It is unlikely to reach past levels of demand this year.
Posted on 02/19/2009 8:50:43 AM PST by rightinthemiddle
The cost of a tank of gasoline has marched higher since the start of the year, defying a continued slide in oil prices and reduced demand.
So what gives?
Industry experts said refiners are trying to reclaim profit margins that disappeared late last year when gasoline prices collapsed after reaching $4 a gallon last summer.
"Refined-product prices were way underpriced relative to the cost of crude oil. The refiners were losing money," said Bryant Gimlin, energy risk manager for Gray Oil, a fuel wholesale marketer based in Fort Lupton.
A gallon of regular unleaded gasoline in the metro area has risen from an average of $1.42 in the first week of January to $1.82 on Wednesday, according to AAA Colorado.
That 28 percent increase contrasts with a 34 percent decline in crude-oil prices from $53.13 a barrel to less than $35 over the same period. Crude oil accounts for about three-quarters of the cost of gasoline.
The rising price of gasoline has cost drivers such as David Todd and his employer extra money.
"It is $10 to $15 more a tank," Todd said while filling up a work van at a station at Alameda Avenue and Broadway. "I wish it would go back to where it was."
Todd, who transports temporary workers to job sites, said he fills up his van two to three times a week and called the increases noticeable in a tight economy.
From about October to mid-December, refiners lost money on every barrel of gasoline they created from crude oil.
In late November, the loss exceeded $7 a barrel. This month, the gross margin for refiners has been as high as $18 a barrel.
(Excerpt) Read more at denverpost.com ...
You said — “Which causes me to ask two questions: First, in what way does their behavior differ from OPEC’s? Second, what good would it have done to have additional refinery capacity on line?”
Well, there’s a big difference form OPEC. The refineries are not an organization that requires their individual members to meet certain quotas (either up or down). They are not organized to collude with one another.
Now..., to have one look at another (refinery) and see what they are doing and to match it (pricewise or cutting back on production) is not illegal for them to do. In fact, I don’t think it’s illegal for them to shut down half of their capacity, if they wanted to, or shut it all down. Of course, they wouldn’t shut it all down, unless it was necessary, because they do want to “make money” from their facility... LOL...
But, there’s nothing to tell them, legally, what quantities they must put out. If one thinks that they should meet certain quantities for output according to whatever conditions one sees in the marketplace (in other words, increase production to prevent prices from climbing too high) — then perhaps what you really want is a government-driven department that dictates to the refineries what output them should meet at any particular time, according to what the government thinks is needed.
If not that, then, since they are a company in which (a capitalistic system), making the most money possible for a company is supposed to “work out” in the end (in that if they price it too high, then others will come in and take away marketshare, or if they price it too low, they will go out of business). So, if the government stays out of their production quantities and their pricing mechanisms, then those refineries can price it at whatever price they want, and can continue to sell it at (given that people will continue to buy it, no matter what...).
Well, it’s about $1.59 in Tulsa and *going down* finally (again). That’s great. I’ve heard that crude oil may bounce off the bottom at $20 a barrel, but I don’t know if that’s going to be the case. We may be at the bottom with $30 a barrel.
But, I would say to look for $3.00 a gallon (or pretty close to it) for this summer.
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I was originally hoping that it would get down to 99-cents a gallon here in Tulsa, but it only made it to about $1.30 a gallon... :-)
You said — “The Liberals want gas high no matter what.”
The problem here is that these current (relatively) low gas prices (and oil prices) have made it impossible to move to other forms of energy or transportation modes and/or mechanisms that would get us *off* this “oil tether” that we have with the Islamic terrorists and their oil supplies. We’re paying for the terrorists, currently. Our money funds the terrorism against us.
So, it has to be high prices that is going to get companies “in the business” of working on all sorts of other ways and means to get away from the “oil tether” to Islamic terrorists...
You said — “The supply is there. The demand is low.”
Yes, I would say the demand is very low, but it is climbing and will climb through summer.
