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Gas is gettin' crazy high.

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Feraud

Bartender
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17,188
Location
Hardlucksville, NY
I came across this interesting article today while looking for something else. It talks about a few of the different reasons why the price of oil has risen over the last few years.
Topics include:
The oil Cartel
Political instablility
Global demand led to oil shock
Speculation
Counter arguement
Alternative fuels
The road ahead.

It is not a very large article.
Perhaps someone here can correct or expound on the topics mentioned?
I was surprised that the war in Iraq appears to not play a significant part in this equation.

A quote of interest.
The main reason, however, for the oil price hike is surge in global oil consumption. The global consumption of oil went up by 3.4% last year. Most of this increase has come from China. China's oil demand grew by almost 16% last year. Although demand has not grown at the same rate this year, as China progresses and more and more people buy cars, China's demand for oil will go up.

And the fact that China is a net oil importing country, its demand for oil will add to the world demand for oil.

But the consumption of oil in the United States remains the biggest reason for this sustained growth in the global oil demand. The US, which has just 5% of the world population, consumes one quarter of the global produce. The oil efficiency of vehicles in the US has now fallen to a 20-year low. Its energy policy does very little to ensure greater fuel economy in cars or sports utility vehicles.

Further, as developing countries keep improving their standards of living (China's oil consumption per person is around one-fifteenth that of America), and automobiles remain a symbol of aspiration, there is only one way where the oil price is headed: upwards.
 

Michaelson

One Too Many
Messages
1,840
Location
Tennessee
There's already rumblings in our State Capitals down here of price gouging (as proved by Matt's photo!), and they're getting ready to clamp down. I'm only 20 miles or so from the Georgia border, and hear the news for not only Tennessee and Georgia, but Alabama too.

Gas was supposed to go over 3 bucks here this morning, but the station I passed on my way to work still had it a $2.79, so I believe it's a regional 'panic attack', though I heard up the road about 10 miles at the next town a couple of stations HAD run of gas, but were expecting trucks in this morning...so the rush just emptied their tank allotments for the day.

Regards! Michaelson
 

Brad Bowers

I'll Lock Up
Messages
4,187
It was $2.73 a gallon here at the cheap station yesterday. Wonder what it'll be today?

My wife and I were reminiscing yesterday about paying less than a dollar a gallon just six or seven years ago. Talk about inflation!

Brad
 

Big Man

My Mail is Forwarded Here
Messages
3,781
Location
Nebo, NC
The situation in western North Carolina

Yesterday, I left for work and it was just another day of "high" gas prices - no real big deal. By the time I headed home gas had jumped .50 per gallon and there were long lines at every gas station in the area. Some stations were limiting gas to $10 per person (that's only 3 gallons), and some stations had already run out of regular (reminded me of the "gas shortages" of the 1970's). All this was due to a rumor that was started about "three gas trucks that were headed to Charlotte to get supplies were turned around because there was no gas." This, of course was just a rumor, but it started a panic by simple-minded numb-nuts who just can't get with the program (can you tell this gets to me). Unfortunately, these morons add to an already serious problem.

We have the same phenomenon here when there is a weather prediction of snow - everyone will rush to the grocery store and buy four or five gallons of milk and all the bread and toilet paper they can carry. Naturally, supplies run out because people are buying at a greater than normal rate. Yesterday, folks were filling up everything they had, and I saw many, many cars filling up three or four five-gallon gas cans and putting them in their trunk. Of course this also concerns me as a Firefighter because it's just a matter of time before one of these idiots has a wreck and than I will have to deal with some nimrod with a "mini gas tanker" on fire!

Overnight, gas jumped another .30 to .50 per gallon, with the average price (for regular) around here being in the $3.50 range. This morning the Governor of North Carolina issued a statement asking all citizens to refrain from "panic buying" and to take steps to car pool and to seriously consider curtailing travel that is nonessential. The Governor's statement also said that he had "...tried to get direction from DOE [Department of Energy] but they have not yet responded." That is interesting. When the Governor can't get his calls returned, well ...

I have spent the past 26 years working with Fire, Rescue, and Emergency Management, and have seen over the years the people's increasing inability to "cope" with "hard times". I'm not referring to those directly impacted by the storms - God knows they are having a horrific time; but I am amazed at those in my own area (and other locations) who, when faced with comparatively minor problems, just can't cope. Twenty years ago, folks would "suck it up" and go on. Now, the most minor of "emergencies" is met with wringing of hands and gnashing of teeth.

