National Average Price of Gasoline Hits an All-Time High

[85SugarVol]

$400! Do they not care?

I can see the headline now -

“Democrats propose $50B in new spending to combat rising gasoline prices at the pump.”

 

[85SugarVol]

The Democrats have found their talking point heading into the midterms.

But all they have done is name it - “Putin Price Hike”

They now need something to sell as the solution. Like the “Rodger’s Rate” except for Biden.

 

[OHvol40]

Will make many on here sad, I'm sure.

When do you think we’ll see this reflected at the pump? The hike at the pump was pretty quick. Hmmmm

 

[DC_Vol]

When do you think we’ll see this reflected at the pump? The hike at the pump was pretty quick. Hmmmm

Weeks

 

[Vol8188]

The 'blame Biden' talking point has taken on a life of its own. It's repeated so often it's become truth without having to concern oneself with the complexity of the free market sale of oil or what effects the global price of brent, wti or crude.

~9000 untapped oil leases and yet it's Bidens fault they can't drill.

The reality is that it costs money to drill and build refineries and these oil companies would rather send dividends to investors and buy back stock. Buuuuut Biden.

Interesting. It does cost money to drill and build refineries. But isn’t that ultimately how they get paid?

So what’s changed today that makes them less likely to do those things?

Could it be left wing attacks on their financing and Biden openly claiming he intends on putting them out of business? When the president is saying he would end your industry if he had enough votes, does that make you want to invest?

 

[OHvol40]

Weeks

Wonder why

 

[lawgator1]

When do you think we’ll see this reflected at the pump? The hike at the pump was pretty quick. Hmmmm

Wonder why

I think we have all noticed that on news that the price per barrel is going to go up that prices rise overnight in seeming anticipation of it, whereas when the price of oil drops the price of gas only. Eru slowly retreats. I tried to find an explanation for that on line, read a few articles claiming there is a reason. But none of it made any sense.

 

[IluvdoubleD's]

I filled up for 3:98$ today.

 

[volinbham]

I think we have all noticed that on news that the price per barrel is going to go up that prices rise overnight in seeming anticipation of it, whereas when the price of oil drops the price of gas only. Eru slowly retreats. I tried to find an explanation for that on line, read a few articles claiming there is a reason. But none of it made any sense.

I imagine part of it is gas stations have to replace inventory at future prices. Oil on an upward trajectory means future gas prices will be higher. A station needs the future value in revenues now to buy in the future. They are likely phasing the increase in. They probably need to see a week or so of oil prices dropping to be confident that the refill they have to buy in a couple weeks is indeed at the lowered price.

The national average is down 1 cent over the weekend.

 

[bigeasy]

The weekly national diesel rates dropped this afternoon. Up another $0.40 to $5.25

Gasoline up as well to 4.315 vs prior week of $4.102

 

[OHvol40]

I imagine part of it is gas stations have to replace inventory at future prices. Oil on an upward trajectory means future gas prices will be higher. A station needs the future value in revenues now to buy in the future. They are likely phasing the increase in. They probably need to see a week or so of oil prices dropping to be confident that the refill they have to buy in a couple weeks is indeed at the lowered price.

The national average is down 1 cent over the weekend.

As LG was saying, it took between 1-3 days to see the increase in price-per-barrel reflected at the pump. We’ll see if it comes down that fast, I would be shocked. Sounds like a ploy that takes money from our pocket and puts it into BP’s pocket. Call me a cynic.

 

[DC_Vol]

As LG was saying, it took between 1-3 days to see the increase in price-per-barrel reflected at the pump. We’ll see if it comes down that fast, I would be shocked. Sounds like a ploy that takes money from our pocket and puts it into BP’s pocket. Call me a cynic.

Gas resellers make more when gas prices are falling. In fact, it works that way for almost every commodity.

 

[DC_Vol]

I imagine part of it is gas stations have to replace inventory at future prices. Oil on an upward trajectory means future gas prices will be higher. A station needs the future value in revenues now to buy in the future. They are likely phasing the increase in. They probably need to see a week or so of oil prices dropping to be confident that the refill they have to buy in a couple weeks is indeed at the lowered price.

The national average is down 1 cent over the weekend.

Let’s start with a few obvious facts:

1 - gas stations want to maximize their profits
2 - profit is measured in two ways: margin dollars and (sometimes more importantly) margin %

If we simplify the cost of gasoline to three basic components:

X - the cost of unrefined gasoline
Y - all else, which I’ll just call adders (refining, freight, middle man margin, taxes, etc)
Z - typical retail markup at a gas station (the gross profit per gallon of the reseller)

Y and Z are usually relatively fixed over shorter spans of time while X can move significantly.

Let’s assume X starts out at $1.50, Y is $0.50, and Z is $0.30. The total retail cost of gas would be X + Y + Z = $2.30. And the reseller margin would be 0.3 / 2.30 ~ 13.0%.

If X goes up by 20%, the profit equation now looks like this:

(1.5 * 1.2) + 0.5 + 0.3 = $2.60. The retailer margin $ remain the same at $0.30, but their margin rate is now 0.3 / 2.60 ~ 11.5%.

