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Discussion Starter #1
Why are gas prices rising when: the media reports demand for ALL products (oil based) are DOWN, Oil and gas inventories are high, yet in the past 60 days gasoline has gone up over 25 cents a gallon (US)  about 20%  While at the same time Oil has moved very little,
 possibly down as much as 5% ??  
 Any one know why?  Where are the billions of dollars going? Oil Companies?  Whole sale prices (NYSE) bottomed at about $.99 a gallon and is about $1.27 now.  This kind of energy cost increases will make any economic recovery almost impossible....
Do NOT turn this into a political debate !! 
 

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Because they can, that's why. If you want to see a real scandal, look at the price of diesel compared to their refining costs etc. They will make more in this economic downturn by gouging then they did when the crude cost was higher.

Keith
 

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Posted By Cougar Rock Rail on 02/11/2009 8:17 AM
Because they can, that's why. If you want to see a real scandal, look at the price of diesel compared to their refining costs etc. They will make more in this economic downturn by gouging then they did when the crude cost was higher.

Keith




Amen!

cale, owner of 2002 F250 7.3L Diesel Monster
 

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Because the Oil company profits are dropping ....and they dont like it

The whole deal of gas prices lately makes me gasp at the audacity of the Oil companies.
Here is a little outline for consideration -


say Oil required to make a gallon of gas cost them $1and they charged $1.50 a gallon for gas
Profit = $0.50

If they sell 100 gallons they make $5.00

Now oil prices jump
It now costs them $2 for the oil to make a gallon so not unreasonably the cost of gas goes up to $2.50
Profit = $0.50

if they sell 100 gallons they still make $5.00

So how come the Oil make Record Profits when oil prices go up ?

Some will say it is because they benefit from the high oil prices from their wells

True to an extent however it is a stated fact that companies like Exxon make more from their refined products than from selling oil
and it is reported that to offset the drop in oil profits they are looking to themake higher profits on their refined ones like gas

so when oil prices drop you dont see the same drop in gas prices, in fact you are now seeing the opposite hence this forum.






Eddie
 

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I thought this wasn't suppose to be a political discussion, but who really cares what the answer is when populism is so much fun!

Jeff - The probable actual answer is complex. You would need to look at the crack spread, total DOE inventory and gas inventory to find the answer. As the saying goes, "that answer is beyond the scope of this post"

But there is one other thing most people do not know: In our blessed home state, it is illegal to sell gas for less than the current spot price. Sounds innoculous, but it is not. The effect of this is that gas prices do not go down as fast as you would like, and immediately rise to match the current price. Your local gas station pays 30000 or so for a tanker of gas. They don't buy gas every day. So when they do buy gas, it is always at a weighted average price that is higher than what you see in the commodity market. (and remember, what you are looking at is the price of 42000 gallons of gas, without delivery costs added)

These rules would only make sense if you collected taxes based on a percentage of the price, and wanted to collect as much as possible.

Draw you own conclusion.
 

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the real reason .. because this is the 2nd Wednrsday of the month ... which makes as much sense as any other reason
 

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I would like to make a few comments to your recent post.

Currently oil is selling for around $40/barrel (although there are many different grades of crude oil, some higher priced than others) or approximately 95 cents per gallon. But this is a sale price at the wellhead. Once a barrel of oil is produced is must be transported to a refinery, refined into products, shipped to distribution terminals, and sent to a filling station. All of these steps add to the cost of the fuel and eat into your hypothetical profits of 50 cents per gallon. The usual profit margin for oil companies is approximately 8%, that is for each $1 in sales they benefit with 8 cents profit. Companies such as Microsoft and many pharmaceuticals have profit margins in the 20-30% range.

There has been much said in the press and TV media about large oil company profits. While the dollar amount of profits are larger so are the total dollar amounts of sales. In other words the oil costs more to purchase and the prices charged are higher and so are the profits but the profit margin is still the same 8%. This year the dollar amounts of profits for large oil companies will be less, princiaply due to the price of oil being much lower and the prices of producs also being down. But the profit margin will still be around 8%.
 

