Do higher gas prices equate to higher price volatility and gauging?

Question

My question is some what vague, but its something I have noticed in more recent years. With high gas prices becoming the norm, first $3 a gallon much of 2007, now $4 a gallon much of 2008, are the higher prices contributing to increased price volatility and price gauging?

In the past 3 years or so I have noticed much more volatility in has prices everywhere as well as much more varying prices from station to station, even within the same town or area.

For example, i live in a Chicago suburb only 5 miles from indiana. Historically, indiana gas was generally about 10 cents cheaper than gas over in IL, due to taxes. Now with high prices you see differences between the two anywhere from 0-30 cents at times. Also even around town there is much more discrepancy among prices at stations, to the tune of a few cents to 30 cents a gallon. This trend has been much more evident with gas at $3 or $4 a gallon than it was for the previous 25 years or so. Any explanations?

Answer 1

Your observation is absolutely correct. The variation in prices at gas stations across the towns, cities and states have increased more now. This is because of a number of factors prompted by sustained increase in crude oil prices throughout the last 12 to 18 months due to the OPEC oil cartel decision to cap production strictly. With prices rising fast, the supplies to gas stations are not so smooth as in the past. The lifting of gas from gas stations by car owners and vehicle drivers have also witnessed changing pattern. Neither the gas supply to stations are smooth at uniform rate, nor the stocking policy of gas stations are consistent and uniform, nor is the gas users' behaviour of bying gas from the statins. Their is acontinuous turmoil going on. The gas stations are not sure about the daily/ weekly off-take gas. The gas purchasers are reacting in various ways when they see the price boards as they drive buy: some times they decide to defer buying reducing use of their cars as a esponse to price rise: sometimes they spend extra gas to buy cheaper gas from another station - though always not successful The movement of vehicles to interior places have gone down and the gas stations have problems of adjusting to lower offtake. As a result of all this, daily prices vary widely depending on the gas stock available with the station, the average price at which the stock had been purchased, the gas off take in the previous two / three days from the station, the likely arrival of gas filling in the next few days for each station, etc. This is causing wide variation in the gas station pricing of gas. In times of shortage and particularly when the neares gas stations are far off, prices are raised more, while nearby stations have smaller variaations unless the average price of their stock varies widely depending on when they had filled their reservoirs last. All this turbulence shows that after a long period stable gas prices below $2 a gallon, the sharp rise by 50% and 100% in a matter of just about a year has caused a great disturbance in the buying behavior for gas. The gas purchaers will take time to settle down to a regular behavior. And,this is causing wide price variations. A sharp and sustained rise in prices within a short period always cause such distortions.