question: Why do gas prices rise and fall at what seems like random points?
comment: It’s based on the price of oil. The price of oil is based on a lot of things, but simply put, supply and demand. As the global population grows, so does demand. As technology advances, so does supply. Depending on which of these is progressing faster you’ll see the price of oil and therefore gas change. Furthermore you’ll see prices change if some countries decide to increase or decrease their production. For example ,OPEC ,a group of oil producing countries formed an alliance to try to keep the price of oil steady. However the US is currently the largest oil producer and they are not part of OPEC. Since US oil is controlled by individual corporations their objective is to sell as much as possible regardless of what other countries are doing. As an example say OPEC cuts some production, supply goes down, price goes up. Because of that US may increase production, supply goes up, price down. An oil company has a breakthrough in oil recovery technology, supply goes up, price goes down.
passages: There is a separate literature, which has explored conditions under which price cycles like the ones observed gasoline markets and found that consumer search models can rationalize cycling under various conditions. Here, the intuition is that there is a small subset of consumers that are not informed about prices and therefore will buy from a firm regardless of the price charged. Once prices get low enough, a firm may find it optimal to charge a high price and exploit this small loyal segment rather than trying to win the whole market.
  
  Section::::See also.
  
  BULLET::::- Sticky pricing
  
  Section::::References.
   Many market participants, especially those transacting in gas at the wellhead stage, then add or subtract a small amount to the nearest physical market price to arrive at their ultimate final transaction price.
   In 2005 and 2006 a perception of impending supply shortage allowed traders to take advantages of the contango in the crude oil market. Traders simultaneously bought oil and sold futures forward. This led to large numbers of tankers loaded with oil sitting idle in ports acting as floating warehouses. (see: Oil-storage trade) It was estimated that perhaps a $10–20 per barrel premium was added to spot price of oil as a result of this.
   The nationalization of oil supplies and the emergence of the OPEC market caused the spot market to change in both orientation and size. The spot market changed in orientation because it started to deal not only with crude oil but also with refined products. The spot market changed in size because as the OPEC market declined the number of spot market transactions increased.
   Investment demand for oil occurs when investors purchase "futures contracts" to buy a commodity at a set price for future delivery. "Speculators are not buying any actual crude. ... When [the] contracts mature, they either settle them with a cash payment or sell them on to genuine consumers."
   Many factors have resulted in possible and/or actual concerns about the reduced supply of oil. The post-9/11 war on terror, labor strikes, hurricane threats to oil platforms, fires and terrorist threats at refineries, and other short-lived problems are not solely responsible for the higher prices. Such problems do push prices higher temporarily, but have not historically been fundamental to long-term price increases.
  
  Section::::Possible causes.:Investment/speculation demand.
   BULLET::::- market for petroleum in question is small compared to market for crude oil (in terms of quantities sold / bought), so that downstream prices cannot drive upstream prices;
  
  BULLET::::- in the short run, only crude oil prices drive petroleum prices (i.e., prices of other inputs are assumed to be constant);
  
  BULLET::::- no substitutes to petroleum are available in the short run.
  
  Given the above, one might expect that:
  
  BULLET::::- increases and decreases in crude oil prices trigger appropriate changes downstream;
  
  BULLET::::- resulting changes are symmetric in terms of absolute size / timing.
   BULLET::::2. Observe Dock Yards: Another low-resolution graphics display appears, depicting oil tankers arriving at the docks. The queue length at each dock is an indicator of the oil supply at the current purchase price and the time it takes for each dock to service each tanker.
  
  BULLET::::3. Service Station Statistics: A table of text information allows players to see such things as the amount of gasoline each station has to sell, how long the waiting queue of cars is, how much the rival stations may be undercutting the player's prices.
   The amount of natural gas produced both from associated and non-associated sources can be controlled to some extent by the producers. The drilling rates and gas prices form a feedback loop. When supply is low relative to demand, prices rise; this gives a market signal to the producer to increase the number of rigs drilling for natural gas. The increased supply will then lead to a decrease in the price.
  
  Section::::Natural gas supply.:Natural phenomena.
   Section::::Natural gas demand.:Price increases, and poverty.
   Oil prices ended the year at $101.80, falling to $100.01 per barrel on 30 and 31 January 2011., then the Egyptian civil war broke out, as it theoretically put the use of Suez Canal at risk. Making matters worse, a gas pipeline to Jordan was blown up by saboteurs in the Sinai Peninsula. Prices remained steady until a dramatic drop began the 2010s oil glut.
  
  Section::::Boom.:Fuel.:Uranium.
   The perceived increase in oil price differs internationally according to currency market fluctuations and the purchasing power of currencies. For example, excluding changes in relative purchasing power of various currencies, from 1 January 2002 to 1 January 2008:
  
  BULLET::::- In US$, oil price rose from $20.37 to nearly $100, about "4.91" times more expensive;
  
  BULLET::::- In the same period, the Taiwanese dollar gained value over the U.S. dollar to make oil in Taiwan "4.53" times more expensive;
  
  BULLET::::- In the same period, the Japanese Yen gained value over the U.S. dollar to make oil in Japan "4.10" times more expensive;
   Section::::Natural gas demand.
  
  The demand for natural gas is mainly driven by the following factors:
  
  BULLET::::- Weather
  
  BULLET::::- Demographics
  
  BULLET::::- Economic growth
  
  BULLET::::- Price increases, and poverty
  
  BULLET::::- Fuel competition
  
  BULLET::::- Storage
  
  BULLET::::- Exports
  
  Section::::Natural gas demand.:Weather.
  
