Posted on 08/25/2015 9:42:36 AM PDT by bestintxas
A little more than a year ago, oil prices were above $100 a barrel. The national average for gasoline was in the $3.50 range. In late spring, oil was $60-ish and the national average for gas was around $2.70. The price of a barrel of oil has plunged to $40 and below—yet, prices at the pump are just slightly less than they were when oil was almost double what it is today.
Oil and gasoline prices usually travel up or down in sync. But a few weeks ago the trend lines crossed and oil continued the sharp decline while gasoline has stayed steady—even increasing.
Oil’s down, gasoline isn’t. Consumers are wondering: “What’s up?”
Even Congress is grilling refiners over the disparity.
While, like most markets, the answer is complicated, there are some simple responses that even Congress should be able to understand. The short explanation is “refineries”—but there’s more to that and some other components, too.
Within the U.S. exists approximately 20 percent of the world’s refining capacity. Fuel News explains that “on a perfect day,” these domestic facilities could process more than 18 million barrels of crude oil. But due, in large part, to an anti-fossil fuel attitude, it is virtually impossible to get a new refinery permitted in America. Most refineries today are old—the newest major one was completed in 1977. Most are at least 40 years old and some are more than 100. Despite signs of aging, refining capacity has continued to grow. Instead of producing at 70 percent capacity, as they were as little as a decade ago, most now run at 90 percent. They’ve become Rube Goldberg contraptions that have been modified, added on to, and upgraded. The system is strained.
(Excerpt) Read more at spectator.org ...
Pump Price B sticky on the way down.
Excellent point. Also, gas is down some 40% while oil is down some 60%. That's not out of line for the underlying commodity and the retail purchase finished product at all.
Capacity is up about 10% over the last 30 years around 18 million bbl/day.
“the newest major one was completed in 1977”
Banana. Republic.
Back in Howard Hughes day, there was a guy who was running around the country building refineries. Hughes kept buying him out, but he’d just go build another one.
We need some guys like that. And the Feds need to streamline the process for approval. Or designate some lands which are preapproved for refineries.
Back in Howard Hughes day, there was a guy who was running around the country building refineries. Hughes kept buying him out, but he’d just go build another one.
We need some guys like that. And the Feds need to streamline the process for approval. Or designate some lands which are preapproved for refineries.
Supply of oil is high, refinery capacity is not.
The problem is simple: all those “boutique” gasoline blends. That means you can’t easily transfer refined gasoline to anywhere in the country, which drives up the price of gasoline at the wholesale/retail level.
My car burns 93 obtain. The price difference between that and 89 octane has almost doubled as well.
Hit the "Show Crude Oil Price" button for comparison.
More proof that Congress is STUPID when it comes to economics. Do they think that oil magically refines itself? I remember all the nonsense and demagoguing when Bush had building more refineries as part of his energy policy and it got pulled. As ye sow, so shall ye reap.
How is propane? I just got a a quote of $1.99 / gal.
Gasoline prices remain strong because “they can”.
So with capacity low the refiners can keep the price high and their profits high as well. You want them to invest billions in new refineries which will do nothing but increase gasoline supply, thus driving down the price they can charge and reducing their profits? Do you really think they'll do that?
What keeps the gas prices high is called “price fixing.”
Gasoline is following oil down hereabouts right nicely. Some stations, the ones right along main routs of rush hour travel keep their prices between an exorbitant $2.35 and $2.43 but you just go over a block and get $2.20. That was yesterday.
Would FR’s resident oilman care to chime in for this question please?
(I know I’d be interested in his answer; I’ve been wondering the same thing)
The refinery owners probably won’t do that, but someone not currently an owner who knows how to build refineries could.
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