I wish I had the answer. Hell, I wish ANYONE had the answer. Right now my major concern is how I can ensure that my emergency vehicles will have the resources to respond to the "normal" emergencies we have every day. Then the second problem will be how to PAY for the gas when we are able to get it.

I'm interested in hearing what others in other parts of the country are experiencing.
 

Biltmore Bob

Suspended
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1,721
Location
Spring, Texas... Y'all...
I filled up my Toyota SR5 (so glad I got rid of my F150 Super Crew) and my wifes Trailblazer today, both veh.s $65...gas was $2.80 at the cheap station. Also filled up every gas can I had. Filling up on groceries later today 'cause ya know those prices are next. Houstons population is about to grow, glad I live north of the city.
 

Michaelson

One Too Many
Messages
1,840
Location
Tennessee
It's already growing. My youngest daughter and son-in-law just drove through on their way to Dragon-Con (they live in Houston too), and said their once almost empty new apartment complex is now filled to the rafters with folks from New Orleans.

Regards! Michaelson
 

shamus

Suspended
Messages
801
Location
LA, CA
I'm an "organic" natural kid of a hippie and I find it funny that only when gas reaches 3.00 a gallon do people start to think of alternative means of power.

As to the "gas" companies, they're worse than enron.

I was thinking yesterday... if BP is pumping the oil, And BP is turning the oil into gas, and BP is selling the gas... And a barrel of oil cost say 70.00 dollars, does BP sell it to themselves? Or do they pump it for free, turn it into gas for say a dollar a barrel, then sell it for 3.00 per gallon? Making more like 500 dollars per barrel...
 

android

One of the Regulars
Messages
255
Some Petroleum Facts

A barrel of oil is 42 US gallons.

About 40% of a barrel is actually gasoline, but consumption is around 50% so the refineries crack heavier products into gasoline which brings the yield up to about 50%

You can watch the market price of crude, gasoline and other commodities on the New York Mercantile Exchange. www.nymex.com. Unleaded is trading for about $2.06. That's the *best* price available for bulk buyers. Smaller buyers buy on the spot market and their prices will be higher.

I'd still like to find out how the corner station sets prices. Are they pricing based on what's in their underground tanks, or what the truck is going to bring the next time it comes?
 

shamus

Suspended
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801
Location
LA, CA
personally, I think gasoline should be regulated and owned by the government. So it's one price in everystate. I don't care if it's $3.00 a gallon as long as it's ALWAYS $3.00 a gallon. None of this it's up 20 cents today then up 10 cents the next, because some saudi got a splinter on his toe.

crazy thoughts I know, but like a state liquor store, one set price. It will never happen I know, but it's a thought.
 
I think the last two messages here denote the necessity that basic economics be taught in school again. Nothing business does is free. If it pumps oil out of the ground there is a cost to keep the pump working, maintaining the pump and the cost of maintaining a crew to do this type of work. The crews are not cheap because this type of work is dangerous and thus their pay reflects that.
Even if a oil/gas company has a horizontal monopoly as you suggest, there are still costs to produce any product. Cost is incurred at every step of the process adding value to the commodity produced. First they have to find where the oil is located. This costs money and is usually termed exploration. Special equipment is used and this costs money right from the very start. They employ people to operate this equipment. There are people who coordinate the efvforts to find this oil and head up teams of explorers. They then determine where to drill to get to this crude oil. It is not a sure thing every time but it is much better now than it was say fifty years ago.
They then drill for the oil. This involves the specialized crew mentioned earlier and adds more cost. They get pump up the oil and tank it to a refinery. Some say this is a sunk cost because they have to have refineries open and ready for production. So I will not need to mention all the workers and costs involved there. I will mention that there has not been a new refinery built in the US in 25 years though because the cost and processes necessary consume so much time it is incredible. No one wants one near them, the environmental laws, the bureaucracy, the permits, fees and greasing of state, local and federal officials and on and on. There is one in the process of being built but it has taken eight years just to get to the point of even grading the site. Then we wonder why our production capacity is limited.
Now we get to the finished product of gasoline that exits the refinery. It just doesn't run to the gas station by itself. It is trucked or shipped via oil tankers on the sea or highways. There is the distribution cost. Then it is delivered to the wholesalers who then deliver it to the gas stations (there are a few more layers of distribution but let's make it simple here). The gas station then stores it in underground tanks for the end consumer to pump when he needs it. All of this involves cost along the way. The station attendants, truckers and tanker ship crews.
The funny thing is that the price of gas also effects the price of gas. This means that the cost of gas or diesel in larger engine trucks, increases the cost to transport, explore for and refine crude oil. Energy in energy out. There is no free lucnh when it comes to refining oil or developing any product.
The gas stations at the end also incur advertising cost, maintenance and price volatility risk. The maintenance is probably the worst. Every ten or so years, depending where you are, the gas stations are required to replace their underground tanks. The gas supposedly eats away at the tank and could contaminate ground water. To replace the tanks and reclaim the soil is a huge expense. My last contact with this was over ten years ago and it came in at $1,000,000 for a small gas station. Needless to say that station is now a parking lot---with the tanks still in the ground.
The price volatility is a risk to the owner because there is a lag from when the gas is ordered and when it is delivered. This is especially true now. However this point usually works in favor of the owner when gas is going up and against the owner when gas prices go down. The station owner has what we call a replacement cost for goods. What cost him $2.75 last week now costs him $3.00. So he adjusts the price accordingly to be able to replace what he is selling and not cut into his profits on the next order.
I hope that helps a bit but I do not want to write a book on the subject. ;) :p

