Posted on 03/16/2020 12:54:20 AM PDT by nickcarraway
Pricewatch: There are several reasons for the apparent rip-off but the main one is tax about 8 hours ago
A man called John contacted us to see if we could “challenge the consumer rip-off at the pumps”.
Clearly annoyed, he pointed out that crude oil wholesale prices had declined dramatically in recent days as a result of the spread of coronavirus and a dispute between Saudi Arabia and Russia. The price of a barrel of oil had fallen over 30 per cent from $68 to $45 while the euro had strengthened versus the US dollar. “Yet the price of diesel per litre at pumps fell maybe 3c or 4c. The only logical conclusion is that the consumer is being ripped off.”
In fact, by the time we got to read his email, the price of a barrel of Brent Crude was closer to $34 a barrel and oil prices had fallen on a scale not seen in a generation. But despite precipitous declines on international markets, price falls on our forecourts seemed negligible.
This is not the first time wholesale prices and the price we pay at our local garage have been out of whack, and it is hardly surprising that when it happens many people blame petrol companies and accuse them of making easy money.
That is not the actually the case – or at least the only reliable evidence we have would suggest it is not the case. The only major study into fuel prices in Ireland was carried out by what was then known as the National Consumer Agency almost a decade ago.
It found that Irish petrol companies did not artificially inflate prices. Figures from other sources, including the AA, have also routinely shown that forecourt fuel prices in Ireland do track international pricing pretty faithfully.
Tax factor So why does it seem like we are being ripped off? There are several reasons for that but the main one is tax. Most of what we pay at the pump is made up of various taxes placed on petrol and diesel. In fact, if a litre of fuel costs €1.40, about 90 cent of it goes straight to the taxman. That means about 50 cent has to be divvied up between the people who get the oil out of the ground, those who refine it and those who ship it to Ireland as well as those who actually sell it to drivers here. According to multiple sources, retailers here make about 5 cent on each litre of fuel sold.
Another factor is timing. If a garage buys its stock of petrol and diesel and pays a certain price, it has no real option but to sell it to drivers at a certain price, irrespective of what happens on global markets.
Having said that, with the price of crude oil now at one of the lowest levels in a generation, the prices on forecourts will have to fall and fall quickly. In the past, when crude prices have been hovering at $30-$40 dollars a barrel, the price of a litre of fuel to consumers should be about €1.20 or so. And that is the price you should be expecting to see in the days and weeks ahead.
First off: Retail prices are the result of supply and demand. Second, much of the retailer’s cost of gasoline is independent of the price of crude oil. In particular, most of the tax on gasoline is per liter (or per gallon) regardless of the pre-tax price. Also, there are enormous refining and logistics costs involved in getting from the wellhead to the gas pump.
It’s kind of funny how the people who imagine oil price conspiracies never complain about the near-total disconnect between the price farmers receive for their corn crop and the price grocery stores charge for corn flakes.
Why does this have to be explained to adults each time this happens (or at any other time)?
BTW, wow, nice premarket selloff. Hope the two FReepers (I can only remember who one of you were) considering an investment in the oils hasn't actually done it. If you do it today (I won't), just a taste, please.
Selected, sorted search results from oil, OPEC, crude, gas, gasoline:
$3.15 average in Washington state with no discernible explanation why so high (it’s always exorbitant here).
https://petroleumservicecompany.com/blog/oil-barrel-42-gallon-breakdown/
You also have 9% jet fuel and 15% other precursor fuel stock items along with1% lubricants.
This gets interesting with storage now that airlines reduced flights. There is very limited storage for jet fuel. I don’t think you can avoid making it when cracking a barrel so what do they do with it?
“”so what do they do with it?””
At a certain point you have to get ride of it, sell it cheap.
California? I’d say 3.05 is pretty low for that area.
I once heard gas prices described as “rising like a rocket, falling like a feather.”
“Taxes.”
Part of it. Back in the early 90’s, when the economy was manipulated into a new gear to create an appearance of success, everyone bought into it when a forced nirvana seemed to be the answer to our country’s problems. So the public was manipulated and went through the growing pains of wages going up inconsistent with the price of a loaf of bread, and had to catch up, which it did...but continued up from there because people thought that success was based upon the DOW and S&P and not the free market. The DOW high in 1990 was 2999.75. This year it peaked at 29600 in February. The feeling was the higher the stocks, the greater the success of which everyone should reap the benefits. But it cost them over time.
In the beginning, 1990, it was wages catching up to the created expectations. In the current which I hope is the end, it is the created expectations needing to catch up with the wages. As long as the businesses are forced to keep their heads above water using 2019 wage levels, the price at the pump is not going to come down because there is no preparation for loss of balance to pay them. And when a created crash is implemented on a false economy, one with no bail out, we are right back into 1929.
Sound gloomy? On February 13 of this year, the Dow was just under 29600. At this very moment it is at 20505. Is it an adjustment, or a failure? Either one is perceived. We got there through perception, we now need to get back the same way in a least painful way. And the cost of everything is the last thing to catch up.
rwood
I assume the private jets of politicians and celebrities can be enlisted to help burn it off
/s
Yep, just like the banks still charge high rates when they are between 0-2% for short to long. It’s legalized scalping.
“ It’s been like that for as long as I can remember. If the price of oil goes up pump prices go up instantly but if they go down it lags by ages.”
****
Yeh, sure does. It goes up instantly on speculation. It goes down slowly driven by demand (lack of) and storage space.
Point is within a couple weeks storage is full and there’s no place to store various distillates and it no place to sell it. After Sept 11th we were about at that point with jet fuel shortly before flight resumed. Now there are a few flights going, but it’s going to be a longer period. Idk how they resolve it. Perhaps demand for all oil related products decrease to where it’s a non issue.
there is a reason for it... if prices are falling, there is no incentive to refill intermediate storage tanks because it will be cheaper to buy them tomorrow, but if prices are rising, they always keep the intermediate tanks full. Since the storage tanks aren’t taking in new gasoline at a lower price, the cost basis of the tank doesn’t fall as quickly, but the cost basis in a rising tank changes quickly.
You also have to consider that the refineries have a stockpile of refined GAS from oil bought at X that they have to get rid of before dropping down to a new Y price
That’s probably a simplistic view of how things work in such a global market.
If I own the gas station ... and ... I just paid top dollar to fill my tanks with the gas I’m now selling to you, do you really think I’m going to lower my price?
Not unless I have to, because I’m also planning to buy more gas in the near future and I don’t know what that price will be.
I need to make that refill tomorrow money today based on what I paid for this gas yesterday.
I might be happy if the price goes down, but not if I paid a lot for what I’m selling now.
With falling prices, now might be a good time to refill my tanks .... but I have to be careful, because if the price continues to go down, I might be selling my gas for less than I paid for it. Not good.
And .. if the price then goes up, I’ll need to make even more money today in order to refill my tanks with tomorrow’s more expensive gas so I can stay in business.
So I raise or lower my pump prices as quickly or slowly as I can and/or as competition allows, since we’re all in a similar situation.
Eastern Nevada $2.85 for 87 octane
35 miles away in Western Utah $2.45 for 87 octane at COSTCO
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