Why Do Gas Prices Keep Going Up?

by Michael on Sep 28, 2012 · 3 comments

Photo of an Old Gas Pump near Route 66 in the Desert

Have you ever noticed that gas prices just keep going up, up, up? Actually, they don’t, at least not in a micro sense. It just seems that way.

In reality, gas prices fluctuate pretty widely over time due to a number of factors, including transitions from winter to summer blends (and back again), hurricanes that disrupt production and/or refining in the Gulf region, unrest in the Middle East, variation in the strength of the dollar, and so on and so forth.

As it turns out, however, the major media outlets really only seem to pay attention when gas is getting more expensive. Consider the following graph put together by the good folks over at NPR’s Planet Money (data from Bloomberg and AAA).

Graph of Gas Prices vs. Media Coverage

Notice how the coverage of gas prices seems to track the prices themselves? The correlation isn’t perfect, but there’s a clear association. Note that the spike back in January coincided with talk of tightening the Iranian oil embargo and the expectation that such action would result in an increase in the price of gas.

Of course, gas prices will inevitably rise in the long run due to ever-increasing demand, dwindling oil supplies, and increased costs associated with extraction and refining. But in the shorter-term, the perception that gas prices are always on the rise is just that — perception. And it’s largely driven by the media.

Source: Planet Money


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{ 3 comments… read them below or add one }

1 Tony September 28, 2012 at 7:59 am

In Canada, gas prices at the pump are near the all time high when gas was at $147 a barrel. It seems like the dealers here are secretly locking the price.

2 Michael September 28, 2012 at 8:09 am

Tony: I’m curious, how much are you guys currently paying for a gallon of regular unleaded?

3 John October 2, 2012 at 3:30 pm

Most people don’t realize that the spikes in oil prices have very little to do with outside forces. It’s actually uncontrolled speculating on Wall Street that has been driving up recent gas prices.

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