Many people have asked about over the years (and until we go all electric with our vehicles) about gas prices and the prices of scrap metal. We have done many blogs and videos on this topic before, but we wanted to refresh and talk about some new points today.
Let’s think about the process of moving things from Point A to Point B…and how the oil/gas prices will affect metals (and so many other things).
Let’s say that you are looking to buy a new car and you want to drive to the local dealership to test drive one, sounds simple enough right? Well, that gas that you have to put in your current car just cost you a little more at the pump, so there is a dent in your wallet. What do you think happened to the car dealerships who had to get those new cars delivered? Well…their delivery prices went up because of the gas prices and they will pass that increase to you.
Now that we got to the dealership and we see that bright and shiny (no not bare bright scrappers…) new car sitting there and you can’t figure out why the car that you have looked at for the last year went up $800 even though the model or features did not change. Well, those increasing oil prices affected the metal deliveries at all of the plants that made the parts and assembled the car, and those prices had to get pushed to someone…and you as the consumer normally are the one who gets the hit.
Suggested Reading: Factors That Determine Scrap Prices
That metals prices should increase when the oil markets have upswings, but that does not always hold true. Since 2000, we have seen so many different forms of energy that have been created and refined from different sources that it has become much more abundant in the market. Shale and fracking has created new energy sources, and because of the increased energy sources, we have seen some transportation costs go down.
So with more energy options that are there, they could help transportation costs stay lower even though the demand for metal is higher…so if the demand for metals overseas and domestically is higher, then we may see metal prices increase even with gas prices going down.
See there is no exact science like there once was in the 1980’s. Those were different times when we saw the same consistent ups and downs year after year and they were able to have a much more predictable flow to metal prices.