Funked, the supply curve is based on the cost of the oil.
I think transportaton and distribution and point of sale costs (fixed and variable costs of the gas station) are significant. There's too much variation between prices at different stations for this not to be true.
Given the oportunity to cut expenses without reducing prices, do you think someone would capitalize on that?
They can't capitalize on that because there is competition. Unless they are fixing prices (and a drive around my town shows that this is definitely not happening), then somebody will always take the opportunity to drop the price and sell more fuel. This principle is a primary reason that the supply curve is upward sloping. It's a universally accepted (among economists) and fundamental truth of the marketplace. If you want to argue that the supply curve is not upward sloping, then we have a special case, and I don't see an argument for that.
That said, it is simply a fact that tens of thousands of people would lose their jobs
Oh I agree about that. But I don't believe that people deserve to keep jobs which needlessly increase the price of a product, and exist only because of archaic laws.
Also, about gasoline prices (and prices in general), don't forget about inflation. If you adjust for inflation (which affects wages as well as prices), gasoline prices don't look so bad. And feature-for-feature, the inflation-adjusted (real) price of autos is pretty stable as well.
