The Marketing Magic Behind Rising Gas Prices

Back in 1988, when the price of oil bottomed out, almost every small Texas entrepreneur suffered cash flow problems unless they were smart enough to diversify. Business in Houston, especially, depended on some facet of the oil economy for healthy cash flow. One evening after a board meeting at my luxury high rise, I struck up a conversation with a neighbor who worked for a big oil company. I asked him what he did at his forty-story office tower in downtown Houston. "I'm one of the big nasties that sit around all day and decide how much you'll pay at the pump," he chuckled. He was a career marketing man at one of the big four oil companies. The whole country was in an uproar about the recent rise in gas prices and it was a hot topic of conversation. Gas was selling for a comfortable US$1.05 a gallon two weeks earlier, and had recently risen to US$1.35. News reports were rife with information about shortages, high demand, and the importance of national reserves during a time of war--during the Gulf War. Sound familiar? "Americans have been getting a deal and the price of gas will continue to rise, take my word for it. Do you know how much they get for gas in Europe?" Note that he was concerned with "what they get" while I was focused on giving way too much. "We have marketing goals just like any other business--the price of gas will continue to rise until it reaches or surpasses what the rest of the world pays." Here we are 17 years later, steeped in another war on the other side of the world. Gas prices are skyrocketing, politicians are showboating and cash-strapped citizens wonder helplessly when the price of gas will level off; before or after it reaches the cost of a gallon of milk.