What I don't understand about rising gas prices

geepondy · Sep 1, 2005

Ok, thruout the US today, gas prices were rising by the hour. Don't the stations pay so much to have their tanks filled and then charge a certain price above that and then when tanks are filled again, adjust the price accordingly to what they paid this time and so on. Obviously it doesn't work that way, can somebody clue me in how it works?

Lynx_Arc · Sep 1, 2005

It has to do with how they change prices. Most companies change prices to match the latest price which equates to last in first out or LIFO. Some companies use FIFO which means all the old stock has to be sold in order to raise price.

The advantage of LIFO is when prices drop you get the benefit immediately while with FIFO they would have to sell the old stock at a higher price before they could drop the price.

Sigman · Sep 1, 2005

Post content deleted, but continued in the thread that Empath linked below.

ikendu · Sep 1, 2005

geepondy said:
... can somebody clue me in how it works?

You've heard of "Heads I win, Tails you lose"?

If you get that principle, you can understand gasoline pricing.

Prices almost always shoot up instantly in response to any reason at all, then if there is overwhelming reason for them to drop...they drop very slowly.

Oil company profits were up like 32% last quarter (surprise).

Empath · Sep 1, 2005

This topic is so close to what has developed in this thread, that I'm going to close it and ask that members continue the discussion there.

What I don't understand about rising gas prices

geepondy

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Lynx_Arc

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Sigman

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ikendu

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Empath

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