Wednesday, December 10, 2008

pump prices vs. crude prices

During the run-up and subsequent fall of crude oil and gasoline prices, I heard Bill O'Reilly repeatedly demonize the evil oil companies and the "speculators", whoever they are. O'Reilly talked of the quick escalation of pump prices from oil futures, and that the prices wouldn't fall when crude prices dropped.

I am eagerly awaiting the correction from O'Reilly, now that his conspiracy and price gouging theories have been completely debunked. The facts are, that as oil prices continued to escalate, gasoline prices in the U.S. rose at a much LESSER rate. You can actually see on the graph a period where crude prices rose at a much greater rate than fuel prices. Market pressures kept pump prices down. As crude prices began to fall, the pump prices stayed flat at first, then plummeted. I listened in dismay one night, when O'Reilly had Neil Cavuto as a guest on his show, to explain this. Just as Cavuto began to inject some common sense and basic market knowledge into the O'Reilly Factor's position on this issue, Bill predictably filibustered him and went to commercial.

So here we are today, with crude prices at a 4-year low, and pump prices are right where they were the last time crude oil was below $50/barrel. The market works.

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