$4 Gas

I have been wondering how long it would take for my local Shell station to start charging $4 for Regular gas. Today, with rounding (see photo), the threshold was reached, although the clarity of a first-digit 4 is perhaps a couple of days away. Instead of repeating that high gas prices are a drag on the economic recovery, this post is about the dynamics between the Shell (3800 Kitsap Way) and its closest competitor—the Valero station at Adele Avenue and Kitsap Way.

The last time I wrote about gas prices in early March, Regular was selling for $3.54/gallon at the Shell station. In less than two months, the price has gone up almost 50 cents a gallon. Although I’m retired and don’t need to buy gas to commute to work, I will admit to being fascinated by the steady upward march. How high will it go? What can we really do about it? Is $4 a plateau or just a step on the way to a new all-time high?

I understand that the $4 mark was reached weeks ago in other areas especially if you consider the higher grades of gasoline or diesel. I’m writing about a local situation.

The Shell and the Valero are my bellwether stations. That’s even though both stations are followers not leaders in setting the local price. Heck, call them slackers. They are always playing catch-up. The price won’t change at either station for a few days, then the media will report on a new average price in Western Washington, and poof both stations will scramble to match it. Because I buy most of my gas at the Shell and the Valero, I don’t consider the higher price to be real until they post it. I’m ignoring the inevitable I know, but it’s the way I look at things.

The Shell was first to the $4 mark, but the contest has been close. Over the past few months there have been a dozen lead changes and as many ties. In basketball terms currently the Shell has a 2 point lead over the Valero. Not to worry. The Valero team has some deadly 3-point shooters and will likely regain the lead soon. A few weeks ago, the Valero surged well ahead. They seemed to be scoring on almost every possession. Shell called time out, put the first team back in, and tied the score on a 4-point play (yes, you can do that in basketball and at the pump). But the game isn’t over. We might not even be in the fourth quarter yet.

So will the gas-price bubble burst anytime soon thus trashing my basketball analogy? In basketball the score doesn’t get lower. Once on the board points stay there. However, prices will begin to drop if you go by the past few cycles. Many Americans cannot keep spending $80 every time they fill their gas tanks, so at some point—as inelastic as it is—demand will start to drop. Or so the experts say. Meanwhile in my neighborhood, we got game.