  Weather conditions can significantly affect natural gas demand and supply. Cold temperatures in the winter increase the demand for space heating with natural gas in commercial and residential buildings.
   Generally speaking, physical prices at the beginning of any calendar month at any particular delivery location are based on the final settled forward financial price for a given delivery period, plus the settled "basis" value for that location (see below). Once a forward contract period has expired, gas is then traded daily in a "day ahead market" wherein prices for any particular day (or occasional 2-3 day period when weekends and holidays are involved) are determined on the preceding day by traders using localized supply and demand conditions, in particular weather forecasts, at a particular delivery location. The average of all of the individual daily markets in a given month is then referred to as the "index" price for that month at that particular location, and it is not uncommon for the index price for a particular month to vary greatly from the settled futures price (plus basis) from a month earlier.
   Information published by uSwitch, a price comparison site whose business motivation is to encourage frequent switching between energy suppliers, after the price cuts, in February 2009, suggested that "Those who were savvy enough to sign up to a competitive fixed-price plan last summer, before some increases in wholesale energy were passed on, are sitting pretty as prices would need to drop by 16% on average before it would be worth moving" but failed to be clear about which specific capped deals it was basing this assertion on, and when it was sensible to have committed to a capped rate deal.
   Oil is marketed among other products in commodity markets. By 2008 widely traded oil futures, and related natural gas futures, included with most of these oil futures having delivery dates every month:
  
  BULLET::::- Petroleum
  
  BULLET::::- Nymex Crude Future
  
  BULLET::::- Dated Brent Spot
  
  BULLET::::- WTI Cushing Spot
  
  BULLET::::- Nymex Heating Oil Future
  
  BULLET::::- Nymex RBOB (Reformulated Blendstock for Oxygenate Blending) Gasoline Future
  
  BULLET::::- Natural gas
  
  BULLET::::- Nymex Henry Hub Future
  
  BULLET::::- Henry Hub Spot
  
  BULLET::::- New York City Gate Spot
  
  Section::::Speculation during the 2008 crisis.
   Section::::Macroeconomic factors.:Fuel.
  
  When fuel supplies are disrupted, the demand for goods that are dependent on fuel, like motor vehicles and machinery, may decrease. Disruption in energy supplies creates uncertainty regarding availability and upcoming prices of these supplies. Often, consumers will not purchase energy-dependent products until they can be sure that fuel will be available to use the product.
   Section::::U.S. market mechanisms.
  
  The natural gas market in the United States is split between the financial (futures) market, based on the NYMEX futures contract, and the physical market, the price paid for actual deliveries of natural gas and individual delivery points around the United States. Market mechanisms in Europe and other parts of the world are similar, but not as well developed or complex as in the United States.
  
  Section::::U.S. market mechanisms.:Futures market.
   The volume of oil production on tight oil formations in the US depends significantly on the dynamics of the WTI oil price. About six months after the price change, drilling activity changes, and with it the volume of production. These changes and their expectations are so significant that they themselves affect the price of oil and hence the volume of production in the future. 
  
  These regularities are described in mathematical language by a differential extraction equation with a retarted argument.
  
  Section::::See also.
  
  BULLET::::- Tight gas
  
  BULLET::::- Shale gas
  
  BULLET::::- Shale oil extraction
  
  Section::::External links.
   Natural gas demand usually peaks during the coldest months of the year (December–February) and is lowest during the "shoulder" months (May–June and September–October). During the warmest summer months (July–August), demand increases again. Due to the shift in population in the United States toward the sun belt, summer demand for natural gas is rising faster than winter demand.
   Between 2010 and 2015, gas demand in the European Union has decreased more than 20%. At the same time, gas projects are evaluated with a more than 70% higher gas demand scenario in 2030. Since 2015 to 2017, there has been an increase in gas consumption, but only by 7%.
   Strategy is based upon several simple economic principles. If players pay their employees poorly, the service time will be longer; however, if players pay them too much, prices will need to be raised to maintain a profit, but competitors may steal business away with lower prices. If gasoline prices go too high, the government may step in and set price limits. Occasionally, stockholders will overrule players' decisions.
  
  A clock runs continuously through the game. When time expires, the player's performance is evaluated.
  
  Section::::Reception.
   Nobel prize winner Milton Friedman said "We economists don't know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can't sell tomatoes for more than two cents per pound. Instantly you'll have a tomato shortage. It's the same with oil or gas."
   The price discovery process (also called price discovery mechanism) is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers. The futures and options market serve all important functions of price discovery. The individuals with "better information and judgement" participate in these markets to take advantage of such information. When some new information arrives, perhaps some good news about the economy, for instance, the actions of speculators quickly feed their information into the derivatives market causing changes in price of derivatives. These markets are usually the first ones to react as the transaction cost is much lower in these markets than in the spot market. Therefore these markets indicate what is likely to happen and thus assist in better price discovery.
   2010s oil glut
  
  The 2010s oil glut is a considerable surplus of crude oil that started in 2014–2015 and accelerated in 2016, with multiple causes. They include general oversupply as US and Canadian tight oil (shale oil) production reached critical volumes, geopolitical rivalries amongst oil-producing nations, falling demand across commodities markets due to the deceleration of the Chinese economy, and possible restraint of long-term demand as environmental policy promotes fuel efficiency and steers an increasing share of energy consumption away from fossil fuels.
  