OMFG... NOW someone want's to tell us that Gas prices and Crude prices are not tied together because global crude prices are based on oil only pumped in Texas... yes, ONLY.

Crude oil is getting cheaper — so why isn't gas?
"The price of gas is indeed tied to oil. It's just a matter of which oil.

The benchmark for crude oil prices is West Texas Intermediate, drilled exactly where you would imagine. That's the price, set at the New York Mercantile Exchange, that you see quoted on business channels and in the morning paper.

Right now, in an unusual market trend, West Texas crude is selling for much less than inferior grades of crude from other places around the world. A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.

But it is the overseas crude that goes into most of the gas made in the United States. So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil."

I must have hit my head on a rock when I fell off the turnip cart.. every futhermucker and his father says "crude goes up, so gas goes up" - even the oil companies, now someone at the Associated Pressis trying to pander-off THIS as an excuse?!?!

I DON'T BUY IT.

If anything, you'd have to think that the PREMIUM OIL COULD NEVER SELL AT LESS THAN THE sh1++y OIL, or the refineries would simply start buying the superior oil because it's cheaper - and supposedly better. This flies 180* into the face of supply/demand economic theory.

Hmmm... I can buy a new Corvette with all the beels and whistles and gadgets for $40k, or I can get a stripper model for $45k.... I'll pay the extra for the stripper because I'm not used to the extra goodies.





Any takers on this "reason" for the recent divergence of gas prices and crude prices?!?!

 

I guess it was always predictable, hey PP?

 

Im really starting to get the impression youre confusing Supply and Demand with Fixed profit.

Supply and Demand doesnt care what the costs of crude are. It doesnt care what the cost of anything is. It doesnt care what it took you in terms of dollars to develop a product or what your reasons for pricing a product at a certain amount. Supply and demand means if there arent people willing to pay the price youre asking you cant sell it at that price, so you adjust your price or you dont sell it.

To answer your question, the way it appears to me, OPEC cut its supply according to CNN a while back when the economy started tanking. They couldnt adjust as fast as the markets were tanking. Demand dropped dramatically faster than they could reduce supply to maintain the price and profitability they would like. Now their adjustments appear to be taking effect. Supply and Demand as I understand it suggests when you go to the pump you are willing to pay up to a certain amt per gallon before you give up and go get a horse. Wether that money goes to OPEC or Exxon and what the costs as it pertains to Supply and Demand are irrelevant. Costs can drive up the price of something, but only if the demand is there to allow it to. There may be any number of reasons price is going up but it all boils down to the fact enough people are willing to pay it.

I am curious though why you think any company needs an excuse for differing profit margins or at what price they choose to ask for their products.

 

Wow this article went to 24 pages.... This most really get people worked up

 

Plant 100 different answers to one question, and no one will know the truth. Eventually, people will tire from looking for answers. And when they don't care, you can do to them anything.

 

It's not entirely untrue. Brent crude is pricing higher than WTI right now. It's about a $6 difference per barrel. However, that $6 difference can't possibly explaing the ~$.50 jump over the past 6-8 weeks in gasoline.

 

For one of the posts above....gas was at its lowest in late December - 6 weeks after the election.

FYI....wholesale cost of gas today (for March delivery) is ~$1.11. Believe it was down around $ .95 back in late November for December delivery (don't remember for sure) Crude is ~$35 per barrel for March delivery (don't remember what December delivery prices were...though one could look it up if really interested).

 

We can always look up the futures to check what the price will be in March, for example. But that doesn't explain the reasons for the high prices given the relatively low oil prices.

 

You said it Brother.

The public can smile and be "Impressed by Intellect" or "Baffled by Bullsh1+".
Either way, they just stand there and smle like they understand every word.

 

Supply and Demand is not a guy, or a girl. "Care" is not a word you will hear in any Econ class when the lecturer is discussing S&D.
Think about that sentence in bold above...
"Supply" is NOT related to the cost of the raw material?!?!


I am impressed that you have thought about this in such detail! That is a good thing.
We don't have to agree on anything, but if I have you thinking about this issue, I'm happy, and feel like I've not wasted my time.

As for my POV - it's far different than yours. Stright-shot, no BS... here's my crude thought...
The financial institutions that are owned by the wealthy elite in the world played their hand too long with the fuel card. Once they saw that they were going to be inverted due to the mortgage and credit problems along with the decline in home values, they realized that their financial institutions were about to go belly-up. Time to start watching the banks instead of the oil fields. Turns out people will prefer a house over their car as well.

The price of crude was droped by edict from a few key players that wanted to stimulate the economy again - plain and simple. Just like the higher fuel costs were causing people to cut back, causing prices in stores and restaurants to go up, and resulting in a slowed economy, so would lower fuel costs help to excite the economy via reduced delivery costs, more activity, more travel, etc. Except... it didn't. People were now gun-shy if they still had a job, and broke if they lost their job. Doesn't matter how cheap gas is, if you are unemployed, you don't buy it!

In my opinion, a company that is LEGITIMATE and HONEST does not need to have an "excuse" for their margins. If they have fair and honest competition, their margins will be what the market produces for them.

