Gas Prices

Oil prices by the barrel have been edging down for 3 weeks. The slide continues. But gas pumps in Illinois are pushing prices higher. The industry claims a power failure to a Joliet refinery are the cause of the price pressure. Not very likely, says I.

In the past, price volatility for gasoline in metro Chicago has been prevalent. The pattern, however, is almost always up. Always a reason to raise prices. Rarely a reason to lower them. But here’s the thing today, July 26, 2024, prices for a barrel of oil are sliding downward and that reality should be driving pump prices lower as well.

A hiccup in Vietnam or China causes gas price movement in the world and Chicago. A downward price of oil raises the gas price in Chicago? And caused by power failures caused by recent storms in a lone refinery in Joliet? Someone in the oil industry needs to do their homework and be straight with the public.

If the oil industry thinks it is solely in control of their pricing, they need to think again. Here’s why:

1.       Most new cars replacing old cars get better gas mileage; that is pressure for lower gas prices; demand is softened; supplies carry farther

2.       Old cars replacing even older cars in households also get vastly better gas mileage. Again, supply and demand are pressure for downward prices. Example: I swapped an 06 Mercedes for an 08 Toyota Prius. The latter gets 45 miles to the gallon; the former got 15 mpg and required premium gas at $5.50 per gallon. A fill up for the Toyota is $25; the Mercedes demanded more than $100. I still do the same low miles.

3.       Working from home is more prevalent. Commuting routines have changed. Less use of autos and fewer miles means less demand for gasoline

4.       Work from home will stubbornly remain in our career patterns. The physical plant costs for employers saved is much more than the fear of lost employee productivity. On the other hand, productivity is hugely increased with working from home. They can badmouth it all they want but WFH makes financial sense. Quality of life is improved, too.

5.       Electric vehicles are expanding in number exponentially. It will take many years for electrics to replace gas burners, but the trend is clear and much more prevalent than the experts forecast. This is a real change agent for use of gasoline.

There are other reasons demand for gas is less and will continue its downward direction. They are numerous but of small affect; still, in total, gas demand falls.

If the oil industry wishes to get into the good graces of the public, they need to be more transparent and honest about their prices. They have few friends left. It is not a good idea to make more enemies during a time of questioning their future existence. Oil products will continue to be needed for a host of uses, just less gasoline. But synthetics will greatly replace oil products as well.

A lot of eyes will be watching pump prices in coming months and years. Beware, oil industry!

July 26, 2024

 

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