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Gas prices give illusion of a bargain
Contra Costa Times ^ | 11/5/5 | George Avalos

Posted on 11/05/2005 2:58:42 PM PST by SmithL

We gripe about it. We can't do a lot about it. And eventually, we get used to it.

Yup, how we respond to persistently high gasoline prices is starting to look a lot like how we talk about the weather.

A few weeks ago, when the hurricanes were tearing through the Gulf Coast, gas prices shot to $3 a gallon and even higher in the Bay Area and other parts of the country.

People howled about the record prices and dreaded every fill-up. They yelped for good reason: Surging fuel costs had begun to chew up their pocketbooks.

Responding to the public outcry, members of Congress headed to podiums and TV cameras to decry rising prices, rapacious energy barons and greedy oil sheiks.

Now, gasoline is closer to $2.60 a gallon, although some low-price leaders in Oakland and Berkeley have shoved per-gallon costs down to $2.37. And a price that would have sparked an uproar a year ago now causes little public outcry. After all, $2.60 looks a whole lot better than $3 or worse.

Debbie DeSantis of Livermore is glad to see the cheaper prices. Yet DeSantis is well aware that there's some irony when drivers rejoice about a price level they once despised.

"If I get a coupon for a free soda, I get all excited because it's free," DeSantis said. "It's an emotional reaction, it's human nature. Any time you pay less, you're happy even if it's still too much."

So how is it that $2.60 a gallon was the proverbial sow's ear this summer but was transformed into a silk purse by fall?

The answer appears to be human nature, mixed with how gasoline is marketed, complete with price signs every few blocks.

"Initially, when gasoline prices go up, that helps create a reference point for gasoline and you notice it when the price goes past that reference point," said Cesar Maloles, a professor with the College of Economics and Business at Cal State East Bay.

And people are often barraged by media reports about a surge in prices.

"They come to expect that prices are going to increase," Maloles said. "When gasoline becomes less expensive, they are conditioned to think the price they are paying is a better deal than when it was at that price before."

What's more, over time, people adopt a new benchmark -- in the case of gasoline, typically at an ever-higher price -- to fashion an attitude about prices. That's their new framework, as the marketing types put it.

"After a while, people will drive more or less about the same amount of miles, take the same kinds of trips, as they did before," said Itamar Simonson, a professor with Stanford University's Graduate School of Business. "This happens when you raise the sales tax from 7 percent to 8 percent. For a few weeks, people get excited about it. Then they get used to it."

Severin Borenstein, director of the Berkeley-based UC Energy Institute, believes our strongest reactions occur when prices first start to rise.

"It isn't really that they're outraged based on real financial pain," Borenstein said. "It's just the shock that it has gone up that much."

Even experts who are aware of how consumers typically react to lower prices give a hearty cheer when pump prices drift lower.

"We've been shell-shocked by $3.25 gas and I almost celebrated when I saw something at $2.64 the other day," said Peter Sealey, co-director of the Center of Marketing and Technology at UC Berkeley. "It looks as if it's on sale."

Bob Dias, principal owner of a Concord-based heating, air-conditioning and plumbing business, R.D.'s Service Contracting, believes that oil companies and gasoline retailers are well aware of the effects on customers forced to suffer through constant up-and-down cycles.

"They have us on a roller coaster with these prices," Dias said. "They get you paying a dollar a gallon more and then back things off a little when people start to complain. That's how they get us used to these prices."

Borenstein, though, believes drivers must share considerable responsibility for the pace of gas prices, not only when they rise, but especially when they fall. Borenstein and an Ohio State University professor, Matthew Lewis, have teamed on research about why gas prices rise quickly when wholesale costs spike, but fall more slowly when wholesale prices retreat.

"When the price goes up, people shop around a lot," Borenstein said. "When prices decline, people get lazy and don't shop around as much. So the market does not respond as quickly and prices fall slowly."

Still, motorists doubtless feel a sense of relief because they have escaped the worst of the high prices -- for now.

