Friday, October 31, 2008
Sexy Prices At The Gas Pump
So Prices are coming down from a Colorado Springs Average High of 4.3699 (Unleaded)
Why have they been able to come down to this mornings average of 2.3299, at such a rapid rate?
Answer # 1... $ Changes in crude oil prices have dropped because the global demand has plumited.
Answer # 2 $ Seasonality in the gasoline supply/demand balance, on average, demand for gasoline increases by about 22% during the U.S. summer months.
Answer # 3 The U.s. dollar is becoming more competitive on the global market and has more purchasing parity value.
Answer # 4 China, India and the U.K. and the U.s have all been bidding for crude oil. Now with the demand going down mainly in China, there is a surplus in the market equilibrium.
In conclusion, prices are falling, but as we smarty-pants in economics know, it won't last. firms will adjust prices, more firms will enter, firms might quit producing, economies will pick back up and increase demand and prices, the surplus will end.... So don't get too comfortable!