Gas Prices Part Deux

#53
#53
champyvol said:
i don't know but we ohioan's are paying $2.85 a gallon and nobody can seem to find a job anywhere. i know most people that live in this crappy state feel like they were lied to.
Click to expand...

Anyone who didn't see the writing on the wall years ago is an idiot.
 
#54
#54
droski said:
yes. the oil price doubled from $70 to $140 but the gas price only went up 50%.



the economy is a far cry from where it was last year too. welcome to economics 101.
Click to expand...

Go look at that data I posted. I think you are mixing and matching here.

If you look at the monthly average, oil never reached above $125 per bbl. and gas never reached above $3.99/gal. (national averages). However there were days where oil hit $140 bbl and gas shot up to $5. So you are not entirely accurate.

It is beside the point anyway, there is still a clear descrepency between oil prices and gas prices right now. As a function of oil price, gas is as expensive as it has been in a long time.
 
Last edited:
#56
#56
rjd970 said:
Go look at that data I posted. I think you are mixing and matching here.

If you look at the monthly average, oil never reached above $125 per bbl. and gas never reached above $3.99/gal. (national averages). However there were days where oil hit $140 bbl and gas shot up to $5. So you are not entirely accurate.

It is beside the point anyway, there is still a clear descrepency between oil prices and gas prices right now.
Click to expand...

I think if you look at the $5 gas I believe it was linked directly to pipeline disruptions.

The bottomline is that the price of oil is a major component of gas prices but changes in other cost aspects were/are also at play. The refining business in particular is highly volatile from a profit standpoint.
 
#57
#57
rjd970 said:
Go look at that data I posted. I think you are mixing and matching here.

If you look at the monthly average, oil never reached above $125 per bbl. and gas never reached above $3.99/gal. (national averages). However there were days where oil hit $140 bbl and gas shot up to $5. So you are not entirely accurate.

It is beside the point anyway, there is still a clear descrepency between oil prices and gas prices right now. As a function of oil price, gas is as expensive as it has been in a long time.
Click to expand...

:clap:
 
#58
#58
volinbham said:
I think if you look at the $5 gas I believe it was linked directly to pipeline disruptions.

The bottomline is that the price of oil is a major component of gas prices but changes in other cost aspects were/are also at play. The refining business in particular is highly volatile from a profit standpoint.
Click to expand...

Possibly, I'm not familiar with it, but it would make sense. This would inevitably affect the bottom line of refiners, and since they can't get there product to the consumers, it would be difficult for them to pass that cost on. Not because they didn't want to, but because they couldn't. I'm sure they didn't voluntarily take that loss.

Plotted out, and using the beginning of the decade as a starting point, the price of a gallon of gas has steadily increased at a higher rate than that of oil. The actual cost of conducting the refining process (independent of the price paid for oil) can't be that much or have a steady and hefty increase every year.

That aside, I understand that the refining aspect probably contributes to the volatility of gas prices. But the economic laws governing price just don't seem to make sense with gas right now...or oil for that matter. Speculators probably have a lot to do with it, but it is just irritating because we are held hostage to it and have to pay the market price, whether it is real or artificially inflated.

And to be fair, I understand that oil (and as a consequence gas) has probably been artificially low for the last 6 months. I just wish instead of these peaks and valleys, the price would stay where reality dictates.
 
#59
#59
do you have a way to factor in changes in gasoline taxes as well? It's possible that taxes have steadily increased accounting for a substantial portion of the discrepancy between oil price percentage change and gas percentage change.

Also, regulatory change hits refining costs moreso than oil production costs. A few years back the changes in regulations concerning MTBE directly impacted refining costs. I don't know the regulatory history over the last decade but it's unlikely that regulations have softened over that time period.


I certainly agree that speculators impact the price beyond strict supply and demand but that does not = manipulation or failure of market mechanisms. It is rational investing based on market conditions and trading rules.

I'm not sure what economic laws governing price are being violated right now.
 
#60
#60
volinbham said:
do you have a way to factor in changes in gasoline taxes as well? It's possible that taxes have steadily increased accounting for a substantial portion of the discrepancy between oil price percentage change and gas percentage change.

Also, regulatory change hits refining costs moreso than oil production costs. A few years back the changes in regulations concerning MTBE directly impacted refining costs. I don't know the regulatory history over the last decade but it's unlikely that regulations have softened over that time period.