"It's like you have a toothache and it temporarily goes away," Sealey said.


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: energy; gasprices

1 posted on 11/05/2005 2:58:43 PM PST by SmithL
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To: SmithL

Absolutley correct. I did not notice where it says that about .56 a gallon in taxes, the reformulated cost is about .20. We should just have the federal standards for gasoline emmission.


2 posted on 11/05/2005 3:11:07 PM PST by Burlem
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To: SmithL
Wonder why the MSM isn't making a big deal about the price of maple syrup. I believe its at an all time high, and with the amount I consume - even in my hamburgers - it's causing a hardship for my family....sigh.

prisoner6

3 posted on 11/05/2005 3:15:32 PM PST by prisoner6 (Right Wing Nuts hold the country together as the loose screws of the left fall out!)
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To: Burlem

http://www.energy.ca.gov/gasoline/margins/index.html


interesting. from the California Energy Comm.


4 posted on 11/05/2005 3:16:08 PM PST by Burlem
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To: SmithL

So do Ronco ads. And don't fall for that sleezebag behind the counter in your local coffee shop who wants to leave you some room for cream.


5 posted on 11/05/2005 3:16:34 PM PST by dr_who_2
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To: prisoner6

That would reflect badly on Dr. Dean :)


6 posted on 11/05/2005 3:17:00 PM PST by chet_in_ny
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To: SmithL
I filled up yesterday at exit 28 on I-70, east of KC, for $1.979.

First time I've seen gas under $2.00 since August.

7 posted on 11/05/2005 3:25:19 PM PST by woofer (Eagles may soar - but weasels don't get sucked into a jet's engines)
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To: SmithL
$1.00 in 1980 equals $2.54 in 2005 based on monetary inflation alone.

(Google "inflation calculator")

8 posted on 11/05/2005 3:26:47 PM PST by gg188
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To: SmithL
It costs me $20 to fill up half a tank. I should be grateful for the decline in the price, even though its not that dramatic. My wallet feels a bit heftier.

(Denny Crane: "I Don't Want To Socialize With A Pinko Liberal Democrat Commie.Say What You Like About Republicans. We Stick To Our Convictions. Even When We Know We're Dead Wrong.")

9 posted on 11/05/2005 3:27:29 PM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives On In My Heart Forever)
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To: SmithL

$1.979 in NE OK - 11/5/05


10 posted on 11/05/2005 3:29:44 PM PST by savedbygrace
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To: SmithL
My last purchase of gasoline was $2.25 per gallon.

I think a fair price of gasoline is $1.50 per gallon. We are all being ripped off.

11 posted on 11/05/2005 3:41:07 PM PST by 2nd_Amendment_Defender ("It is when people forget God that tyrants forge their chains." -- Patrick Henry)
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To: 2nd_Amendment_Defender

Since the Law of Supply and Demand hasn't been repealed, do you have any suggestions for getting a fair price?


12 posted on 11/05/2005 3:45:26 PM PST by SmithL (There are a lot of people that hate Bush more than they hate terrorists)
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To: 2nd_Amendment_Defender

I disagree.

Fair price for gasoline is 10 cents a gallon.

That's what my granddaddy paid. Why should I get cheated?


13 posted on 11/05/2005 3:49:47 PM PST by El Sordo
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To: 2nd_Amendment_Defender
I think a fair price of gasoline is $1.50 per gallon. We are all being ripped off.

So stop buying it.

14 posted on 11/05/2005 3:53:03 PM PST by Doe Eyes
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To: SmithL

Still about 75 cents too high in Chicago.


15 posted on 11/05/2005 4:13:38 PM PST by Chi-townChief
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To: SmithL

Just paid 2.38 at El Cerrito Costco this morning. Hasn't been that low since last March.