Regards to all,

J
 

Wild Root

Gone Home
Messages
5,532
Location
Monrovia California.
I remember in 1998 the price of gas at an Arco was .89c a gal! That was so nice! I could fill up my 1990 Toyota (Yeah, I haven't always had a vintage car) for 8 bucks! Talk about nice! When I came home from my Mission in 2003 the price of gas was $1.56 per gal. Well, now it's $2.91 last I saw at Arco! For the CHEAP STUFF! It's not cool when $15. bucks will only get you 5 gallons. It hurts badly! It's almost $40. bucks to fill up my 15 gallon tank.

Root.
 

android

One of the Regulars
Messages
255
jamespowers said:
I think the last two messages here denote the necessity that basic economics be taught in school again. Nothing business does is free.

I'm not sure why anything in my post would denote that.

All of the costs you itemized are reflected in the cost of crude and gasoline on the mercantile exchange except for the transportation which is mostly by pipeline until it has to go to the station.

That's the $66.00 per barrel for the crude. If you do the math, about half a barrel becomes gasoline. That's 21 gallons with a raw cost of around $33 or around $1.57 per gallon.

The difference between $1.57 and the $2.06 commodities market price is what is cost to refine crude to gasoline and profit on that process.

The difference between the market price of $2.06 and the $2.99 at the pump is transportation and profit, but mostly local, state and federal taxes.

Pretty straightforward.

I'm just wondering if stations or wholesalers can buy futures or if they are always paying "today's price."

I disagree that the government should own the oil industry, we don't need it screwing up anything else.
 

shamus

Suspended
Messages
801
Location
LA, CA
And this would of course explain why Exxon alone made a NET profit from April through June of 7.64 BILLION dollars....

Hmm. I guess they're the ones buying up those 20 grand monticristo hats.
 

Michaelson

One Too Many
Messages
1,840
Location
Tennessee
I think the math that folks are mainly upset about is the following...only 8% of the nation's gasoline comes from the Gulf. As of yesterday, 3% of the refineries were back on line, leaving us down 5% in terms of gas available to the U.S. consumer. If my subtraction capabilities aren't to rusty, that means 92% of our fuel supplies come from other sources that WEREN'T affected by Katrina, and when the storm hit, we loss availability to only 8% of the fuel used. Gas prices immediately jumped 40%+ overnight in every part of the country, and it hasn't come down yet.

Why?

These facts figures came from the Nashville 'Tennessean' newspaper, Tuesday the 6th business section, in case you're wondering. They asked the same questions I listed above....their political cartoon showed an insert of the President saying anyone caught gouging the American public regarding this strom would be dealt with, and the main part of the cartoon showed several men marked 'Oil Millionaires' hiding under a desk.

Regards! Michaelson
 

CoffeeDude

One of the Regulars
Messages
207
Location
Bellevue, WA.
What grinds me is that gas companies like BP are recording higher PROFITS this year! It's like several years ago when the price of coffee beans went up a couple of cents a lbs. so Starbucks raised their price of coffee (10 cents a cup) and set a record in profits that year. I don't care what they claim what variables in their production costs are, you can't justify greed.
 
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