I certainly agree that speculators impact the price beyond strict supply and demand but that does not = manipulation or failure of market mechanisms. It is rational investing based on market conditions and trading rules.

I'm not sure what economic laws governing price are being violated right now.
Click to expand...

The bolded part is a good point, but I can't imagine taxes...at least at the federal level...changed that much with a republicans controlling both houses and and the executive branch for much of that time. The state tax may have changed, and accounted for some of it.

As far as the regulations, again, federally, I wouldn't imagine they would have changed much over the last 9 years.

Supply and demand is definitely out the window right now, which would leave speculators and investors. A bubble isn't rational, and by definition market rules aren't in play and they inevitably pop. Hence the run-up we had last summer and the current run-up we are seeing now. All you get are artificially high and low prices. I guess I disagree with you that this is all rational investing.

Supply and demand is definitely being violated right now.
 
#61
#61
rjd970 said:
The bolded part is a good point, but I can't imagine taxes...at least at the federal level...changed that much with a republicans controlling both houses and and the executive branch for much of that time. The state tax may have changed, and accounted for some of it.

As far as the regulations, again, federally, I wouldn't imagine they would have changed much over the last 9 years.

Supply and demand is definitely out the window right now, which would leave speculators and investors. A bubble isn't rational, and by definition market rules aren't in play and they inevitably pop. Hence the run-up we had last summer and the current run-up we are seeing now. All you get are artificially high and low prices. I guess I disagree with you that this is all rational investing.

Supply and demand is definitely being violated right now.
Click to expand...

the price went up too high on the high end because of the speculators and went down too low on the low end because of the speculators. i'd argue we are currently at a reasonable price.
 
#62
#62
rjd970 said:
The bolded part is a good point, but I can't imagine taxes...at least at the federal level...changed that much with a republicans controlling both houses and and the executive branch for much of that time. The state tax may have changed, and accounted for some of it.

As far as the regulations, again, federally, I wouldn't imagine they would have changed much over the last 9 years.

The MTBE phase out was a big factor in gas prices when it occurred

Actually state/regional regulatory change can be a major player - the requirement for different regional blends; summer/winter blends directly impacts refining costs. I don't know if this changed much during the time period but it doesn't have to be federal to have a substantial impact.

Supply and demand is definitely out the window right now, which would leave speculators and investors. A bubble isn't rational, and by definition market rules aren't in play and they inevitably pop. Hence the run-up we had last summer and the current run-up we are seeing now. I guess I disagree with you that this is all rational investing.

Don't forget that investing is individual decision making aggregated. It is certainly rational decision making if I believe oil prices will rise in the future so I lock in now. If enough folks share the believe, it becomes a market reality. We see annual speculation on gas prices surrounding hurricane season. There is an expectation of supply interuptions based on hurricane forecasts - it impacts future prices whether or not there is a supply interuption. All this is rational investing decisions. The problem may lie in the ease with which speculators can enter the market and control large amounts of volume on relatively small investments. Again, this is not irrational from a market perspective. The system may allow too much emphasis on speculation but the speculation is still ultimately based on underlying economics.





Supply and demand is definitely being violated right now.
Click to expand...

Gauging supply/demand as a simple look at how much oil was consumed vs how much was produced is too narrow a view of economic rationality.

Futures speculation is basically a guess on the above with uncertainty on both ends. Rising oil prices due to speculation is essentially a group of rational investors gambling on what they think will happen - what makes it rational is they are trying accurately price uncertainty.
 
#63
#63
droski said:
the price went up too high on the high end because of the speculators and went down too low on the low end because of the speculators. i'd argue we are currently at a reasonable price.
Click to expand...

I would agree, but gas prices are not reflecting the current reasonable oil price.
 
Last edited:
#64
#64
volinbham said:
Gauging supply/demand as a simple look at how much oil was consumed vs how much was produced is too narrow a view of economic rationality.

Futures speculation is basically a guess on the above with uncertainty on both ends. Rising oil prices due to speculation is essentially a group of rational investors gambling on what they think will happen - what makes it rational is they are trying accurately price uncertainty.
Click to expand...

Are you in favor of more regulation on commodities speculation?
 
#66
#66
rjd970 said:
Are you in favor of more regulation on commodities speculation?
Click to expand...

Yes. There definitely needs to be a hedging mechanism but now it is too easy for people with no interest other than pure speculation to impact prices.
 
#67
#67
volinbham said:
Do you mean aren't?