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Pete - I must correct you. No doubt people will complain you are a big oil shrill - because you live in TX - and so I feel compelled to correct you.

If your software company had net margins of 25 percent you would be fired. Hardware tends to run 55-65%. Software in excess of 70% margins. Next time get your story straight.

I will bet that do to E&P spending major oil companies will show a negative cash flow this year. But that is another story, not worthy of note when we need to find someone to blame.
 

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Well i do not see the new pres doing anything about it either. Here sure did complain before he became pres. Later RJD
 

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Discussion Starter #15
So the short answer in inventory, but all I hear from the media when they "investigate" is inventories are UP... So with all the information I can find gasoline prices should have held steady at the lower prices they reached in January.
John, yes I know the prices do not include delivery, custom additive packages or taxes, but I was just looking at the change in price... I did NOT know that the state had their fingers in the pricing !!
Jeff
 

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The simple answer is we can't tell why they're going up...that's because in the case of gasoline...supply has a lot of meanings...oil availability out of the ground, tanker/pipeline availability, storage availability, refining capacity, and lastly, refined product delivery capacity. It's NOT just about the cost of oil futures on the NYMEX...and it's oil FUTURES that get all the price talk...not spot prices.

Right now, the US has a oil supply problem in the context of oil storage capacity. Believe it or not...the tanks that crude are supplied in are full...especially the HUGE ones in Oklahoma that connect to all the national pipelines. There's no room at the inn...for the newer "cheap" oil. The rest of the bad news is that they are full of oil that was bought months ago and can't be sold now because oil prices have fallen...well, can't be sold without taking a loss.

So....the refiner's solution is simple...raise the cost of the end product (gasoline) so that the refiners who bought the expensive oil a few months ago aren't losing money as fast. There's also a strong likelihood that several months back, due to the recession and people buying less fuel, that the prices for fuel were reduced too fast or too far...and that there's a need to re-earn that loss by raising prices.

Personally...I think it's that later reason...the refiners are trying to recoup the losses the suffered in January so that by the end of the quarter their profit/loss looks better. I think they went too low when gas got to $1.75 a gallon.
 

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Posted By Pete Chimney on 02/11/2009 11:20 AM
I would like to make a few comments to your recent post.

Currently oil is selling for around $40/barrel (although there are many different grades of crude oil, some higher priced than others) or approximately 95 cents per gallon. But this is a sale price at the wellhead. Once a barrel of oil is produced is must be transported to a refinery, refined into products, shipped to distribution terminals, and sent to a filling station. All of these steps add to the cost of the fuel and eat into your hypothetical profits of 50 cents per gallon. The usual profit margin for oil companies is approximately 8%, that is for each $1 in sales they benefit with 8 cents profit. Companies such as Microsoft and many pharmaceuticals have profit margins in the 20-30% range.

There has been much said in the press and TV media about large oil company profits. While the dollar amount of profits are larger so are the total dollar amounts of sales. In other words the oil costs more to purchase and the prices charged are higher and so are the profits but the profit margin is still the same 8%. This year the dollar amounts of profits for large oil companies will be less, princiaply due to the price of oil being much lower and the prices of producs also being down. But the profit margin will still be around 8%.



Wow, someone else that paid attention in a college level petrochemicals history class. Mine was many years ago, but the same held true for the little to big boys back in the early days. Much of this was shown in the movie "There will be blood" when Plainview started his pipeline to increase his margin and get away from the tank car monopoly.

Also remember the Saudi's claim that their "break even" price on a barrel of oil production is $55 or so, so the OPEC cuts are going to be part of it.

Still, the US has some of the cheapest gas. Friends in Holland are paying more than $10 a gallon, but then, the Netherlands are the home of Shell.......but they have a much higher tax level.
 
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