I will have to take the other side on this one.
My take is that the oil companies are simply opportunistic and it is the market that ultimately drives the price. If it is too high, then the market reacts as it has done and started using less fuel by buying more economical vehicles. In fact, if you look at the price of gas adjusted for inflation, its barely at an all-time high.
No one ever thought the market could handle gas prices in the high two dollar+ range. When Katrina hit and they had a "reason" to jack them up, the economy took it in stride and it was proven that the market could handle the higher price.
Also, there is the other side of the equation. Supply. There are so many hurdles to building new refineries that they simply don't build them. And, new fuel formulations and seasonal requirements have placed more fault prone equipment into the refineries. Couple that with the fact that the oil companies know that the market can handle $3 gas and there is hardly an incentive to make sure they run at 90%+ efficiency.
The only solution to this is a national gas company like Pemex in Mexico...and we all know how well the govenrment runs business...
So, there you have it.
Oh, and one other thing...the reason that $3 gas does not make the market flinch is because there is so much disposable income in the economy that is caused by three things:
1. More two income families that that are "required" to support their "needs" (like multiple cell phones, satellite TV, and on and on)
2. Lower cost of true "necessity" goods such as clothing and some foods (again adjusted for inflation -- $6 kids pants at wallmart -- 30 years ago my toughskins cost that much -- thank the imports for that)
3. High Real Estate Equities and loos lending policies
One last thing...I pay 99 cents for a dozen eggs and $1.67/gallon for milk here in SLC. In some other areas of the country those cost 3x that and the cost is not justifified by trucking costs or other reasons...why does it happen? Same reason...market economics...people will pay the $5 and can pay the $5 for that gallon of milk or the $3 for eggs.
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Happy GulfStreamer
2004 Ultra Supreme Class A 30'
- Added hard-wired Pro-Sine 1000 Inverter
- Converted batteries to 4x6V from 2x12V
- Added Bully air-horn
- Added Safe-T-Steer
SLC, UT
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