Rut row, compressing margins. This would look bad at quarter end, especially for publicly traded companies. In an environment where commodity pricing is consistently moving up, margin rates are going to be under relentless pressure.

They know this, so as soon as the news hits of higher prices, the psychology of the consumer is already shifting. This presents the perfect opportunity for a first mover to get ahead of the inevitable margin compression. The first mover will raise their price, despite sitting on lower priced inventory. As long as competitors follow, every reseller has now expanded margin dollars AND rate on the current sales of the lower priced inventory. They are padding their bank
account in anticipation of the compressing margins.

As inventory costs catch up to the retail price, margin dollars and rate fall similar to the simple equations above, but they’ve helped offset some of that already.

As commodity prices start to fall, the reverse happens: margin rate expands. The reseller will then try to step pricing down slower than the fall of the commodity price, resulting in higher margin dollars AND expanded margin rate. Some of the margin goodness may be eroded if they are sitting on higher priced inventory than a competitor who may be the first mover on a price reduction.

The goal is to keep overall margin rate over the course of the commodity pricing cycle stable. Even better if you can manage to expand it a little. The longer prices have pushed up, the slower the reseller is going to try to step prices back down.

Apologies for the long response, but I find the pricing strategy for commodities in this environment fascinating, and it’s a question a lot of people ask and may have never thought about it like this.

 

[Pepe_Silvia]

Let’s start with a few obvious facts:

1 - gas stations want to maximize their profits
2 - profit is measured in two ways: margin dollars and (sometimes more importantly) margin %

If we simplify the cost of gasoline to three basic components:

X - the cost of unrefined gasoline
Y - all else, which I’ll just call adders (refining, freight, middle man margin, taxes, etc)
Z - typical retail markup at a gas station (the gross profit per gallon of the reseller)

Y and Z are usually relatively fixed over shorter spans of time while X can move significantly.

Let’s assume X starts out at $1.50, Y is $0.50, and Z is $0.30. The total retail cost of gas would be X + Y + Z = $2.30. And the reseller margin would be 0.3 / 2.30 ~ 13.0%.

If X goes up by 20%, the profit equation now looks like this:

(1.5 * 1.2) + 0.5 + 0.3 = $2.60. The retailer margin $ remain the same at $0.30, but their margin rate is now 0.3 / 2.60 ~ 11.5%.

Rut row, compressing margins. This would look bad at quarter end, especially for publicly traded companies. In an environment where commodity pricing is consistently moving up, margin rates are going to be under relentless pressure.

They know this, so as soon as the news hits of higher prices, the psychology of the consumer is already shifting. This presents the perfect opportunity for a first mover to get ahead of the inevitable margin compression. The first mover will raise their price, despite sitting on lower priced inventory. As long as competitors follow, every reseller has now expanded margin dollars AND rate on the current sales of the lower priced inventory. They are padding their bank
account in anticipation of the compressing margins.

As inventory costs catch up to the retail price, margin dollars and rate fall similar to the simple equations above, but they’ve helped offset some of that already.

As commodity prices start to fall, the reverse happens: margin rate expands. The reseller will then try to step pricing down slower than the fall of the commodity price, resulting in higher margin dollars AND expanded margin rate. Some of the margin goodness may be eroded if they are sitting on higher priced inventory than a competitor who may be the first mover on a price reduction.

The goal is to keep overall margin rate over the course of the commodity pricing cycle stable. Even better if you can manage to expand it a little. The longer prices have pushed up, the slower the reseller is going to try to step prices back down.

Apologies for the long response, but I find the pricing strategy for commodities in this environment fascinating, and it’s a question a lot of people ask and may have never thought about it like this.

 

[AM64]

Let’s start with a few obvious facts:

1 - gas stations want to maximize their profits
2 - profit is measured in two ways: margin dollars and (sometimes more importantly) margin %

If we simplify the cost of gasoline to three basic components:

X - the cost of unrefined gasoline
Y - all else, which I’ll just call adders (refining, freight, middle man margin, taxes, etc)
Z - typical retail markup at a gas station (the gross profit per gallon of the reseller)

Y and Z are usually relatively fixed over shorter spans of time while X can move significantly.

Let’s assume X starts out at $1.50, Y is $0.50, and Z is $0.30. The total retail cost of gas would be X + Y + Z = $2.30. And the reseller margin would be 0.3 / 2.30 ~ 13.0%.

If X goes up by 20%, the profit equation now looks like this:

(1.5 * 1.2) + 0.5 + 0.3 = $2.60. The retailer margin $ remain the same at $0.30, but their margin rate is now 0.3 / 2.60 ~ 11.5%.

Rut row, compressing margins. This would look bad at quarter end, especially for publicly traded companies. In an environment where commodity pricing is consistently moving up, margin rates are going to be under relentless pressure.

