Posted on 02/15/2009 9:59:43 AM PST by saganite
NEW YORK – Crude oil prices have fallen to new lows for this year. So you'd think gas prices would sink right along with them.
Not so.
On Thursday, for example, crude oil closed just under $34 a barrel, its lowest point for 2009. But the national average price of a gallon of gas rose to $1.95 on the same day, its peak for the year. On Friday gas went a penny higher.
To drivers once again grimacing as they tank up, it sounds like a conspiracy. But it has more to do with an energy market turned upside-down that has left gas cut off from its usual economic moorings.
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.
(Excerpt) Read more at news.yahoo.com ...
Not to mention the Southwest just took a hosing on the hedges they established mid-last year.
Thanks. How far in advance of delivery are the contracts typically made?
That’s not a free market. They should be losing money just like the airlines. The fact that they aren’t proves they are crooks scamming the system.
Exactly. I’m trying to explain the economic impacts of futures contracts to someone on this forum and it’s a challenge.
The minute the economy looks like it's even starting to recover, though, just watch: you're going to see a manipulation of energy pricex, via regulation, such as neither you nor this nation have ever seen before.
Thackney, and Eric in the Ozarks, and Smokin' Joe (and numerous others!) and I have been trying to do this for a couple of years. Some folks -- especially the 'conspiracy' crowd, of which there is no shortage here on FR -- just don't get it, sadly.
Although the wholesale price of propane is down to about half of last year we are still paying this year's prices.
To augment your argument U.S. refineries run close to 100%
capacity. Any one of them going off line will spike
retail prices.
The left won’t allow for building new refineries.
What scare me is the ignorant talk on FR blasitng the oil
companies when the price is really a function of the limits
set by our Government.
Watch for nationalization of oil in the near future.
Word.
Petrol is not the only product made from oil. Much of the ‘waste’ products from gasoline production is where the high profits come from. During the distillation process that creates gas, many byproducts are created that help an oil-company’s profits. You have everything from petrochemicals to make plastics, makeup, chemicals, coke for steel production, etc. If you’ve ever read the detail of an oil company’s reports, you’ll realize that this upstream production profit is where a majority of an oil company’s profits come from. They also make a lot of money off international operations based on the careful balance of international prices and the US Dollar that the product was purchased by. I remember the year end report for XOM showed that all her record profits where international or upstream, it actual lost money on domestic downstream sales.
Very true, I was just trying to keep a simple analogy for those who apparently expect the retail costs to drop to zero if crude prices drop to zero and think there is manipulation if it doesn’t.
Anyway, what is wrong with profit?
Wikipediais not a reliable source for facts.
Example from the article you quoted from.
“Cash is fungible”
True in a general sense.
However, would you rather have 100,000 Zimbabwe dollars or 100 American dollars?
The devil is in the details as they say.
But that's a guess. I know we've a couple of retail operators here on FR. Can't recall their names, unfortunately, but they'd know for certain.
FReegards!
All good and dandy. You arn’t teaching me anything new, but thanks anyway.
Is there a point to your post? Does you post explain why fuel can go up in price while crude goes down?
Just wondering how long we have to wait to see if you guys know what you’re talking about;)
See the other post of mine further up than that. There are a lot of other expenses in the model than simply the wholesale cost of crude.
Do you expect the retail cost of gas to drop to zero if the price of crude falls to zero?
But you won't wish to be, because you'll have learned how the industry actually works, indeed, how it must work in order to be able to funciton coherently at all times and under all circumstances.
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