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Gas prices fall under 3 bucks a gallon at majority of U.S. stations
(www.cbsnews.com)
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this post was submitted on 03 Jan 2024
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puts on tinfoil hat
EVs are starting to make a dent in the market place and oil producing countries don't like that so they lower oil prices to keep people driving ICE (Internal Combustion Engines) vehicles.
takes off tinfoil hat
I'm sure it's more complicated than that
Prices are always lower in the winter. It'll be back to $4.00 in the summer.
The single reason that gas is sold cheap in the United States is because the government subsidizes the hell out of it
We'd be priced more similarly to the UK. People really don't know how much gas costs. They just see that x amount of dollars per barrel of oil cost and think that's it
puts on plastic wrap hat
EVs are starting to make a dent in the market place and oil demand is dropping because there are fewer cars on the road that use it, combined with the fact that the holiday travel season and its predictable effect on demand have ended
But it's possibly a factor in the minds of executives who decide if it's a good time to squeeze for more profit. They might have decided higher gas prices will push more people into buying ev which will fuel further infrastructure spending leading to a steeper adoption curve thus lower long term profits for oil companies.
Congratulations on discovering the radical fact that, in the face of declining demand, businesses generally drop prices.
You're never gonna guess what happens when demand increases or if supply drops!
I'VE GOT A DEMAND CURVE GRAPH AND I THINK THAT I CAN SOLVE ALL THE WORLD'S ECONOMIC PROBLEMS BECAUSE I'M THE FIRST PERSON TO REALLY THINK ABOUT IT
Macroeconomics
I’m sure I’m not the only one that doesn’t find being an absolute dick about stuff funny.
I could have admittedly been less crass about it, but my point is that it's more than a little disheartening to see people engage with a basic principle that's as foundational and indisputable to economics as evolution is to biology and still feel the need to label it as tinfoil hat conspiracy.
Yes, oil companies lower prices in response to decreased oil demand, because they think that that will make them more money. This is not meaningfully different than old VHS tapes being cheap, or on the opposite end, someone leaving for a higher paying job after gaining more experience or more specialized skills. Prices are not randomly pulled out of hat; there's a reason that you can't sell an avocado for $10,000, nor can (most) workers charge $10,000 an hour for their time, and that if you instead sell avocados for $0.10 each, you'll have a line of people around the block (and soon be either out of stock or bankrupt).
That aside, if some dry sarcasm is your bar for "being an absolute dick", you must be surrounded by literal angels.
Well, yes, but no. In oil, it IS meaningfully different than other products like VHS. I'm glad you took macroeconomics 101 but this is different.
OPEC can cut production to meet demand and maintain a stable price at any time. They don't need to "lower prices to increase demand". EVs have NO impact on the cost of fuel at the moment. There aren't enough EVs and the demand for fuel far outweighs the savings.
Several OPEC+ countries agreed to voluntarily cut oil production by a total of 2.2 million barrels per day in the first quarter of 202
So don't expect the price to stay low or get lower. They fluctuate which is normal but not due to EVs as the top poster assumed. Demand went down and price dropped. It'll go back up end of February.
When COVID hit and demand dropped DRASTICALLY the prices plunged (shipping stopped, cars stopped, oil production didn't stop in time). But that was an exceptional situation. OPEC doesn't want barrel prices to drop.
This illustrates exactly why we make fun people who bleat about demand curve graphs from their econ 101 classes. Yes, this all works for commodities and zero barriers to entry in the market and perfect information and no collusion and no subsidies and no externalities and free of transaction costs. Take out just one of those assumptions for a given market and now you have the basis for a masters thesis.
Thanks, my friends are pretty cool!
Maybe this person's acerbic humor will cause this lesson to register and people here can stop blaming "greed" for price increases but not for price decreases, since both are "greed"
A man can dream.
No no, the increase was Biden’s fault, but this drop is because oil companies are so nice.
You joke but people really do think that