I found some interesting tidbits about retail gas pricing in the big-city paper (Here comes another Charlotte Gas Spike). The article concludes with this:
Dropping demand -- estimated at 5 percent to 8 percent lower than a year ago -- could help dampen price spikes, Felmy said.
"You can't always pass on price increase," he said, "because you might lose more business."
It is actually quantity demanded (a movement up the demand curve) that is dropping but that is too tricky to put in the paper. Dropping demand would be caused by something other than the gas price increase (e.g., dropping income).
This mistake in terminology happens all the time in the papers and it always bugs me. Should it? Yes, dropping demand causes prices to fall and that is the wrong prediction.
Much of the article beginning at the beginning:
Gulf Coast wholesale futures gas prices soared past a record Tuesday to levels well beyond those after Hurricane Katrina. At one point after Katrina, Charlotte-area drivers were paying $3.50 a gallon or more for regular. The Southeast receives virtually all of its gas from the Gulf, where Hurricane Rita has hampered production.
Gulf Coast futures prices closed at $3.12 a gallon Tuesday, beating the record of $2.89 set days after Katrina, according to Platts, an energy information company. Once taxes and transportation costs are added, that translates to pump prices at more than $3.70, but experts said drivers shouldn't expect to see those types of numbers posted on gas station signs.
Oil companies have helped keep prices below $3 by charging wholesalers and stations less than the Gulf Coast price since Rita struck Saturday.
The Charlotte metro average is $2.90, AAA said.
"No one wants to be accused of being the one to cause higher prices," said John Felmy, chief economist for the American Petroleum Institute, the oil industry trade group.
But the sub-$3 prices might end with Tuesday's 56-cent jump in wholesale prices. "There will be a spike," said David Ruisard, Platts' Gulf editor.
How much is unclear. One day last week, when wholesale prices jumped 48 cents, pump prices quickly rose 20 cents to 30 cents in Charlotte.
Wholesale futures prices rose on growing worries about tightening gas supplies from 16 refineries closed and damaged after Rita. None have restarted. In addition, the pipeline that provides most of Charlotte's gas was operating at a little more than half capacity.
