Gas Prices Rising in Summer – It’s a Lie. [CHART]

by Darwin on February 20, 2012

The mainstream media loves a headline, especially one with a purported “expert” touting $6 gas prices by the summer time (last year’s $6 prediction, this year’s $6 call “by Spring!”) to get you to “stay tuned” across a commercial break or click their link. Writers and anchors, the sheep they are, always repeat the common refrain of the coming increasing gas prices in the “summer driving season”. While gas consumption may increase in the summer, which is logical (and a predictable trend), wouldn’t you think capacity utilization and output would anticipate such increases and keep the supply/demand curve in lockstep? The only thing that would prevent that is if refining capacity were constrained. While that may have been a culprit in 2008, this past year, the US was a huge EXPORTER of gasoline and refined derivatives. How much so?

Gas and Distillates were our single largest export in 2011!

That’s right, we sold more gas derivatives than wheat, cars and whatever other good or commodity you can imagine.

So, if you’re going to tell me there’s a shortage of refining capacity in the US while our largest export is what they’re refining, I have a bridge to sell you.


4 Year Gas Price Chart 


Gas Price Chart



Why Does It Matter?

Well, media messages influence behavior and decisions. On one hand, I had previously said people should stop whining about gas prices, which pissed off a fair number of people, but I stand by the premise. Cost of living matters, but if gas prices rising 20 cents versus falling 20 cents make or break your family vacation budget (aside from the fact that perhaps your vacation your budget is too reliant upon gas prices), I wouldn’t blindly listen to “expert” predictions and the media for what gas prices are going to do this summer. As the past few years have demonstrated, actual gas prices in the US are pretty random. And if you are sensitive to gas prices in your personal or business budget, it’s very simple to hedge your gas prices like I do all year round.

Oil prices obviously play a substantial role in the price of refined gasoline, but oil prices are quite volatile and random as well. Of course, if the Middle East blows up in turmoil over Iran, the purported experts will say, “I told you so”. If oil stays in the $100-$120/barrel range for the rest of the year and gas prices don’t increase, they’ll be nowhere to be found.


Do Gas Prices Influence Your Plans or Behaviors?

Does It Surprise You That the US is HUGE Exporter of Gas and Jet Fuel and That Prices Don’t Always Rise in Summer?

{ 8 comments… read them below or add one }

YFS February 21, 2012 at 11:56 am

Gas prices without a doubt do not influence my behavior. I’m with you. If gas prices influences you that means you’re too reliant on gas prices and need to hedge appropriately.


Darwin February 22, 2012 at 10:51 pm

The concept of hedging is probably too scary for a lot of people but it’s not that complex.


Paul @ Make Money Make Cents February 21, 2012 at 11:19 pm

I will agree, gas prices do not influence me. They do tick me off though. Do you think we could actually see the $6 price if problems with Iran get worse?


Darwin February 22, 2012 at 10:52 pm

I’ve been hearing about Iran for 30 years (yes, since I was 6), and we’ve never seen $6 gas. Anything can happen. But the same prediction every year gets old.


cashflowmantra February 22, 2012 at 7:07 am

It is interesting to see how they tend to spike quickly and slowly decline. That annoys me the most. The reason we are exporting gasoline is because prices overseas are higher and yield more profit. Globalization will steal jobs but bring you cheap iPhones. Do you want Wal-Mart or cheaper gas? It is a new world. Better adapt.


Darwin February 22, 2012 at 10:53 pm

Yeah, I’ve always loved that phenomena on price action; consumer gets screwed!


JT February 22, 2012 at 10:00 am

I think it’s pretty stupid how talking heads point to gasoline’s rise during the Obama presidency. I mean, I don’t even like the guy, but I’m not going to wonder why gas was less than $2 when oil was like $35 a barrel and why it’s $4 now. It’s stupid political nonsense, really.

The world economy rebounds, and the price of oil and its derivatives rises. It’s not that hard to figure out.


Darwin February 22, 2012 at 10:54 pm

Yeah, it’s so subject to countless other forces from the cost of oil to the overall economy. In theory, if Obama didn’t screw up the economy so much with all the pointless bailouts, debt, lack of focus on jobs and healthcare shackles, the economy would really be chugging along and gas prices would be even higher!


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