Originally Posted By jonvn So, China somehow has stopped their demand for oil, is that it? And suddenly, refinery capacity has gone up so that prices are now able to drop a major percentage? Is this what you are saying? Bleat?
Originally Posted By DouglasDubh <So, China somehow has stopped their demand for oil, is that it?> Of course not. Which is why oil isn't going back down to where it was in the 1990's. But somebody did just find a huge new supply of oil, making the futures speculators a little more optimistic. <And suddenly, refinery capacity has gone up so that prices are now able to drop a major percentage?> Refinery capacity has not gone up, but some concern that hurricanes would take down some refineries like they did last year caused some increase in prices. When that didn't happen, and with the usual decrease in driving after Labor Day, the prices came down a bit, although, again, not to where they were in the 1990's.
Originally Posted By SingleParkPassholder Makes no sense to me. China wants more oil, but people like me, who live in Long Beach, California, literally right next to several refineries, have topay more for it. Nope, sorry, doesn't pass the smell test.
Originally Posted By DouglasDubh Actually, gas is pretty close to the same price it was 18 months ago, except that then it was rising, and now it's falling. <a href="http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html" target="_blank">http://www.eia.doe.gov/oil_gas /petroleum/data_publications/wrgp/mogas_home_page.html</a>
Originally Posted By fkurucz Its important to remember that crude and gasoline prices do not march together in lock step. They are certainly relate dto each other, but can also fluctuate in somewhat independent ways. There is a refinery capacity shortage in the US. So even if crude prices were to drop, if demand for gasoline were to increase in the US, the refineries might be unable to meet demand and gas prices could rise. So there are definitely ways to manipulate prices at the pump. Prices at the pump can even seem strangely arbitrary. For instance, gas prices in Denver are usually lower than in Loveland (the city, not the ski resort). However for the past few months they have been as much as 10 cents lower. Why? Good question. Especially since for the past 10 years its been exactly the opposite.
Originally Posted By DouglasDubh I drove through Loveland last year. My guess is Loveland is adding more cars than it is gas stations. The price of gas we pay at the pump is dependent on a lot of things besides the cost of crude and refineries. There's also land, labor, and regulatory costs.
Originally Posted By mrichmondj <<< Refinery capacity has not gone up, but some concern that hurricanes would take down some refineries like they did last year caused some increase in prices. >>> So, we are pricing gasoline based on a concern about refinery capacity and not the actual capacity itself. Sounds like price manipulation to me. We have plenty of refined gasoline in the United States, and the price at the pump is largely derived from the price of crude oil on the world market -- very little related to the supply of refined gasoline. We did have gasoline shortage earlier this year when switching to the summer fuels mixture, but it had nothing to do with refining capacity. There was plenty of gas, but a shortage of the appropriate type of tanker trucks to transport the new fuel mixture. The refining capacity red herring is a common theme from the oil industry to distract peoples attention from the true mechanisms behind global oil prices.
Originally Posted By ecdc To suggest that supply and demand is the reason why oil companies have generated record profits is silly. It shows a partisanship that can't even acknowledge that gas prices are higher because corporations can make them higher to make more money, whatever the supply might be.
Originally Posted By vbdad55 Nothing changed in the last 4 months to drive prices up to $3.50 from $2.25 and then back down... We all understand China is using more natural resources - oil / concrete / steel etc...but NOTHING has changed so dramatically to explain the recent gouging going on, except greed. Oh yeah and that oil find in the gulf -- that is 6 - 8 years away from retrieval was the last estimate I saw....it had little effect short term.
Originally Posted By tiggertoo <<…gas prices are higher because corporations can make them higher to make more money, whatever the supply might be.>> And such is our bane due to an inelastic market commodity.
Originally Posted By fkurucz But the futures market has little impact on today's price. Those people are basically gambling on what prices will be in the future.
Originally Posted By SingleParkPassholder It's the futures market, it's supply and demand, it's well, let's face it, price gouging.
Originally Posted By fkurucz >>And such is our bane due to an inelastic market commodity.<< Its true that demand for gasoline is somewhat inelastic. But as prices climbed earlier this year I found myself making fewer discretionary trips, and would plan ahead to combine multiple errand into one trip. I suspect that others did as well. Also, witness how demand for large pickups and SUV's slumped. So there is some elasticity. But I do agree that one cannot simple say: "I'm not buying gas this week".
Originally Posted By fkurucz According to the laws of supply and demand big oil should be furiously building new refineries to meet the ever growing demand for gasoline. But they aren't building any. I wonder why. And since barriers to entry are high, its unlikely that a new player (say Richard Branson) will jump in and build new refineries to give big oil some competition.
Originally Posted By DouglasDubh Meanwhile, the Dow just closed over 100 points over it's previous high close.
Originally Posted By DouglasDubh <According to the laws of supply and demand big oil should be furiously building new refineries to meet the ever growing demand for gasoline.> That would only be true if the capital return for investing in new refineries regularly be the capital return for other types of investments. In spite of a few spikes in oil company revenues, that's not the case.
Originally Posted By tiggertoo <<So there is some elasticity. But I do agree that one cannot simple say: "I'm not buying gas this week".>> Very true. The greater issue arises as oil companies essentially can raise prices to recoup the lost revenue from marginally decreased demand, knowing full well that the consumer will eventually reach the limit of expendable gasoline cuts.
Originally Posted By SingleParkPassholder "Meanwhile, the Dow just closed over 100 points over it's previous high close." Big deal. All the foreign shareholders will be thrilled, however.
