I'm not an economist, but ...
Oil, which for our purposes is "light, sweet crude," hit $140 per barrel on July 11.A gallon of petrol at my local pump on East Boulevard cost $3.97 per gallon on July 16.
Let's jump ahead to today.
Oil now is trading at $101.18 on the New York Mercantile Exchange.
By my calculations, that's a drop of 28 percent in two months.
A gallon of petrol at my local pump on East Boulevard now costs $3.62 per gallon.
That's a drop of 9 percent in (almost) two months.
What am I missing here?
posted by Jay G. Tate at
11:53 AM
25 Comments:
as someone who spends well over $100/week on gas...$200 on a bad week I have asked myself that same question several times over the past few days. I guess if I were smartt I would own a gas station
I used to like the commute. It gave me time to wind up and down to and from work.
Now it just scares me as I watch the $'s click out of my bank account for every mile I drive my small, Japanese, economy car up and down 85.
The wholesale price of gas is up b/c of Hurricna Ike, Gustav, etc. Refineries are being shut down temporarily for 5-7 days at a time causing not as much gas to be produced. It will adjust in a few weeks when the storms go away. Till then....
Building such critical refineries right in the middle of hurricane alley is ... a curious choice.
Again, I'm only a sports writer.
Ya know i was thinking the same thing yesterday....gas was up here in atlanta to 3.69 and oil was down $.68. Go figure. We are getting screwed.
JGT, saying you are "only a sports writer" is like saying The Beatles are "just a rock band."
You want to read something really scary about oil and gas prices. Google "OPEC". We need to cut ties with Foreign oil, ASAP.
It also has to do with "relative" gas prices.
From what I understand (which is very little) price gouging is defined in the US of A as charging 23% more for your gas than the AVERAGE PRICE in your area. So that means that as long as no one drops the price, then everyone is within an acceptable range. It's too soon to see drastic price decreases. As each station lowers it to gain competitve advantage others will follow suit.
I'm sure there are other factors, but that doesnt help.
Gas station owners make little profit, if any, on the sale of gasoline. That's why every commercial you see for a gas station, they are pushing snack foods and drinks.
I work in the oil industry and I'm pretty sure the prices you are seeing are indicative of the Hurrican season. Refineries are shutdown or in the process of shutting down for Gustav/Ike. This is going to constrain the downstream market significantly, which leads to prices that do not follow normal patterns. Componding that, it is normal for the prices at the pump to lag the oil futures market.
I live in California and can tell you that gas prices here have dropped more on the range of 15-20%. I think it'll go down more with the current oil future decreases. This would be closer to your expected ratios.
Hopefully, you'll see markets stabilize after we get more refineries online in the Gulf Coast and inventory levels back to normal. Of course at that point, who knows what the price of oil will be...
Anyway, I'm a huge fan of this blog. Keep up the quality sports reporting.
Jay,
Are you kidding me.... its the law of supply and demand.... once the price goes up to a point even though the cost to trade drops, the gas cost is what the cost is at that point... they are slow to reduce prices to reflect trading prices... and they like that almost $4.00 a gallon threshold. We demand it and are willing to pay at their cost, so they appease us with droping it a few cents on the dollar and we think its a big deal and we are saving all this money....hahahaha...it will never drop below $3.50 ever again.....
it all has to do with the speculation prices which oil stocks are bought and sold. people who buy speculative stock buy according to what they think the pice of oil will be in the future (buy now and sell when the price is higher in the future) right now the speculation is that oil prices will be lower in the future thanks to the offshore drilling bills recently passed by the govt. thats one of the main reasons the price is dropping. a friend of mine who watches a lot more cnn than i do says he thinks they could be down to 2.75 a gallon by christmas. im all for it. i just moved to texas and it averages 3.35-3.55 a gallon here
Although oil prices are the main factor in the price of gasoline, they are not the only factor. Most of the other costs in the price of gas are stable and not dependent on the price of oil. Costs like taxes, distribution, marketing and refining do not flucuate.
