just demand.
I do agree with you though, it's not like I drive less due to higher prices. Not yet anyways. It has certainly made me think about what vehicle to buy next though.
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Price of Crude Oil
consumer's willingness to pay
long term sustainability of the industry
Most Oil producing nations want to maximize profits, but want to do so without the risk of killing the golden goose. Economies such as those in the Middle East are almost exclusively based on the commodity price of Crude Oil. A dollar drop can have devestating effects on their economies. They do this by manipulating the supply. Oil shooting up to 80 dollars a barrel would be nice in the short term effects, but everyone has a breaking point and those nations recognize this. Think back to the Oil shocks. In the US they really started to introduce regulations on gas guzzling cars in the hopes of reducing their dependancy on Oil. These nations have an interest in keeping prices at a sustainable level.
Oil companies could probably make more money if they decided to double the price. More people would probably still pay in the short term, but it would absolutely crush the long term sustainability of the industry. Their goal of course is to make as much profit as possible, and they are doing that. They just tend to push the envolpe in this respect.
They know what they can get away with. So does the May long weekend actually put severe strain on the oil refineries? Of course not. They fully expect and anticipate the boom. But people are still going to drive and not going to do anything about it. So why not raise the price.
As far as events producing short term price increases? Those are pretty much just excuses given that Oil is on the futures market, (I'm not a market expert so someone can correct me, but I believe it is sold in 1 month, 3 months, 6 months, 12 months intervals). They have a long term impact on price, but shouldn't do much in the short term. It sure is a nice excuse to raise the prices though.