June 7, 2002
Just for the record, there was a holiday in the US at the end of May, and gasoline prices didn't jump.

Bob Tippee

Just for the record, there was a holiday in the US at the end of May, and gasoline prices didn't jump.

This conflicts with popular presumption.

It is widely believed in the US that gasoline prices rise noticeably and annoyingly when holidays come along.

The effect should be pronounced when holidays occur toward the beginning of driving season.

The holiday just past, Memorial Day, falls into that category.

According to prevalent American thinking, a holiday early in driving season should have been worth fifteen, maybe twenty cents a gallon. The reason: Refiners and other gasoline sellers raise gasoline prices in anticipation of heavy driving on the assumption that holiday drivers will pay whatever they must.

To be sure, gasoline sellers like to raise prices and do so at every opportunity. Sellers of anything charge as much as they can for their products and services. It's how business works.

But sellers can only charge as much as buyers are willing to pay. Gasoline consumers have proven to be altogether willing to limit purchases when prices get high.

Competition and price freedom keep these conflicting interests in healthy tension.

So Memorial Day came, inventories of gasoline, crude oil, and other products were at healthy levels, and consumption didn't do anything surprising.

And the average retail price of gasoline nationwide stayed pretty much where it had been for 8 weeks at $1.39/gal, which is 29¢/gal less than its level of a year earlier.

This is not the first time the gasoline price has failed to take its much-heralded holiday leap. Sometimes the market just won't let it happen.

Nobody writes much about these contradictions of popular expectation, however. Why write stories about something as droll as gasoline unless they give politicians reason to shake their fingers at oil companies?

Markets change, though. Gasoline supply and demand can't stay this cozy indefinitely.

Consumption is rising. Its year-to-date average is 5% higher than it was last year. Stocks are slipping. Refinery utilization rates are rising. Tightness looms for the crude oil market.

And—finger-pointers, take note—Independence Day is less than a month away.

(Online June 7, 2002; author's e-mail: [email protected])