[ELI5] Why do gas prices fluctuate so frequently?

1.12K views
0

[ELI5] Why do gas prices fluctuate so frequently?

In: Economics

The price fluctuation is due to the available supply relative to expected consumption. When more is needed than expected there is a greater demand so the prices will increase slightly to reflect this. When the supply of crude oil is stable the price of fuel still fluctuates due to seasonal demand and the specifications of the fuel needed.

people are unusually sensitive to gas prices. Maybe because they get no enjoyment from it, they just treat having gas as normal and buying gas as a problem.

So gas stations compete on price by selling as low as they think they can. As global commodity prices fluctuate the gas stations adjust their prices.

Also, normally the cost of an item in a store is almost unrelated to the cost of the ingredients. Bread has something like 25 cents worth of wheat in a loaf. So a fluctuating price of wheat does not change the cost of bread.

McRib from McDonald’s has an odd variant on this. Mcdonalds has a set price for mcribs, what they think the market will pay. When the price of oork drops low enough that they can make a profit on mcribs they bring them back. So rather than fluctuating orice they fluctuate availability