Why does the price of gas not seem to be affected by inflation even though industries related to the extraction/processing of gas seem to be affected?
In: Economics
Because gas is a highly fungible, traded commodity. The cost of the fuel is not directly influenced by what it cost to produce it. It’s influenced by the financial markets that trade it
When you buy pop tarts, Kellogg’s sets the price based on what they think consumers will pay but they are going to guarantee they make their money back at least
When you buy gasoline, the producers just go to the one big gasoline market and try to sell it for whatever people will buy it for. Sometimes the demand for gas is low, so there’s not a lot of people trying to buy it and those who do don’t want to pay a lot
On the other hand, if you’ve got a tank full of gas you need to move it, and you don’t want to hold on to it (some producers can hold SOME gas) so you’re going to just sell it. In fact, for a brief period of time in 2020 during the deepest depths of COVID, oil (which behaves very similarly) had a negative price
Longer term, the price of gas is absolutely influenced by inflation and everything else, as in the short term producers may take a loss, but eventually they will simply stop producing and then that will cause the price to rise since there will be less to buy at the market. Which, in and of itself is an inflationary pressure. It’s not just gas responding to inflation, gas prices cause/are inflation
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