16 posted on 11/05/2005 4:21:07 PM PST by pbear8 (France is guilty of regicide)
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To: Chi-townChief

$2.70 in Reno, Nevada


17 posted on 11/05/2005 4:24:03 PM PST by B4Ranch (No expiration date on the oath to protect America from all enemies, foreign and domestic!)
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To: savedbygrace

I'm going to move there then:)


18 posted on 11/05/2005 4:28:04 PM PST by moog
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To: B4Ranch; Brad's Gramma

$2.70 in Reno, Nevada

They could have a slot machine next to the pump. They would make more money if they said--"Play for free gas."

I haven't seen Brad's Gramma for a while. She's probably knitting Christmas stockings that fit Michael Moore. I hear it's a year-ROUND project.


19 posted on 11/05/2005 4:30:43 PM PST by moog
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To: B4Ranch

I paid 2.28 here on da Sout' Side this a.m.


20 posted on 11/05/2005 4:50:29 PM PST by Chi-townChief
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To: Chi-townChief

I paid $1.759 plus tax today. We should pass a law that gas prices are advertised at the before tax price. I think an aweful lot of people think that the 9/10ths is the tax.


21 posted on 11/05/2005 4:58:44 PM PST by hawgwalker
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To: 2nd_Amendment_Defender

You should really provide a basis for your opinion of what the fair price should be.

I think I should be paid $ 600 per hour. I think that's a fair price. What do you think?


22 posted on 11/05/2005 5:06:46 PM PST by sgtyork
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To: El Sordo
That's what my granddaddy paid.

If old granddad had been REAL smart, he would have installed a big tank in his back yard when it was 10 cents, and sold off a bunch in mid September.

;->

23 posted on 11/05/2005 5:07:22 PM PST by Izzy Dunne (Hello, I'm a TAGLINE virus. Please help me spread by copying me into YOUR tag line.)
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It is true. Gas was $3.50 for a while here. Damned expensive so when I see $2.50 gas, I get excited even though just a year ago I would have found that crazy expensive. I remember in the late 90's paying less than $1 a gallon!


24 posted on 11/05/2005 5:08:49 PM PST by SmoothTalker
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To: prisoner6

You can eat without maple syrup. Many people can't get to work without gas.


25 posted on 11/05/2005 5:10:40 PM PST by Quick1
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To: Quick1
You can eat without maple syrup...

What blaspheme speak ye!

prisoner6

26 posted on 11/05/2005 6:02:43 PM PST by prisoner6 (Right Wing Nuts hold the country together as the loose screws of the left fall out!)
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To: moog; Brad's Gramma

I spoke with her this am. She's fine, just busy.


27 posted on 11/05/2005 7:39:01 PM PST by B4Ranch (No expiration date on the oath to protect America from all enemies, foreign and domestic!)
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To: 2nd_Amendment_Defender
I think a fair price of gasoline is $1.50 per gallon. We are all being ripped off.

That's the beauty of free enterprise. YOU can open up your own service station and SELL it for that price...

28 posted on 11/05/2005 10:12:56 PM PST by Onelifetogive (* Sarcasm tag ALWAYS required. For some FReepers, sarcasm can NEVER be obvious enough.)
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To: 2nd_Amendment_Defender
I think a fair price of gasoline is $1.50 per gallon. We are all being ripped off.

This is a joke right?

29 posted on 11/05/2005 10:18:31 PM PST by Jorge (Q)
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To: pbear8

2.35 in Eldersburg, MD last week. Of course, without the taxes, it would have been 1.93.


30 posted on 11/06/2005 9:10:15 PM PST by Tolerance Sucks Rocks (Freedom of speech makes it easier to spot the idiots! --kellynla)
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To: 2nd_Amendment_Defender

Fair price?

Locate, drill, ship, refine, distribute and market. If you can do it cheaper, go for it.

Beware someone will think your price is unfair.


31 posted on 11/06/2005 9:18:52 PM PST by endthematrix (Those who despise freedom and progress have condemned themselves to isolation, decline, and collapse)
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To: Quick1

But....maple syrup is my work?!


32 posted on 11/06/2005 9:20:27 PM PST by endthematrix (Those who despise freedom and progress have condemned themselves to isolation, decline, and collapse)
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