Gas Prices Fall

You may have noticed that the gas prices dropped a bit over the Labor Day weekend.  We should all be pleased, right?  Perhaps, but I think a deeper and more critical look is needed. 

In my estimation, gas prices do not fluctuate in response to supply and demand as most other economies do.  Although entry level economics tell us that the market price for a good is found with the equilibrium of supply and demand, it does not seem as if gas prices fall victim to the same economic rules.  Granted, I am the furthest thing from an economist, but its not hard to see gas prices change due to a perceived threat of decreased supply or at the first sign of military conflict in the Middle East.  My point is that gas prices tend to be artificially set instead of allowing the natural economic forces setting the price.

With that, allow me to slip into my conspiracy theorist persona.  Why the sudden and drastic drop of gas prices now?  There was not a sudden surplus of crude oil flowing like a geyser in the desert.  People did not suddenly switch to alternative fuel sources.  The conflicts in the Middle East are unchanged (in respect to the recent gas price dip).  I have two theories...

-Approaching midterm elections
Nothing pacifies the masses like affordable gasoline.  Suddenly everyone has a little more change in their pocket, since that money previously went towards paying for gas.  When voters see a positive that affects them directly like lower gas prices, they tend not to vote out the incumbent.  After the election, the prices return to $3/gallon.  A small price for the oil companies to pay to insure future protection from their elected government officials.

-$2.50/gallon was the target price all along.
The country went into an uproar when prices were climbing above $3/gallon.  People were used to spending closer to $2/gallon.  Even if big oil wanted $2.50/gallon prices, it would be a shock to the average American.  Instead of moderately raising prices to meet that target price, inflate it well above the target, then drop the price where you originally wanted without much effort.  That way it looks like someone has the public's interest at heart.