Tuesday, December 23, 2014

The Mysteries Of Gas Pricing And Our Reactions - Stock Market To Drop When Prices Go Up And When They Go Down

I just filled my mom's car in the nearby Costco here in LA.


We all know that gas prices have been dropping and that Alaska is lagging behind in that fall.  Anchorage Gas Prices reports the lowest prices in Anchorage right now are $.45 higher than the lowest price in LA.  (And Alaska has an $.08 tax per gallon while California has $.41 tax per gallon.  Without the tax, the price difference is $.33 more.

Screenshot from Anchorage Gas Prices 12/23/14 11am Alaska time

I find it interesting that the Dimond Costco is $.04 cheaper than the the DeBarr Costco.  Is that because one was checked one hour ago and the other two hours ago?  I decided to call DeBarr Costco and the person who answered the phone checked with the manager and said that the two stores do price differently and they try to match the prices in the neighborhood.  She couldn't tell me whether the two Costco's order gas separately, or not, but her answer does imply that the price of gas reflects, not what they pay, but what gas costs close by their location.  But this is all really an aside.

I did start a post on gas prices back in October and this seems like a good place to add those thoughts in too.

Large Drop [In Oil Prices] A Boon To Consumers But Could Pose Long-Term Economic Problems 

That was the subtitle of an AP story published in the ADN in October this year.  I couldn't find a linkable ADN copy of the article, but here's the headline for the same article at The Great Falls Tribune:  "Why drop in oil prices has downside for US economy.

If you're scratching your head about this, that's good.  It means you're thinking, and possibly somewhere in your subconscious you've stored old headlines from another time.  Like this one from CBS-DFW in February 2013:  "Fast Rising Gas Prices Could Hurt Recovering Economy."   

Dropping prices are bad and rising prices are bad.  So, would slowly rising prices be ok?  What about stable prices?  Are the people writing these headlines just using the knowledge that bad news gets more readers?  Are they reading the articles?  

Notice that both headlines include qualifiers - "could" and "may."

The October article says the lower prices are good for consumers, for big energy consumers like airlines and manufacturers.
"But a sharp fall in energy prices often results from weakening economic growth, and the benefit of lower fuel costs ins't enough to offset it."
That sounds like the falling energy are CAUSED by a weakening economy, NOT the CAUSE of it.   It seems to me, except for oil companies and oil producing states like Alaska, a drop in oil prices has to be good for most businesses and thus for consumers, which should help the economy down the line, though stockbrokers who don't like uncertainty sell when anything changes.  Or maybe these kinds of headlines means they can churn the stocks in their portfolios.

Conclusions I can draw from this:

1.  Despite the assurances from the oil companies and our former governor and other oil company supporters, the oil companies squeeze as much out of us as they can and Alaska is simply a place to get oil and they'll tell us whatever they think people will believe.

2.  Costco also isn't your friend either.  Their prices don't reflect their costs, but what they think they can get away with.  So don't assume it's cheaper because you're at Costco.

3.  The media generally either do not have a clue about economics and/or they don't care what's true, they care about headlines that sell copy.

Of course, none of these conclusions should be a surprise to anyone paying attention - but unfortunately, in Alaska anyway, not enough people who vote are paying attention.


  1. Costco matches the lowest price gas station in town. that's why you may see a difference.

  2. Still $3.53 is the lowest in Juneau (Fred Meyer, supplied by Delta Western). Ketchikan is still higher thought it's closer to the refinery in Anacortes.


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