Gas Price Ripoff

Yes, on the long term it seems to look like it but, I'd like to see the last few month opened up to see if there was really a 28% jump in crude to warrant such an increase in gas prices.
Why is there such a spike in the wholesale gas price mid 2008 when there was not such a spike for crude? Same goes for that flat crude price for Dec08/Jan09, yet wholesale is jumping, again?

 

Thanks, I guess. So, the refiners are controlling the gas prices, not supply and demand, mostly.
A 28% gas price rise here since the low a few month ago, yet crude is nicely hovering in the mid $30s, certainly not a huge price increase to justify the gas prices but manipulation because they can, legally.

 

The US hasn't built a new refinery for many years, partly due to environmental restrictions. Sometimes the US is trying to compete in a world economy with one arm tied behind their back. Not always, but sometimes.

We have now decided to immediately not develop off shore drilling. That's neat, we are letting it go to China/Cuba with horizontal drilling & mark my word, because we will loose our oil in the northern hemisphere to Russia & other countries because of it.

The price of oil still follows the market to some degree & I can't do much about the price. I can choose to buy or not buy. I buy. I can choose the vehicle I drive. That is why I bought a Prius. They can say what they want, but the bottom line is that it gets better mileage consistently than any other mass produced vehicle available in the US today. It has an outstanding reliability rating. It gets me from point A to point B very nicely, thank you.

I do have some acreage & no a Prius won't pull my stock trailers, fence posts, livestock & barbed wire. I have a 4WD extended cab Chevy for that. It gets from 12 mpg fully loaded and trailer to 20 mpg hwy pu alone. Highest I got was 21.7 mpg which was across Oklahoma, through Wichita, KS rush hour traffic.

New technology can & will come & create changes.

 

Because they had long-term contracts. Now they're *losing* money because many of their contracts are above the current spot price.

 

The US hasn't built a new greenfield refinery in some time because it's much cheaper to expand existing refineries (as has been done repeatedly), because the profit margins on refining are lousy (so it has been a bad investment), and, at present, because the projected declines in the amount of conventional oil available mean that you'd be making a 30 year investment in an asset of declining worth. We may end up building or expanding capacity to handle heavy oil (e.g., from the Tar Sands) but I don't think there is or has recently been an economic case for building a new US refinery for conventional oil.

 

One thing not mentioned about developing domestic reserves - huge costs. Believe it or not, there is oil right here in Manitoba, at least in the SW corner of the province. When oil went north of $60 a barrel, a lot of capped wells were rushed into production. Now that oil has gone south of $40, they're capped again

A lot of our domestic reserves break even north of $50 a barrel, tar sands +$70 a barrel. Ocean extraction, like Hibernia, is at least $70 a barrel but the Crown Corporation refuses to come clean with real numbers. What Hibernia Management and Development Corp does do is guarantee a fixed cost of $30 a barrel to Exxon Mobil to run the platform, a sweet deal

I'm all for deep sea extraction. Matter of fact, I'm all for passing laws requiring 100% domestic source oil. Of course, there is no way that could be done unless the domestic oil was priced at least $80 a barrel

 

Bob,

I hope you were not implying that I believe/subscribe/whatever the projections/forecasts/tea leaf reading in the above graph. I was merely pointing out that historically, from a 20,000 ft level, gas and oil prices have tracked pretty closely.

Charles,

The monthly data is available from the website...Unfortunately the oil and gasoline futures/spot markets are separate beasts and we have very little say over what we wind up paying...

Greg

 

The graphs are fine and all that - but what they don't explain (which tends to lend credence to the subject title) is the enormous year-over-year profits the oil/refining companies are making.

Showing the price of a barrel of crude compare to final gas cost is all well and good - but those prices aren't TODAY'S prices, it's TODAY'S price for a barrel of crude in 3-6 months.

And you don't actually think Exxon and Philips 66 are buying on the spot market do you? Those guys have LONG term contracts and are paying some fixed price per barrel, maybe a contract 30-40 years old (depending).

I'd like to see the above chart, compared to the profits (note that I said PROFITS, not gross sales) they have been making the last 3-4 years. That might be more indicative of the reality of the situation.

EDIT: Don't know why I didn't think and mention this in this post, but is that chart showing the future price of crude at a given day, or what crude was actually selling for on that day? Based on my own observations, every time there's the mention of an increase in the future cost of crude, I'm paying for it the next day. It's as if there's a direct pipe from the Middle East, with only a 100 gallon reserve at each gas station.

