Recently I had a revelation. The price of gas has nothing to do with supply and demand, or production. The price of gas is solely a function of how much the American public is able to afford.
Theoretically, the price of gasoline is pegged to the price of crude oil, which in turn is driven by the futures markets. Extreme leverage is what drives the huge fluctuations in the futures markets but in the end, it averages out. Year over year, decade over decade, the average price of a barrel of oil has gone up steadily along with the cost of everything else.
The average price of a gallon of gasoline, when looked at over a period of decades, also shows a slow and gradual increase.
But week-to-week, the price of a gallon of gasoline is the most volatile expense in the American household. There is nothing else which Americans consume regularly which fluctuates so much in price.
Whereas the price of a gallon of gasoline ought to depend on the average price of a barrel of crude oil, the opposite is in fact driving the market. It's the price of gas which sets the price for the oil.
And just what sets the price of gasoline? If you ever ask a true huckster how much something will cost, they will always ask you 'how much do you got?'
The gas companies will charge more and more for their product until they can't charge any more for it. They know they're charging too much for it when people start to change their consumption patterns. People will conserve gas, and so the gas companies don't sell as much. Earning may plateau but production drops and that means less shifts at the refinery. On a larger scale, unsustainable gas prices make the whole economy stall as people are unable to afford as much of other goods and services.
On the low end, the gas companies will never charge less than they are able to charge, because that would be leaving money on the table and that's just not good business sense. Have you ever known a corporation to not earn as much as they can?
So there you have it: A better rationalization for the price of gas than for the oil it comes from.