SteveR Loc: Michigan

Maybe somebody can explain it to me because I don't understand it. I remember when oil was $200 a barrel and gas was less. If the supply is low, why isn't the price of oil higher?

Longshadow Loc: Audubon, PA, United States

Supply and demand?
Higher refinery/transport wages?
Greed?

SteveR Loc: Michigan

If it were supply and demand, wouldn't the price per barrel be higher? I could understand that a portion of that price could be higher delivery charges for the gas for the trucks, but then again, that seems kind of circular.

Najataagihe

Two problems:

1. You are thinking like a junior high economics student or a consumer, not a businessman.

2. Prices at the pump are NOT linked to the price of crude. The price of crude is but one factor in the pump price.


Imagine you are a franchise owner of a convenience store. (Have you noticed fuel-only stores are few and far between?)

You make your main profit on what you sell in the convenience store.

Fuel is, mostly, just an incentive to shop in the store.

Your profit margin on fuel is between 1% and 3%.

Your profit margin on store items is over 15%.

You have to keep your pump prices in line with your competition or no one will stop and buy store products.


Now, you can’t price your fuel based on what its wholesale price is, NOW, you have to base it on what you think it will be then next three times you buy bulk.

Look at the market, today.

Is it stable? (No.)

Is the wholesale price liable to increase before your next refill? (Durn tootin’.)

WILL THE PIDDLING PROFIT YOU MAKE ON FUEL, TODAY, PAY FOR THE REFILL NEXT MONTH???


Did you say “no”?


Here’s your sign…. <~~~In case you aren’t familiar with the phrase, this is a joke.

tramsey Loc: Texas

That makes more sense that what CNN has been telling me.

Bill Engvall is the 'Here's Your Sign' comedian. One of my favorites, He and The Cable Guy

Longshadow Loc: Audubon, PA, United States

The demand is for gas, crude gets made into many things other than gas.
Crude prices are a starting point.

SteveR Loc: Michigan

If that were the case, the cost for crude should be higher. From what I've seen so far, we're all in the dark and nobody in the media is taking the time to explain it to us. That should scare us.

burkphoto Loc: High Point, NC

Oil prices are often based on futures — speculation that the replacement price of gas in the convenience store tank will be higher than it was the last time they filled their station tanks. The same speculation applies to the crude oil market. The price of crude goes up when there are worries of a shortage (in this case due to war and sanctions on Russia).

American consumers naturally shoot themselves in the foot. Every time gas prices fall to ridiculously low levels, they buy big honking SUVs and pickups. When gas prices spike, you can't sell those. People want hybrid sedans and hybrid SUVs. THOSE prices (hybrid and electric vehicles) are spiking now, along with used hybrid prices in general.

Meanwhile, nobody can get enough $$$$ out of their existing SUVs and pickups to avoid being underwater on their loans, so they just drive them. The price of gas keeps going up but the demand remains high for a relatively long time. There is LOW ELASTICITY of demand, meaning people are gonna buy gas when they need it. With high demand and low elasticity, and a prediction of short supply, the oil companies can make windfalls, so they do.

Unfortunately, too, the oil companies don't want to build more refineries, since the trend is away from fossil fuels and towards battery- and hydrogen-powered electric vehicles. So even when/if they have plenty of oil, they can't make enough gasoline from it, fast enough. Demand is UP world wide, because countries are boycotting Russian petrol and natural gas.

Net result is that the price is squeezed from all sides and shoots up. There's nothing really nefarious there... just natural economic forces at work.

Longshadow Loc: Audubon, PA, United States

Not if the goal is increased profit/reduced debits.

Lots of things going on now scare me, gas is just one of them........
We're probably more in the dark than one would think.

Najataagihe

It’s not crude futures, it’s local vendor futures.

SteveR Loc: Michigan

That doesn't explain a lot to me. I remember when crude was at $200 and gas wasn't this high.

DAN Phillips Loc: Graysville, GA

It's amazing how fast and how far our country has fallen in less than a year.

jerryc41 Loc: Catskill Mts of NY

Oil companies are making record profits. When their costs go up a little, their prices go up a lot.

https://www.usatoday.com/story/money/economy/2022/05/07/oil-company-record-profits-2022/9686761002/"

ExxonMobil pocketed $5.5 billion after taxes; Chevron gained $6.3 billion; and ConocoPhillips made $5.8 billion"

https://www.newyorker.com/news/our-columnists/as-gas-prices-reach-new-highs-oil-companies-are-profiteering

jerryc41 Loc: Catskill Mts of NY

Yes, life is tough.

traderjohn Loc: New York City

A barrel of oil is not gasoline or other uses from which oil is refined.