Also, oil and gas prices often move in the same direction, but they aren't linked directly. For instance, the price of oil has risen much more than the price of gas in the last year.
I'm just glad its not $4.15/gal anymore. $1200/month (not a typo) was more than I could handle for gas (I commute a little over a hundred miles each way every day)... Glad to have recently found your blog. Good work.
i've been wondering what gas was when oil was $100 a barrel a while back. when oil went up gas prices went up. sure doesn't seem to work in reverse does it. cringe when the quarter profits come out from the gas companies. think it's great they make profits, but these record profits are excessive.
supply and demand are one thing, getting taken advantage of is another.
i've been wondering what gas was when oil was $100 a barrel a while back. when oil went up gas prices went up. sure doesn't seem to work in reverse does it. cringe when the quarter profits come out from the gas companies. think it's great they make profits, but these record profits are excessive.
supply and demand are one thing, getting taken advantage of is another.
The huge profits made by the big oil companies aren't from high prices at the pump. The profits are made by their exploration and production activities. When they pull the oil out of the ground, its sold on the open market. They are not setting the price, but are benefiting from the record high prices.
i vote 'peter frankenschmidt' best last name on the HABOTN. sweet.
random thought: omg, i just saw Shelly Smith on 'college football live' on espn. i vote her worst tv hair ever. don't these people have stylists? they're on tv for goodness sakes!
oh, gas prices......forgot.... as nick saban would say, 'it is what it is.'
Hi Jay,
We're happy to explain the lil' statisticall cuteness you've posted.
Ya see..that 28% drop in price of that light, sweet, deliciously Arabian crude oil you've noted?
Well, that's OUR 28%.
And that 9% change in the price of refined gas?
Yeah.
Well..that's YOURS!
Enjoy and thanks for playing!
Thanks,
Big Oil
I totally agree with the comment on exploration and production companies. They make long-term investments in oil fields to produce oil over decade(s). They don't set the price, they just sell it for market value. The blame for higher oil prices are largely a result in high demand. If you want to do something about it, trade in the truck and drive a 4-cylinder. American demand has dropped and this has helped decrease the price of oil -- supply and demand.
Also, refineries and gas stations are not making a lot of money right now. Check out their stocks (Valero, Tesoro, Western, etc) -- they have been losing money or barely turning profit. The market is what it is. Until the world demand changes and/or new cheap sources of abundant oil are found, we are going to have to face high prices.
what are you missing? the profit margins.
Also, what is Picken's angle on this whole renewable energy thing. I know he has one. Billionaires like him don't do things for free.
Logic test:
If the oil companies are "greedy" hen the price increases, what were they before the increase?
Altruistic or stupid?
True, oil companies want profit. But so do all other companies. Their prices are market driven, due to supply and demand. There is some level of forecasting due to the refining process, but the bottom line is our demand, the relative supply of the refined product and a wildly speculative futures market (investors shifted to oil from the failed housing market) have caused this increase over time.
The reason you don't see a reduction of gasoline prices when the price of oil drops is because this isn't the primary factor concerning gas prices. It's related, but fairly remotely, and not in real time.
Does anyone realize how much the government makes from the sale of gas? Check it out and think about it sometime.
Once you do you'll realize something. Uncle Sam makes almost as much profit from tax revenue as Exxon, etc. Do they really want the price to go down? My opinion - NO.
Step 1. Buy a bike.
Step 2. Get in shape.
Step 3. Move closer to job.
Step 4. Ride to work.
Step 5. Save $$$.
Now you are healthier and wealthier. Congrats.
Impractical you say? Only people in Colorado do that you say? Not true. I did it and I live in Columbus, GA.
1) I have a bike
2) I am in shape
3) I live close to where I work.
4) I can't carry lumber on my bike.
5) I still think it costs to much.
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