Why do gas prices fluctuate so fast?

tmazanec1 · Heavy Crude Joined: Oct 12, 2004 Posts: 424

Why is gas $1.99 one day, $2.19 the next, and $2.09 the day after? What is changind so fast to put it up AND down like that in a matter of hours?

Colorado-Valley · Intermediate Crude Joined: Aug 16, 2004 Posts: 732

Mine's been sitting at $2.33 for the last month or so. No change at all.

Perhaps you live in a region where there is actual competition between gasoline wholesalers.

spot5050

tmazanec1 · Heavy Crude Joined: Oct 12, 2004 Posts: 424

They also vary by 10 cents a gallon a few miles apart.

aahala · Intermediate Crude Joined: Feb 03, 2005 Posts: 954

Of course the underlying reason for the price swings is in the changes
in the wholesale price of gas.

What has exagerated the swings is the fact the US gas stations are mostly
convenience stores -- their profit is in the food and drink items they sell
much more than in gas. So gas is just a lead in to food sales.

The stations are increasing or decreasing their spread, attempting to
maximize their gain or minimize their loss but they must adjust the price
compared to others in the area. If their price is too high, inside profits
decline sharply but if they are well under other's gas price, the loss may
not be made up by increased profits from food items. So it's a constant
price dance.

Caoimhan · Intermediate Crude Joined: May 10, 2005 Posts: 562

Price fluctuations also occur due to the uncertainty of the market. Remember that oil futures contracts are bought and sold by human beings, who tend to react to news in wildly different ways. This ends up causing oil prices to fluctuate terribly during these uncertain times.

Example: If terrorists blow up a section of oil pipeline in Iraq, a maneuver that might reduce supplies by 1% for a month, it could cause a 10-20 cent increase in gasoline at the pump, because futures traders over-react to the news.