Thursday, April 24, 2008


Capitalism works like this ... (update)

Apparently, the price of gasoline is the topic du jour every jour on the Phil Valentine Show. I heard 15 minutes of his show on my way home from work this evening, and every minute I heard was devoted to gas prices.

In the course of his gas-talkin', Mr. Valentine queried why all gas stations pay the same price for the gasoline they receive from gas distributors, aka Big Oil. Well, I'll tell him (and you):

The price of gasoline is not determined in a boardroom by a cabal of corporate suits. Gasoline is a commodity, and just like all commodities its price is determined on a commodities exchange. (In the case of gasoline, it's the New York Mercantile Exchange, or Nymex.) Thus, when it comes to gasoline, oil companies charge, and gas stations pay, whatever the market is dictating on any given day.

That said, here's an interesting experiment which you and your friends can try when you wanna know what a gallon of gas will cost on any given day ...

Get a copy of the Wall Street Journal. Pull out the "Money & Investing" section. Turn to the commodities page, and find "petroleum futures." Check out what a gallon of gas is going for on Nymex. When you find that figure, add federal, state and local taxes (roughly $.50). Then add the nickel your local gas station gets for that gallon of gas, and you will know, give or take a few pennies, what gas is going for in your ville.

So there (again).

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