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Monday, June 21, 2004


As the price of gas fluctuates from $1.50 to over $2.00 in most parts of the USA, we should put this in the perspective of other countries that have a much higher baseline petrol price.
To best make sense of this, contextualize gas increases in terms of percentages and how consumers react to price variations in other products. For example, most consumers do not make a decision based on sales markdowns of well under 10%. However, price reductions over 30% provide significant leverage. So, essentially Europeans and Japanese are dealing with fluctuations of less than 10% overall while Americans get dragged around by their nose.

But this can also have political repercussions on the way down. Huge fluctuations on the way up combined with consumer's short-term memory can actually trick some people into believing that current gas price reductions are good deals.

How this plays out close to election time remains to be seen.

Update: And of course there is the historical perspective courtesy of Howling at a Waning Moon.


Professor Anonymous Anonymous said...

Thanks for adding a link to my blog. Keep up your good work.
Bob Whitson


8:48 AM  

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