They know this, so as soon as the news hits of higher prices, the psychology of the consumer is already shifting. This presents the perfect opportunity for a first mover to get ahead of the inevitable margin compression. The first mover will raise their price, despite sitting on lower priced inventory. As long as competitors follow, every reseller has now expanded margin dollars AND rate on the current sales of the lower priced inventory. They are padding their bank
account in anticipation of the compressing margins.

As inventory costs catch up to the retail price, margin dollars and rate fall similar to the simple equations above, but they’ve helped offset some of that already.

As commodity prices start to fall, the reverse happens: margin rate expands. The reseller will then try to step pricing down slower than the fall of the commodity price, resulting in higher margin dollars AND expanded margin rate. Some of the margin goodness may be eroded if they are sitting on higher priced inventory than a competitor who may be the first mover on a price reduction.

The goal is to keep overall margin rate over the course of the commodity pricing cycle stable. Even better if you can manage to expand it a little. The longer prices have pushed up, the slower the reseller is going to try to step prices back down.

Apologies for the long response, but I find the pricing strategy for commodities in this environment fascinating, and it’s a question a lot of people ask and may have never thought about it like this.

So what happened to the concept of free markets and competition ... competition that supposedly spurs better products and competitive pricing? It seems commodities markets simply set the across the board price and leaves competition out of the equation.

 

[DC_Vol]

So what happened to the concept of free markets and competition ... competition that supposedly spurs better products and competitive pricing? It seems commodities markets simply set the across the board price and leaves competition out of the equation.

I was simply pointing out that the perception that prices rise faster than they fall is a real phenomenon.

 

[Weezer]

Gas is too damn high!

 

[OHvol40]

So what happened to the concept of free markets and competition ... competition that supposedly spurs better products and competitive pricing? It seems commodities markets simply set the across the board price and leaves competition out of the equation.

Natural monopolies at the distribution stage and taking advantage of a mostly inelastic market demand: that’s oil.

 

[AM64]

Natural monopolies at the distribution stage and taking advantage of a mostly inelastic market demand: that’s oil.

Commodities markets made sense when we had small family farms who were at the mercy of large buyers who held a lot of leverage over the prices paid to individual farmers. Oil and other commodities don't really seem to fall into that category At some point "compression" because of limited refining and sometimes pipelines limits competition, but perhaps some of that goes back to government approved mergers in the industry. Breaking companies apart (like Standard Oil) and then controlling mergers is probably big business in congress, and contributes nicely to the average congressional critter's bottom line.

 

[Rasputin_Vol]

Gasoline vouchers worth $300 a month? Some economists back new government aid as prices at the pump soar (msn.com)

 

[Pepe_Silvia]

View attachment 439527

Keep the presses hot.

 

[hog88]

As LG was saying, it took between 1-3 days to see the increase in price-per-barrel reflected at the pump. We’ll see if it comes down that fast, I would be shocked. Sounds like a ploy that takes money from our pocket and puts it into BP’s pocket. Call me a cynic.

BP, Exxon, Sunoco ext hasn’t owned convenience stores for several years now. When they did, selling gas wasn’t their highest priority, beer, cigarettes, car washes and sundries were where they made the money. A beer cooler or car wash went down the vendor had 4 hours to be site regardless of the day. Gas pumps, even a complete shutdown of all of them was a 12 hour response.

 

[MurphyVol]

BP, Exxon, Sunoco ext hasn’t owned convenience stores for several years now. When they did, selling gas wasn’t their highest priority, beer, cigarettes, car washes and sundries were where they made the money. A beer cooler or car wash went down the vendor had 4 hours to be site regardless of the day. Gas pumps, even a complete shutdown of all of them was a 12 hour response.

The majority of gas stations are privately owned, but there are (or at least were) some circumstances where the oil companies own the tanks. Back in the 90s I was in food sales and some of my better clients were C stores. They went through a forced environmental tank "upgrade" with new tanks, sensors, etc. Even way back then the cost to dig up and replace a lot of them was around $150K. A lot of them struck deals with BP and others where they paid for the tanks. They "owned the tanks" set the price, etc and paid the store owner a commission.

This is all old info, and maybe those arrangements have been changed but back then the markup on gas was around 4% and the markup on food, drinks, etc was 35%.

 

[C-south]

View attachment 439527

This is sad af too.

White House drafts TikTok stars to blame Putin for rising gas prices

 

[hog88]

The majority of gas stations are privately owned, but there are (or at least were) some circumstances where the oil companies own the tanks. Back in the 90s I was in food sales and some of my better clients were C stores. They went through a forced environmental tank "upgrade" with new tanks, sensors, etc. Even way back then the cost to dig up and replace a lot of them was around $150K. A lot of them struck deals with BP and others where they paid for the tanks. They "owned the tanks" set the price, etc and paid the store owner a commission.

This is all old info, and maybe those arrangements have been changed but back then the markup on gas was around 4% and the markup on food, drinks, etc was 35%.

I remember that, we dug up a whole lot of those tanks. Now the vast majority of the tanks at the independent mom and pop C-stores are owned by the distributors instead of the actual oil companies. Then of course you have the 7-11s, Circle Ks, Sheetz ext that own thousands of stores between them and they own their own equipment.