Where do you think the disconnect with market forces lies then?
Click to expand...

Yes, I went back and changed it.

I don't know. It could be taxes, or regulation as you suggested. I'm not sure I buy the refining volatility explanation though.
 
#68
#68
By refining volatility I mean volatility of margins. High gas prices doesn't necessarily equal high margins. Are they making profits now? Don't know but historically it's an up and down business. Perhaps they are jacking margins now to make up for losses last year?

However, unless there is price fixing somewhere in the pipeline (forgive the pun) then we have market forces setting price. Generally if there is excess margin and the ability to take market share, some competitor will move down the price chain to make a temporary grab of market share.
 
#69
#69
rjd970 said:
I just wish instead of these peaks and valleys, the price would stay where reality dictates.
Click to expand...

when did the reality of price become anything other than what someone will pay?

volinbham said:
Yes. There definitely needs to be a hedging mechanism but now it is too easy for people with no interest other than pure speculation to impact prices.
Click to expand...

and how do you do that with globally traded commodities? It's become impossible in the current world. The US makes a move like that and everyone moves to another market
 
#70
#70
utvolpj said:
when did the reality of price become anything other than what someone will pay?
Click to expand...

Look at prices last summer and tell me they were realistic. For the majority of us, the price of gold doesn't affect us everyday, but the price of gas does. I buy it, or I don't get to work, period. Alternatives, such as public transportation isn't a reality where most suburbians and commuters live. If gas jumped to $10 a gallon, we would have to pay it, there is no other option.
 
#71
#71
rjd970 said:
Yes, I went back and changed it.

I don't know. It could be taxes, or regulation as you suggested. I'm not sure I buy the refining volatility explanation though.
Click to expand...

what do you mean you don't buy it? if the refiners could control the margins 90% of them wouldn't have almost gone under a year ago.
 
#72
#72
utvolpj said:
when did the reality of price become anything other than what someone will pay?

Something that many people don't understand. Nothing has intrinsic value - it's all basically determined by what someone will pay for it.



and how do you do that with globally traded commodities? It's become impossible in the current world. The US makes a move like that and everyone moves to another market
Click to expand...

Never said I had an answer for how to do it :)
 
#74
#74
droski said:
what do you mean you don't buy it? if the refiners could control the margins 90% of them wouldn't have almost gone under a year ago.
Click to expand...

I'm not talking about margins necessarily. I am talking about the other forces. Every season there is an excuse for prices going up. In the summer time it is driving season, the fall is hurricane season, the winter is heating oil, the spring is repairs. Then we have pipeline and inftrastructure problems sprinkled throughout. Most of the time the factual basis for most of it is overblown and exaggerated. For instance, demand is actually down from this time last year, yet gas (as a function of oil price) is up. Why? All we hear is it is driving season, so prices rise. I think these refiners can control margins somewhat, but not to the point where they can shoot themselves in the foot. As VBH suggested, maybe they are making margins higher now to make up for last summer, but don't peddle this summer season crap when the data simply doesn't back it up.

This refining explanation just doesn't float most of the time...taxes, regulations, and speculators drive it much more IMO.
 
#75
#75
rjd970 said:
I'm not talking about margins necessarily. I am talking about the other forces. Every season there is an excuse for prices going up. In the summer time it is driving season, the fall is hurricane season, the winter is heating oil, the spring is repairs. Then we have pipeline and inftrastructure problems sprinkled throughout. Most of the time the factual basis for most of it is overblown and exaggerated. For instance, demand is actually down from this time last year, yet gas (as a function of oil price) is up. Why? All we hear is it is driving season, so prices rise. I think these refiners can control margins somewhat, but not to the point where they can shoot themselves in the foot. As VBH suggested, maybe they are making margins higher now to make up for last summer, but don't peddle this summer season crap when the data simply doesn't back it up.

This refining explanation just doesn't float most of the time...taxes, regulations, and speculators drive it much more IMO.
Click to expand...

as i've said before if they could make margins higher they surely would have done it last year when they were going under. there are a lot of forces at work here. one is the belief that future oil production might be low with obama not allowing any domestic drilling. i really don't think there is some vast conspiracy. oil demand and supply are hard to predict and because of that when one or the other has problems it creates massive fluctuations which gets magnified by the speculators. edit: also the dollar dropping has been a huge factor here.
 
Last edited:
New posts
You must log in or register to reply here.

VN Store



Back
Top