by Deb Cupples | It make no sense. In my North Florida town, gasoline prices were in the $2.90s in April; now, gas is in the $2.70s. What happened?Back in 2007, gas prices were near or above $4 a gallon nationwide. The public-relations people paid by oil companies habitually blamed it on "supply and demand" (i.e., lower supply or higher demand automatically caused higher prices).
Fast forward to 2010: on or about April 20, a BP oil well exploded and started spewing oil into the Gulf of Mexico. Thousands of barrels of oil have been flowing into the Gulf each day, but the estimates vary.
According to McClatchy (May 19), BP's oil spill was causing a loss of about 95,000 barrels or 4 million gallons of crude oil each day. According to the New York Times (June 10), the flow of oil into the Gulf was 25,000 to 30,000 barrels (1+ million gallons) per day. According to the New York Times (June 15), the flow of oil was "as much as 60,000 barrels" (or 2.5 million gallons) per day. According to Reuters, an internal BP company document states that the worst case scenario (depending on whether a piece of equipment malfunctions) is that up to 100,000 barrels (or 4.5 million gallons) of oil may flow into the Gulf.
As late as June 18, BP's own estimate was that the flow of oil into the Gulf was under 5,000 barrels per day.
Whichever estimate is more accurate, the fact remains that our nation's oil supply will decrease because of BP's massive oil spill. Thus, according to notions of "supply and demand," oil and gas prices should be going up (even if only due to market speculators' anticipation of the decreasing supply). Yet, gas prices in my area have been going down.
What gives? Again, Oil company executives have habitually attributed climbing gas prices to "supply and demand," implying that price hikes are caused by some natural force beyond their control -- the way physicists might attribute a falling satellite to gravity.
Recent declines in gas prices make one wonder whether oil companies have always been forthright about what causes gas prices to increase.Perhaps "supply and demand" played a significant part in some gas price fluctuations. Perhaps a stronger factor was oil executives' fundamental desire to funnel more consumer dollars into their own pockets.
How can we know what to believe?