Posted on 04/30/2008 5:50:57 AM PDT by RSmithOpt
OK folks, after Monday's and yesterday's regular drop in crude and gas prices resulting from profit taking of speculators, would anyone want to bet that gasoline will be 5-10 cents higher at the pumps by Friday/Saturday this coming weekend?
I'm willing to bet one gallon of gas to a donut, it does.
I have watched this pattern for well over 8 months now. As of this morning both commodities being reported on Bloomberg are indicating the regular Wed/Thur/Fri rise.
If prices drop today or Thursday, there will be the obligatory incident somewhere as a pipeline blows up or refinery fire, Congress ran out of toilet paper, etc. by lunchtime Friday.
But that gas station needs to make enough of a profit to cover the cost for next week's purchase. There are far more factors than just the price of crude. With as little of a margin as one sees in gas, they have to 'speculate' on the high side (on the downstream end), just like the upstream speculators have to bid (speculate) high enough to make sure they can buy that barrel versus let another bidder get it. Frankly, when we get down to the real world, I am surprised how cheap gas is. You have a commodity that is purchased a half a world away (OK, most is from Canada), shipped over there in big tankers or in multi billion dollar pipelines, goes through billion dollar refining processes that are highly regulated by Federal, State and Local governments, then to be shipped to each gas station so they can take a few pennies in profit, all for only about $3.50/gallon. Oh, and that oil that is the raw commodity of gas, guess what, gas refineries are not the only ones trying to buy it. There are also petrochemical companies who make everything from plastics, to chemicals, to food coloring and preservatives from it.
Now, with all that said, $3.50/gallon isn't all that bad. Heck, walk inside that gas station and buy a bottle of water and you are paying the equivalent of $21/Gallon for that water. Or run across the street to Starbucks and you will pay the equivalent of around $40/Gallon for your Venti Skinny Cappicino.
Ping, thought you would get a kick out of it.
You don't think that a couple billion of Big Oil's recent record profits aren't redirected quarterly to off shore hedge funds that inject money in the 'future' commodity they produce?
Since a fund like that is 'manged' offshore and not held to US laws, seems like a nice setup in assuring record profit achievements.
Thanks.
It is because they are buying their product on a daily basis. They can't hope that one or two day downward trends will be a part of a long term trend. When you look at long term trend prices, even with all of the short term drops, the long term trend is always upward. This chart is from 98-03 but it is a pretty decent reflection of how the trend relates.
No, as a rabid investor, I pour over their annual reports. One thing that is consistent is that the majority of those 'billion dollar profits' don't come from domestic downstream supply (ie, oil that goes to US gas production). Most of the profit comes from wholesaling that oil to Europe (lower dollar allows this) or selling the oil to petrochemical companies that turn it into plastics or other chemicals. The profit from domestic downstream is pretty much flat. The big bucks are in upstream wholesale reselling and downstream produits blancs.
Simple economics. Govt imposed restriction in supply at the same time demand is rising results in price increase. We go thur this same stupid series of events every sprint. No plot, no evil manipulation of the market, just a simply result of our own stupid political fashionable “Green” policies.
Thank you for injecting a little sanity into this thread.
We need a new ping list or something. We could call it the “Freeper Rabid Investors Club” :-)
Usually my name and sanity don’t go together.
Sounds fun.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.