Quote:
Originally Posted by Soriak  Two things to keep in mind when it comes to gas:
1. the demand is very inelastic in the short term. As prices went up, the demand hasn't gone down all that much. Yeah, people change their behavior a little, but in the big picture it's not all that significant. For the price of gas that means unless your competition cuts its prices, you have no incentive to do so yourself. (after all, you know that when you drop prices, your competitors will be forced to match it - everyone ends off worse. It's different when it comes to raising prices, it's better to hold that off as long as possible.)
2. The price of gas at the pump is not as volatile as the price of oil. This is largely because companies trade in the futures market to lock-in prices far into the future. Some of the gas being refined today was actually bought 2 years ago. This helps slow down the rise of the price of gas, but it also means that even if oil got cheaper, gas would still get more expensive as the futures bought one year ago mature and so on.
I don't know if refineries still buy oil futures at the current price, but I don't think they can afford not to do it. It's a huge risk to bet that oil will be cheaper in 2 years. Just consider the impact on airlines: the ones that hedged against high oil prices pay maybe half as much for fuel as the ones who didn't. |
right. im not talking a short term solution here obviously. im not even sure the infrastructure would be mostly in place for something like drilling in anwar etc. but if it isnt that means more domestic jobs etc.
and southwest airlines for the win.