 

What I find interesting is the disparity betwen wholesale and retail prices: typically 40 cents per gallon. That is a very large margin in my opinion

 

There's another question, I'm assuming the retail price shown includes Fed/State Taxes, or does it? And if it does, which state? Every state has a different tax rate for fuel. Fed tax is consistent, but state tax isn't.

 

I was amused at the gently rising projected price when as oil becomes shorter and shorter in supply, we know the price changes will oscillate with even greater extremes. Gas prices will actually peak and drop quite dramatically as the shortage becomes worse and worse.

I'm also observing that the top two vehicles by volume in January were the Ford and GM pickups. Gas prices come down a little bit and by golly, pickup sales led the top ten.

Bob Wilson

 

I also wasn't defending the sound purchasing principles of the general public...

tundrwd, the graph states that the retail price includes state and federal taxes; I do not know specifics of the data they present (although the actual data is available from them on their site)...I also am bothered by the instantaneous increase in fuel prices when upticks in crude are reported...

 

Ah, stop your whining.
I pay between 6 and 8,2 dollars a gallon here in Norway
Mind you, at least 60% of that is taxes.
And my friends don't even understand why I bought a Prius....

 

Indeed. Welcome to America. If nobody can make a profit, nobody sells anything. If you truly think that the price is what it is ONLY because of profits - a little introspection will go a long way. If people didn't buy it, the price could not go up. Surprise! We are the reason the price of gas goes up. The price of gas is in your hands. Stop buying it if you want it to be cheaper.

 

Nothing personal to any blogger, we all have opinions and most are right at least some of the time.
My opinion.
Demand for gas has dropped ...oil prices have dropped...gas prices at the pump are going up...all in lock step price increases.
The supply is being reduced by the major oil refineries cutting output...I suspect if the public cut our use of gas in half we'd see some refineries shut down permanently...and gas prices would go up artificially in order to cover "overhead". If our economy and use were to pick up we'd hear the cry from the industry that they're doing all they can to meet demand and since there is a shortage they regret the price increases that would be straining our economy...and by the way "open those National Parks to drilling".
This may be poorly stated but what I'm trying to say is I do not believe that we live in a state of true supply and demand economics...I wish we did.
I do not trust the "system". Where critical resources like energy are concerned we are at the mercy of secret meetings in the White House and poorly regulated suppliers.
We've seen too much ENRON, Wells Fargo, "Gold Parachutes"...and most large corporations grabbing for the bottom line and quick dollar at the cost to our environment, our American workers, and ultimately our nation's security...all the while feeding at the corporate welfare trough when times get tough in the "spirit of the free Market."
Something is not right ...but you're also right...I'm sorry to say:
"Welcome to the American Way. "

 

Anyone who believes that any company is making too much profit should be buying that stock. Exxon-Mobil's common stock price has been stable & pays a dividend. Every corporation in this country should be so poorly run.

 

This has been hashed over before. The price of oil is speculative--you don't have to buy oil anymore to buy oil futures. That has resulted in high volatility of oil and gasoline prices, which, along with the financial fears, has wrecked the car industry.

Right now, we are in a deflationary spiral in the economy. Oil futures and stock prices are way down. My sense is the big players have pulled most of their cash out of oil and stocks, and are sitting on the sidelines waiting to see what happens. At some point, when they have restored confidence in the financial markets, they will start piling their cash back into oil and stocks, which will raise oil and stock prices.

Cheap oil right now is a boon to the economy, and is bound to lessen the severity of the recession since inflation and interest rates will stay low. Let's hope oil stays cheap for awhile.

 

USA will soon have a 60% gas tax.

It is coming.

I don't mind paying 60% if I knew it was going to a good cause, but government waste is not for me.

I know I can spend my money better than the government.

Power to the people! "Let me spend my money the way I want to spend it!"

 

Ah that's great!
Start by building some schools, some hospitals and why not fix up a few miles of road. It's great to hear you are willing to do this for the community because if a government collects no tax they can't build those things.

Good for you!!

 

The one thing I find ironic is that our ancient refineries are not upgraded to be as modern and efficient as possible. When you compare the cost of greenfield to brownfield it's almost always more cost effective to modernize the older refineries

Consider that around 50% of the total refineries in the US were closed between 1960-1980, yet total gasoline production was increased. By killing off the most inefficient refineries, and upgrading the better ones, production could be met with far fewer refineries

When a new petrochemical refinery is constructed overseas, such as the SECCO facility near Shanghai, the gains in efficiency are remarkable. That plant went from cold start to in-spec in one shift, not the 2-3 weeks required for our plants here

No doubt the refinery owners expect a certain profit margin, and are willing to cut production to meet that expectation