Wednesday, November 30, 2005
On this day:

Where did all the gouging go?

From today's Birmingham News:

The average cost of gasoline has dropped a record 84 cents a gallon within the past two months, driving prices as low as $1.94 in the Birmingham area Tuesday.

The cost of a gallon of regular unleaded gasoline has dropped 45 cents in the past month, also possibly a record, said Clay Ingram, spokesman for the American Automobile Association-Alabama. ...

Statewide, the average price of a gallon of unleaded stood at $2.11 on Tuesday.
Travel analysts predict the price will continue to drop - at least through January.

Crude oil prices are falling because of strong production with only a few oil refineries on the Gulf Coast still off line, Ingram said. ...

AAA has found that demand is 2 percent lower this year than it was at this time last year. Consumer demand, based on total sales nationally, usually rises about 2 percent a year.

"That's a 4 percent swing," Ingram said. "Which is very significant and really the reason we have seen the price drop as much as it has." ...

Competition is the key, Ingram said: "Buy the cheapest gas you can find and that will help get the price down," Ingram said.

In September, Mr. Ingram gave his support to legislation that would make price-gouging a felony in Alabama. So, if gas stations were gouging back in September, why is it safe to say that they aren't gouging now?

I think that Ingram answered that question: competition.

But, the level of competition hasn't changed since September. There were roughly the same number of gas stations then as there are now. They were just as hungry for customers then as they are now. If we assume that competition is enough to prevent gas station owners from gouging now, then how is it logical to say that retail gas prices in September were indicative of price-gouging, rather than a reflection of greater market uncertainties and risks? Hmmmm?