How does gas pricing work?

[CyCloned]

I am very confussed by the fact that as the price of crude oil continues to fall, the price at the pump stays the same, or if you live in Cedar Rapids, goes up.

Now when the price of crude was climbing, I didn't like it, but at least it made sense that the price at the pump would rise. Hard for me to understand what is going on now.

 

[IcSyU]

OPEC is trying as hard as they can to drive it up by cutting supply.

 

[isu200023]

OPEC is trying as hard as they can to drive it up by cutting supply.

This is correct. On top of that, get ready for a gas tax increase. Hope and change my friend.

 

[cmoneyr]

I think the same people that are in charge of the BCS system set the gas prices, nobody will ever understand it.

 

[Wesley]

It works by local competition and the transport costs. Oklahoma, Missouri and Texas gas are somewhat cheap due to fewer transport costs through pipelines. It works through state taxes (Iowa is cheap) and through federal taxes which soon will go up a notch. It works though oil rigs in Gulf not being shut down by hurricanes. It works thtrough having enough refinery capacity in Texas to supply the pipeline. During the summer, work is done on many refineries and capacity is diminished so gas goes up. It depends somewhat on need for heating oil and diesel fuel and the number of various grades of gas that EPA requires to be formulated. It depends on customers supporting station no matter what the price. It depends on the amount of demand which is now down 5%. It works by getting the new higher prices by fax from the home office. Right now it appears to drop slower than it spikes. I believe the gas companies like Exxon are not making very much at $50 per barrel compared to last year and they are hesitant to drop the prices very fast since Exxon imports 80% of their product from overseas. Suposedly the oil companies only try to get their small profit margin, but they must also have to pay for all those oil tankers waddling/waiting in the ocean trying to find a port to drop their oil off onto in the past month.

It is capitalism and big business at its finest.

 

[AIT]

It's all about supply and demand. The oil companies control the supply, so they get to demand higher prices.

 

[ISUonthemove]

SPECULATORS

 

[brianhos]

It's all about supply and demand. The Evil countries control the supply, so they get to demand higher prices.

Fixed that for ya.

 

[iowacubjim]

Based on supply and demand, the reason you see the prices increase at the pump even though the gas in there tanks were the old price is they want to get more money from there less expensive gas to pay for the increase that is coming in the near future as crude increases. Although is seams unfair to the consumer from a strictly business stand point it is very sound. Just realize that if gas prices were to have gone up over the years to keep up with inflation we would be paying over ten dollars a gallon by now.

 

[ISUAlum2002]

It's all about supply and demand. The oil companies control the supply, so they get to demand higher prices.

This.

All the nonsense about supply and demand is just that, nonsense. Some economic principals just don't apply to the oil industry, supply and demand being one of them. Artificial shortages drive the price up.

 

[Cyclonepride]

This.

All the nonsense about supply and demand is just that, nonsense. Some economic principals just don't apply to the oil industry, supply and demand being one of them. Artificial shortages drive the price up.

Yes, they can defy the laws of space and time as well:no:

 

[Wesley]

Hedge funds had bought and drove up the oil futures for the three months to the high level of $140. When the stock market collapsed, the hedge funds and other speculators had to dump their futures contracts. Then it became like a runaway barge down the mississsippi as prices went under $100. When Trump said all the oil tankers were looking for ports to dnmp off their cargo, the oprce went down further. Sauid wants $80 oil to balance their budget. Looking for $80-100 oil next summer.

Drive Now. Visit your warm weather relatives now.

 

[AIT]

Fixed that for ya.

Yeah, I hate Canada too.

 

[Bubbahotep]

This.

All the nonsense about supply and demand is just that, nonsense. Some economic principals just don't apply to the oil industry, supply and demand being one of them. Artificial shortages drive the price up.

Artificial shortages are a joke. Basically before the spring and summer driving seasons, oil companys perform maintenance on the refineries that last about a month. They pretty much take them apart and put them back together to make sure they are working correctly. I can't get a straight answer from my bro-in-law as to why they don't perform TPM maintenace throughout the year instead of this, but this causes a drop in production that you see at the pump. These procedures are why they get the large subsidies from the government, although the subsidies are supposed to prevent them from having to raise prices because of a production decrease. It's a vicious circle that will continue until gasoline isn't the #1 energy need.

 

[Aclone]

Here's how it works: If there is an article in the media that crude oil/gas/natural gas prices are going to go up some day, gas prices will go up the next day.

Is that clear enough? :yes:

I was shocked one day in early December when gas prices jumped twenty-odd cents just because Obama said he might shut down certain drilling operations.

 

[jbhtexas]

It's a vicious circle that will continue until gasoline isn't the #1 energy need.

Or to maybe generalize this a little bit, until there are viable alternatives to petroleum products for motor fuels.

The problem is one of lack of competition...not particulalry lack of competition in the oil industy itself, but the fact that there is no viable competition to petroleum as a motor fuel.

Somebody needs to get busy on that engine that "burns" sea water...

 

[CyCloned]

So it looks like crude oil prices drive the price of gas at the pump unless the crude oil price drops. Then the price is driven by refinery repairs, national media scares and gas production facilities that may or may not be actully supplying fuel to my area, and demand (which is suppose to be down, even in the US).

I am happy with paying under $2 a gallon for gas, but what was gas selling for the last time crude was $40 a barrel?

 

[jdoggivjc]

This.

All the nonsense about supply and demand is just that, nonsense. Some economic principals just don't apply to the oil industry, supply and demand being one of them. Artificial shortages drive the price up.

Sure simple supply and demand applies to the oil industry. The demand of oil is almost perfectly inelastic, which means the demand curve is vertical on the graph. What that means is the oil supplier can set the quantity of oil at a specific point, and then charge whatever they want for the product and the consumer will pay for it.

Sounds to me like someone didn't pay attention in Econ 101 to me...

 

[jbhtexas]

Sure simple supply and demand applies to the oil industry. The demand of oil is almost perfectly inelastic, which means the demand curve is vertical on the graph. What that means is the oil supplier can set the quantity of oil at a specific point, and then charge whatever they want for the product and the consumer will pay for it.

There's another step in there between oil supplier and consumer...what mix of products the refiner decides to make out of the inelastic supply oil with his limited refining capacity, and how much of those products he decides to make.

For decades, up until three years ago, diesel was generally less expensive than gasoline. Now, diesel is significantly more expensive, even though diesel is easier to manufactur than gasoline. The refiners determine the mix of products to make from the crude oil to best meet their profit goals while maintaining some calm among the consumers and politicians.

 

[Racer68]

As far as diesel goes, that has everything to do with our lawmakers in D.C. They required that diesel be ultra low sulfur a couple of years ago...and the only way to refine ultra low sulfur diesel is to refine it from light sweet crude...the same crude used to make gasoline. Until a few years ago, diesel was refined from any other basic crude that was pulled up and not light sweet crude...so that's also a big reason as to why gas prices are still slightly high as well as diesel being raised through the roof. Plus, taxes on diesel have gone up significantly in the last 2-3 years.

Gotta love our senators and congressmen!!!