What you MUST dicern as a HUGE DIFFERENCE in basic products and crude/fuel is that most basic products (like shoes, pencils, and newspapers) are goods we can totally live without if we choose to do so, or we can make our own substitutes for these goods and improvise, and certainly we recognize that NONE of these goods are absolutely critical to our everyday economy... making it "churn and burn" so to speak. Would the world stop 3 days after all pencils were sold from the shelves and no more produced? I doubt it.
Oil (and hydrocarbon-based fuels) are ESSENTIAL to our existence every day... we MUST have it to get to work, to run our factories, to heat our homes, etc. In most cases, there is no alternative for the masses (yet), so we are captive to the product. You nor I can go out in our back yard and dig for oil, pump it, refine it, and use it in our vehicle. But certainly you and I can make our own shoes from hides or textiles, craft our own pencils from some ash and a tree branch, or investigate and write our own little newspaper and sell it. We can even take some copper wire, wind it around a shaft, stick it in a magnetic field armature, throw some steel blades on the shaft, and make our own electricity if we want. But we can't do oil Bro.... DIFFERENCE. BIG DIFFERENCE.

Throw in the fact that there are a handful of producers, even fewer that extract it from the earth, and even those few are controlled like puppets by the true "big money", and you have the perfect scenario for an oligopoly - which I feel there is. A few folks in bed with each other deciding what the rest of the world will get/have/deal with.

But fear not... once they fleece the taxpayers to cover all the lost value in mortgages and homes, and several of the big banks are consortiumed into a few huge banks that are easier to control... well, all will be better in a few more months (or years), and we will have $3 and $4 gas back again!

Right now I think they are doing better through the bailouts than they were through the oil prices... the bailouts were just free money - no work involved. With oil, they actually had to "do something" to get the money.

 

I don't buy the conspiracy theory you threw out there, but there's no doubt we'll see high gas again. Not much doubt that the gov't will take control of much of our banking system too....I guess that will make things all better. If we're going to have a banking system similar to Europe's, perhaps we can then tax gas at the same rate they do to? Won't that make things better? Maybe then Exxon won't be the only bad guy?

I would also suggest that we could do with a LOT less oil than we use now, and it would be much easier than trying to do without or make the little things you used above in your analogy (shoes, pencils, newspapers). No, you can't go drill for oil in your backyard, but you can ride a bike or walk instead of ALWAYS taking the car (might even shed a few lbs and save a few dollars in medical bills...imagine that). Live 25 miles from work? Whose choice was that? There are other ways to heat - and you can use much less energy heating and cooling with simple weatherstripping, better windows, keeping doors shut, etc. You can save a LOT of electricity by just turning off things when not in use. There are literally DOZENS of other ways to "stick it" to the evil oil companies and the evil bankers. But most people only want to have all the material things in life that they hope will make it fun....then bitch about the very system that allows them to have it.

Sorry to be so blunt. Nothing personal intended.

 

Nothing personal taken!

FWIW... I have the most up-to-date water heater, well-insulated home, double-pane vacuum-sealed windows, seals and wipers on all man-doors, seal and wipers with side-seals on my garage doors. We have auto-switches on some interior rooms. We have cieling fans in every room, two in the great room. We have a brick exterior, 1:insulation, then the inside framing with R18 on the exterior walls (I designed and built the house!). My electric bill in January was $139 for a house with 3800sf of living and a 1900sf heated/cooled basement. I'd say that's pretty-d@mn good.
So consider me "sticking it to the man"... AND enjoying my chosen lifestyle too.

I quit my job 48 miles from home 2 years ago and now work 7 miles from home. No way in hell I am going to walk or ride a liquor-cycle on these 2-lane highway country roads around here - we've had many killed doing just that in the last few years. But still - I've put my money where my mouth is.

Just because I have adjusted my life to use less of those resources, that does not mean I am totally excluded from using them, and I doubt that is possible at all. CONSIDER... crude goes into everything from asphalt in your shingles and driveway to every piece of plastic "anything" in your home, to your clothing, it is in all kinds of chemicals (Vaseline, Chapstick, oils, greases, lubricants, etc) all over your home. It is the foundation in numerous medications. Maybe you don't heat with it, but if your heat is electric, it could come from a plant that used a railway to bring coal to it from elsewhere, etc.

MY POINT IS - you can't "get away" from oil.
We can certainly do things to reduce our consumption - especially in gross ways like racing on weekends, driving gas-guzzlers, etc - as you noted, but we can't live without it. So we are "captive" to it, and they (the world's elite) know it. Controlling oil may only be trumped by controlling water in the world when it comes to uber-control of he earth and all it's inhabitants.

THAT is a huge concept to grasp - even for me, and many simply can't.

Your points and suggestions are totally acceptable "common-sense" observations... to the point where I have done them myself. But that does not excuse me from expecting "the man" to play a fair and honest game.

Nothing personal intended to you either - just my POV.

 

You read WAY too far in to "care". Irrelevant would have been just as good. Also my point was more so that Demand does not care, or it is irrelevant to demand what it cost the seller to produce it as to what people are willing to pay for something. In other words, if you found a stash of gold in your house that cost you nothing, you can sell it at a price negotiated due to demand. Ill read the rest later...

 

On this point...and I think it is your main point...I completely and totally agree.

And btw...I just finished a house in November. It is brick, sprayed-in insulation throughout, double-pane windows (though not as good as I hoped they would be), and geothermal heat/cool (ouch - that bill hurt!).

But I like my toys too. And when the price of gas went through the roof (regardless of reason), I adjusted as much as I reasonably could to reduce my use of oil.

 

If you dont mind me asking Bob - how was the system set up (was it a shallow ground loop?) and what part was the real ouch part?

i'm really interested in geo heating/cooling and I keep reading its crazy expensive to do at this time, but in the long run it looks like it might be worth the initial cost in a new home contstruction, epsecially when its complimented by things like radiant floor heating, large thermal mass construction, radiant shielding for the exterior, ect.