Oil prices drop, gas prices rises?????

[DocGlock86]

Oil falls below $99 on low Ike damage: Financial News - Yahoo! Finance


Now maybe i'm reading this wrong. But the way I see it prices dropped so why am I paying 4.14 a gallon?

 

[baldmax]

Hurricane Ike hit 20% of our refining capability. Thew speculators went nuts.

 

[BloodEclipse]

Hurricane Ike hit 20% of our refining capability. Thew speculators went nuts.

Correct. Most of our refining capabilities lie in the south. They had been shut down as a precaution and it may take awhile to bring them back online. So while oil dropped, supply of gas will be impacted causing prices to go up. This should however be temporary.

 

[shooter521]

So while oil dropped, supply of gas will be impacted causing prices to go up. This should however be temporary.

And we got off easy; damage to the facilities down south was evidently pretty minor, and Indiana doesn't get the majority of its gasoline from those refineries. Prices in KY, TN and even parts of IL, which are much more reliant on the southern supply chains for their fuel, spiked to over $5.00 a gallon before and just after the storm.

 

[munky_3434]

i was in panama city saturday...supply was limited, but still only 3.95 a gal. i got home about 11:45 saturday evening and it was 4.15 a gallon here. how is it cheaper where supply is directly affected? my dad was driving through missouri sunday and it was only 3.55 a gallon there.

this speculation crap is ridiculous

 

[Virtus]

i was in panama city saturday...supply was limited, but still only 3.95 a gal. i got home about 11:45 saturday evening and it was 4.15 a gallon here. how is it cheaper where supply is directly affected? my dad was driving through missouri sunday and it was only 3.55 a gallon there.

this speculation crap is ridiculous

Futures trading is risky business, I am sure some oil speculators lost some big money over the last 2 months. As for why the gas price is higher in one state vs. the other, you can thank the EPA for that. Formulas for gas are different from region to region. So the refineries that are offline (mainly the south) only produce the formula for that region so their supply is lower than the Midwest. More reason to build more refineries and to get rid of the stupid formulas.

 

[turnandshoot4]

All I can say is the Ike hit the 13th and gas went up THE NEXT DAY. I don't care about futures and trading. We get gas the next day from the refinery? BS. It should take at least a couple of days. The companies cashed in on the weekend. Period.

 

[ar15junkie]

We have refinery city up here in Whiting and gas is still over 4 dollars a gallon. Its all a scam, gas rises .50 over night then takes 2 weeks to go back down.

 

[turnandshoot4]

Yep. I call it the stairway method. Go up $.15 and drop $.05. Slowly they creep the prices up.

 

[turnandshoot4]

Gas is still up for some reason...............

 

[Scutter01]

Gas is still up for some reason...............

Because if it goes down, they don't make as much money. Obviously.

 

[shamowfski]

The race is one of the reasons gas was/is high.

 

[DocGlock86]

Yep. I call it the stairway method. Go up $.15 and drop $.05. Slowly they creep the prices up.

AMEN!!!. I cracked up a while back when I heard the news saying we were getting a relief on the gas prices. It was 4.00 and it dropped to 3.80. My rear. A relief to me would be back to the 2.00 range.

 

[Fletch]

All I can say is the Ike hit the 13th and gas went up THE NEXT DAY. I don't care about futures and trading. We get gas the next day from the refinery? BS. It should take at least a couple of days. The companies cashed in on the weekend. Period.

Gas stations sell based on the expected replacement cost of gasoline, not the cost of the gas in the storage tanks. It doesn't matter if they bought the first 10,000 gallons for $1/gallon; if their suppliers are now charging them $3.50/gallon to replace it, that's what they'll base their prices on.

See here:

The concept most people, seem to have most difficulty with is the replacement cost argument – the refinery or gas station bases it prices on what it expects to pay for its next delivery and not to recoup the cost of the last one. People understand that nobody will sell them 1000 shares of Google for 10% above last January’s price, or a Pacific Heights apartment for 20% above its 2000 price, and consider that this is perfectly reasonable.

Yet the same people expect a gas station owner, who paid $2.50 a gallon for the gas now selling at the pumps, to be morally bound (and in some states legally bound) to sell it for a “fair price?, $2.58 a gallon, even though the cost of the next shipment from the refinery will be $2.75 a gallon.

If my next 10,000 gallons is going to cost me more than I can earn from selling you my current 10,000 gallons, it makes no sense whatsoever for me to sell it to you unless I plan to go out of business as soon as the tanks run dry.

ETA: I suppose I could depend on getting a loan for the difference, but then I'll be forced to add the cost of paying interest on the loan to the prices I charge for gas, thus driving all my customers to my competitors.

 

[indyjoe]

The local gas station isn't where the fleecing is occuring. If you want to know where, try to find what industries have multi-billion dollar profits over the last few years. (Not real hard.)

 

[Fletch]

The local gas station isn't where the fleecing is occuring. If you want to know where, try to find what industries have multi-billion dollar profits over the last few years. (Not real hard.)

"Multi-billion dollar profits" is one of those catchphrases that sounds obscene until you actually dig into it. The capital required to operate one of these businesses is insane. The cost of drilling and exploration alone is beyond the reach of any but the most well-financed organizations. And when it comes to "excess" profits, these are what is needed for a business to grow and expand its operations. When the time comes (and it will) to drill in ANWR or off the coast, the businesses that have been proven most capable by the market and their profits are the ones that are going to do it.

There is also the economic fact that profits are what it takes to attract capital. If a business sector is not profitable, over and above the rate of interest, it will be liquidated. If it is profitable above the rate of interest, those profits attract investors to the market sector and thus production is increased, eventually resulting in a fall of real prices, if not money prices. Since capital is inherently finite, these businesses are not just competing with each other, but with all other market sectors, for new investment -- no investor worth his salt would put money into oil if something else was paying better dividends.

 

[epsylum]

The local gas station isn't where the fleecing is occuring. If you want to know where, try to find what industries have multi-billion dollar profits over the last few years. (Not real hard.)

You mean like the government? (the government makes twice as much off of a gallon of gas as the oil companies do).

Not to mention that those multi-billion dollar profits go to the stock holders (hint: there is no Mr. Exxon-Mobil). Who are these evil stockholders fleecing us poor downtrodden folks? Why it is ..... US! Most of the stock in "big oil" is held by little guys with 401ks and such. I know at least part of my 401k is in oil and natural resources.

 

[epsylum]

Here is Exxon-Mobil's financial data.

Here look at "profit margin". Hmmm 10.17% That is the same amount Bob marks up his new guns, but he is always considered such a great guy with great prices and he isn't selling the lifeblood of our economy.

XOM: Key Statistics for EXXON MOBIL CP - Yahoo! Finance

Here's their income statement.

XOM: Income Statement for EXXON MOBIL CP - Yahoo! Finance

and cash flow

XOM: Cash Flow for EXXON MOBIL CP - Yahoo! Finance

Notice that not all of that is a money going in. There are billions upon billions going out as well.

Let's compare that to Apple has a 15% profit margin

AAPL: Key Statistics for APPLE INC - Yahoo! Finance

and Chase bank that has a 19% profit margin

JPM: Key Statistics for JP MORGAN CHASE CO - Yahoo! Finance

 

[turnandshoot4]

I have read this argument time and time again. If it is you (not me, I don't have any stock with them) then could you please stop your company from running this country in the ground? If I can't talk to Mr. Exxon then I should talk to you. Thanks for FINALLY doing something to help your country here.

 

[Fletch]

I hardly see how taking enormous financial risks to provide essential goods and services qualifies as "running this country into the ground".