Oil Companies Doing Their Job

[lu_hawk]

First you should read about how capitalism and more specifically price-taker markets actually work.

Gasoline futures actually do trade on the NYMEX along with crude oil futures. It is funny because the futures prices are falling into November and fall faster after November. And if you compare crude oil prices to retail gasoline prices you will see a correlation, if oil doubles over a period of two years or something like that then retail gasoline will probably be up a similar amount. But over shorter periods of time the correlation begins to lessen. You can look it up.

We have two logical options here:

A) Everybody in the gasoline food chain(drillers, refiners, distributors, retail stations) are engaged in a massive conspiracy to keep the price of gas low to help Bush in the election. They are doing this at great personal cost to themselves BTW, because according to your theory they could sell gas for much more if they chose to.

OR

B) You are wrong.

[The Armchair]

MSNBC's analysis does a good job of explaining the factors that contribute to this anomoly.

I'll paste part of it:

[ QUOTE ]

First off, U.S. gasoline refiners have been operating at near-record levels -- nearly 94 percent of capacity -- in recent months, so gasoline stockpiles have easily accomodated the demand.


“We had such great prices and great (profit) margins for refiners that they ran as hard as they could in the second quarter and produced a tremendous amount of product -– one of the strongest quarters ever,” said Jacques Rousseau, an oil analyst with Friedman, Billings Ramsey & Co. in Houston.




Higher gasoline prices earlier in the year also damped down demand for gas. Now, with the summer driving season winding down, gasoline dealers have lots of gas to sell, which is helping to forces prices lower. The nationwide average price of a gallon of regular unleaded has fallen from more than $2 per gallon in May to an average of $1.80 to $1.90 per gallon during the past 6 or 7 weeks.



[/ QUOTE ]

That'd mesh with the Department of Energy's Primer on Gas Prices.

You can put your tinfoil hat away whenever you'd like.

[cardcounter0]

Care to make a prediction of the retail price of gas after the election?

Seems using logic and market forces, since demand will be lower and refineries can continue to produce more, the price should be even lower than now, right?

[cardcounter0]

"Everybody in the gasoline food chain(drillers, refiners, distributors, retail stations)"

Recently with the Texaco/Mobil/Exxon/Shell type mergers, and the partnerships with Saudi Partners (ARBURSTO), etc. What exactly is this chain? The major oil compaines are partners or the drillers, they are the refiners, the distribution is to their retail oulets (the old independent mom and pop gas station is rapidly getting run out of business by the corporate franchise). So who is there to be in a conspiracy with?


I didn't see your prediction for the retail pump price of gas after the election.
[img]/images/graemlins/confused.gif[/img]

[lu_hawk]

It wasn't a prediction, it was the actual prices for the futures contracts. But seriously you need to learn how a price-taker market works and how it makes your ideas ridiculous. But you wouldn't care about that.

[cardcounter0]

Flordia State Tax doesn't account for the lower National Average, which is the prices I used.

Yes, I am greatly oversimplifying the price. I am sure it is a much, much more complex quadratic formula with 27 variables to corelate the price of crude with retail pump prices.

However, you are in a high demand period, the price of crude has risen steadily upward for 6 months, and yet gasoline is cheap.

What is your prediction for retail gas mid-November after the election?

[cardcounter0]

I still didn't see a number in your post. Couldn't you use the future market to hone your estimate?

Hint: a prediction of the price would probably contain one of these characters: 0123456789

[ddollevoet]

The price of gas in mid-November will depend largely upon whether or not countries in the Middle East restrict production between then and now.

All thing being equal, the gas prices will be similar to prices today, less a small inflation factor.

Oh, by the way. Gas prices, when adjusted for inflation have been decreasing for the last 80 years.

http://www.cato.org/dailys/05-13-04.html

[The Armchair]

The article I linked to -- which you apparently didn't bother to read -- suggests that prices are about to go up, and probably significantly.

[lu_hawk]

I will post the futures prices going out 6 months but the NYMEX market must be part of the conspiracy as well so these probably don't mean anything.

Wholesale futures $/gal: (please note before you say the numbers are doctored, wholesale always is MUCH lower than retail.)


SEP 04 = $1.3090
OCT 04 = $1.2970
NOV 04 = $1.2760
DEC 04 = $1.2400
JAN 05 = $1.2460
FEB 05 = $1.2425

I got the numbers from the Bloomberg, but they are also possibly a co-conspirator so I don't know how much you can trust this data.