A Christian Liberal is NOT an oxymoron.

Posted by XT on July 29th, 2008 in US News

If you read this NY Times article; then you are likely to think that something magical is going on. Gas prices have been on the rise for months and suddenly – around the July 4th weekend – they reversed course. What could be going on? No hint from the NYT.

Take a look at this graph:

In the last two years, there have been three times when gasoline prices started down. Each time – surprise – was in July.

The first peak is right at the beginning of the chart – 7/28/06. Prices wandered down from that point to a low point in January of 2007.

The second peak is about 5/27 – which is not July – but price drops and then immediately comes back up to an only slightly lower peak on or around 7/16. If you’re tracking price on a bi-weekly basis, the two peaks become a single peak – and I’m going to count that as price peaking in July.

Price wanders downward until about the end of October and then starts a long rise through July of this year.

What’s happening? Well, refineries shift around July or so from making summer grade gasoline to making winter grade gasoline. So all the gas you will by from now until around October is already in the tank – so higher crude prices (or lower crude prices) won’t really change the price of that gasoline. This is why lower oil prices won’t immediately be seen at the pump.

Another reason is that profit margins are always reduced in a price run-up. This is especially true when price begins to curtail demand, as we have seen in the last few months here in America. Profits aren’t really lost so much as they are deferred. Before the price starts to drop, the margin will increase again. That’s just business and it’s what allows the corner station to stay open for you.

So don’t get excited. Prices will go down a bit for a few months then break records again (possibly) next year again. Demand isn’t going to decline by an appreciable amount on the world market and supply isn’t going to boom, either. The problem is that we designed our modern American cities based on the idea that cheap, personal transportation meant using a private car. It’s going to take some forward thinking redesign to change that, and that isn’t going to happen soon.

So get used to the pain. Like your favorite pair of old shoes, you aren’t going to be able to throw it out.

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