Gasoline Prices: A Gentle Reminder
4 August 1998
Gasoline Prices: A Gentle Reminder
FAIRFAX, Va.--Aug. 4, 1998--The issue of gasoline prices has received much public airing in Connecticut over the past year.Gasoline prices at this time are lower than they have been in some time. Why? The answer, says Mobil's regional gasoline marketing manager is in the marketplace, where supply and demand meet every day. "We offer the enclosed opinion column on the subject of gasoline prices and the marketplace for your consideration."
Gasoline prices: a gentle reminder
Keith DeSena
Mobil Oil Corp.
Vacation season is in full swing. For many people, a summer vacation will include a few hours, perhaps even a few days of driving. As valued customers, we hope your vacation experience is a pleasant one. And do drive carefully, we want you to arrive home safely.
One thing you've probably also noticed is the price of gasoline. At the end of June, the average price for regular gasoline in Connecticut was $1.24, down 16 cents from a year ago. And as demand climbs during the driving season, prices may well rise.
Much as some people still cling to the notion that oil companies control gasoline prices, we have to say once again, "We don't." Rising and falling gasoline prices are a permanent part of the economic landscape. A gentle reminder on how things work:
Rising and falling prices reflect how free markets operate. Absent government intervention, the interplay of supply and demand determines what customers and businesses will pay for particular goods or services.
As producers and sellers of a product as essential as gasoline, Mobil has mixed feelings about rising and falling prices. Rising prices benefit some parts of our business; others clearly suffer. The same is true with falling prices. In the end, though, Mobil's feelings really don't matter.
In the commodity world of crude oil and gasoline, what matters is the dance between supply and demand. Consider what has been happening:
The cost of crude oil is a major component in the cost of gasoline. Right now, the world enjoys an abundance of crude oil. Demand has dropped because many Asian economies have contracted sharply. New areas of supply -- Central Asia and offshore eastern Canada -- have emerged. And improved technology is boosting rates of production.
Together these factors have pushed crude oil prices to very low levels. So low, in fact, that OPEC several weeks ago announced it would scale back production to try and force crude oil prices higher.
While lower energy costs have helped sustain the U.S. economic performance, energy prices are most noticeable at service stations when customers fill up.
How long prices stay at today's level is anyone's guess. Economics 101 is working. Sometimes, though, other factors -- concerns over potential disruptions in supply, market psychology and political events -- can override fundamentals, triggering sudden run-ups or downturns in crude oil prices.
Where will pump prices be tomorrow? Look to the marketplace where supply and demand tango to a new tune every day.
We hope you have a great vacation!
Keith DeSena is Mobil Oil Corp.'s regional manager for gasoline sales and distribution in New England. Mobil is headquartered in Fairfax.
