Could Lower Fuel Prices Cause Shortages?
August 15th, 2008Good news! The cost of fuel has dropped during the past two weeks, and it is predicted that this trend will continue, at least in the short term. This is great news for consumers, or is it?
Some economists are predicting that because of the drop in prices, there could end up being fuel shortages for short periods of time if the prices continue to fall. The way that this would happen is that fuel retailers would maintain lower amounts of fuel stock waiting for prices per barrel to continue falling, rather than buying at the current price and having to sell the fuel at lower prices at the pump when the current price per barrel continues to fall.
In the meantime, there is a second half of this bizarre situation, which makes some sense from a business point of view. The second half of the scenario is consumers.
As consumers see the prices fall, they will wait until the last minute to purchase fuel, and then fill up at the lowest price possible. If the price drops significantly, consumers will possibly be in a rush to purchase while prices are down, creating the need for more fuel. With fuel companies keeping their stock low and trying to buy in bulk at the lowest price possible so they can sell at a profit, and at the same time, consumers trying to purchase as much fuel as possible at the lowest current price, there could be a shortage created.
Economists feel that the shortages would be a day or two at a time and would not necessarily become a long-term situation, however, it could still lead to a lot of concern and possible chaos for both consumers and fuel retailers.
Even with the drop in prices, however, fuel will still remain expensive to purchase. In addition, economists advise that to avoid a shortage in your personal situation, it might be good to spend the extra 2 cents per gallon and fill up your tank, not waiting for rock bottom prices to see what happens.
Tags: consumers, fuel costs, fuel prices, fuel shortages, Gas Prices