so crude has been in the high 30s and low 40s for many months now, but gas is still 95c/litre, where it ought to be in the 70s at the most, any idea?
it still doesn’t explain it, even if the other gas is $50/barrel (say) there is no way prices at the pump should be as high as they used to be when it was at $80-$90/barrel… somebody must be making a lot of money somewhere
Supply and demand.
Gas demand is down but supply is also down so the price is up. Oil demand is down but supply is up so the price is down.
There are 42 gallons in a barrel of crude and a few months ago the price went back over $40 at the same time wholesale unleaded went under $1. That is called a negative crack spread. A refinery’s profit comes from the difference in the crude cost and the price of the refined gas after “cracking” the crude hydrocarbons. Oil companies were selling refined gas at lower than the cost of the raw crude. Refineries cut back production runs and moved up planned maintenance to further cut production.
The oil Co’s can control the price of gas by changing their refinery output. Sad but simple.
Here in California the state wants to add 37 cents in new gas tax so we will see our prices go up even more.
Dave
Oil & Gas pricing is far more complex than most people realize. It’s the result of a compex interplay of the grades of oil available, pipeline capacity, refinery capacity, storage capacity, and many, many other factors. As someone who trades daily in the business, I barely understand the price moves. There’s little chance the layman ever will. What I can tell you is that it is very competitive and the notion that someone is “gouging” the consumer is a pile of crap. There are many, many players, all of whom are trying to squeezing margins to the minimum. The top 5 U.S. majors constitute less than 25% of the total market.
Good article. Thanks for that.
“What I can tell you is that it is very competitive and the notion that someone is “gouging” the consumer is a pile of crap.”
I wouldn’t go that far. The majors control far more than 25% of the refined product being sold in the US. Crude yes, but not distillates. I have seen big oil move the price up 20 cents in a day to insure a merger went through. I have seen a major move price up big in the whole Western US just so they would make bonus numbers for the quarter and year. Oil companies will charge every sent they can get away with. I know because I was setting the prices for one of the majors in N Cal for a lot of years. I couldn’t take the dishonest business practices and our corrupt (in my personal opinion) so I left big oil a few years ago.
Dave
its almost as if the price of oil isn’t the only thing that affects gasoline prices
HOLY SHIT
im going to go ahead and assume its an evil conspiracy to maximize profit that JUST started, whereas for the last 100 years companies were being nice and selling things cheaper than they could have.
it still doesn’t explain it, even if the other gas is $50/barrel (say) there is no way prices at the pump should be as high as they used to be when it was at $80-$90/barrel… somebody must be making a lot of money somewhere
As a NorCal resident I agree that there are issues there. They are entirely govt. created: Govt. has prevented new refineries from being built and they are constantly changing blend requirements. E.g. they require everyone to use MTBE; then suddenly they change their minds and restrict it. This means costly switchovers and higher prices that consumers don’t understand the source of. It also establishes govt.-created monopolies with price distortions. But even with that, gas is still generally cheaper than bottled water – which is pretty amazing when you consider what has to be done to get it out of the ground, transport it around the world, and refine it.