Remember all those convoluted explanations by the oil companies when gasoline prices at the pump shot up in the wake of Iraq's invasion of Kuwait - even though it was previously purchased supplies that were being sold?
Remember how they said the world spot market price of oil at the moment supposedly dictated the rest of the oil price structure?Okay. But why does that process prevail only when world prices go up, not when they come down?
The average U.S. motorist may not be aware of it, but the prices traders are now paying for unleaded gasoline on the world market have fallen to the level they stood at just before Iraq invaded Kuwait.
In spite of this development, prices at the pump are holding steady near all-time highs.
Of course, the new 5.1-cent federal gasoline tax has had an impact. But the static nature of high prices leads one to believe that the oil industry is not too quick to let go of a good thing.
At the first hint of shortages or higher costs, pump prices skyrocket. Yet when world prices fall, pump prices take a long time to follow. Why doesn't the system work equally quick in both directions?
There seems to be some quirk in the law of supply and demand as applied by the petroleum industry. Or maybe they've discovered an exception to the usual law of gravity: what goes up doesn't necessarily have to come down.