Financial markets are the ultimate predictor of gas prices

Dear John: Regarding gasoline prices, I spent over 20 years working in oil refining and marketing.

Gasoline and other prices are set entirely by market forces except for various tax and regulatory impacts. To think otherwise is pure stupidity and shows a complete lack of economic understanding. RB

Dear RB: You are right that “market forces” dictate the price of gasoline and other energy prices. But you don’t understand which markets are setting those prices.

The financial markets are the ones that bet on whether prices are going up or down, based on perceptions of the quantity of energy products in the future.

And when there is trouble in oil-producing areas of the world, these markets push prices up.

And when that trouble dissipates, prices drop.

The problem is, when oil and gasoline prices drop in the futures markets, those savings are slow to show up at the pump.

The financial markets are the only ones you need to pay attention to.

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