But, other than that, why should a company sell a product for a lower price than they figure is profitable to them? It doesn’t make sense for a company to do that. In fact, a company is supposed to be able to set whatever price they want on a product. If no one buys it, then they’ll get the idea that the price is too high. If they can raise it and raise it again — to be more profitable — and people *still buy it* — then why shouldn’t the company be as profitable as it can be?
Your argument that we need to develop our own resources so we don’t send money to “terrorists” is enough.
In a sane world, we wouldn’t need high energy prices as motivation. Patriotism would suffice.
High energy prices last year was the final nail in the coffin of the economy. The economy cannot recover with high energy prices; a strong economy will raise prices naturally.
It is unlikely to reach past levels of demand this year.
“Diesel price may drop below gasoline”
Yippee!! I own a diesel-engined car.
I've noticed the narrowing, recently. Around here, where once the gap between regular gasoline and diesel was as much as 80 cents or even a dollar per gallon (and remained high even after prices crashed), it's now less than 30 cents per gallon.
sitetest
Supposedly the refineries.
Some of it is your taxes, for sure.
We are at 1.85 north of Detroit. The lowest we got was 1.75.
>>But, I would say to look for $3.00 a gallon (or pretty close to it) for this summer.<<
Geez I hope so.
We have a trip to Philly planned and we’ll be pulling a camper!
When we did Niagara Falls, we were totally beat up on the gas prices. And in Canada no less!
Our taxes haven’t gone up though. They’ve remained constant.
Hmmmm. I’m not sure at all then.
But really, I’m not the brightest bulb in the bunch. I hang around with FReepers to make me look good.
Yikes, I should clarify that post.
3.00 is better than 4.50 that we paid in Canada.
And you do look good. ;-)
I think we have a valid beef right now, and I have actually been a defender of the industry on a number of occasions.
You said — “In a sane world, we wouldn’t need high energy prices as motivation. Patriotism would suffice.”
The problem with that idea is that doesn’t work with companies. Businesses are supposed to be concerned primarily with making as much money as possible, while still staying competitive and within the law (in other words, not illegal practices or an illegal business). Now, with that in mind, along with a stock market where buyers of stock are going to demand the highest value possible, or else they’ll dump it for something else that will — that means patriotism plays absolutely no part at all. It’s solely — money, money and more money — as the *basis* for all operations.
So, the problem is — do you let “money and more money” sink the country? The only other way is to mandate certain practices or erect trade barriers or enact whatever government policies (making it “law”) that a company has to do “this thing” or “another thing” in order to enforce patriotism (or enforce things which are more beneficial to our country and go against “making more money”).
Without that, you’ve got nothing driving it, except money and more money — nothing else at all... That’s pretty much what you get with the so-called “free market” (however free it is...) and capitalism as the prime and driving forces (and *encouraged* to be so...).
I mean, if companies can make a lot more money by engaging overseas countries and their work force which can work at garbage wages — and the only way we can compete on those products is to pay similar garbage wage, then we might as well jump in the boat of the third-world countries and join them in all aspects of their lives and economy and so on. We’re proceeding in the direction of joining them anyway — in the name of “making more money”...
You said — “What I will not defend, it the consumer obviously getting screwed over the oil companies. IMO< what is taking place right now is the corporations trying to continue to show massive profits, so that their stock costs will remain constant.”
What I don’t get is why those companies shouldn’t make as much money as they can, no matter what prices they charge. If they can charge double or triple the amount (which they did for a while) and still get people to buy the gasoline, why shouldn’t they continue to do so, under the principle that the “company” is designed solely for “making money” and should not be hampered or fettered with anything to prevent it from making as much money as it can, under a “so-called” free enterprise system (as much as it might or might not be).
I thought the *sole aim* of a company was to make *as much money as possible* for its owners (and but maybe not necessarily for its workers, in many cases..., because they have the choice to work there or not, if they don’t want to work there...).
So, how can people complain about any company making a windfall amount of money doing what they are supposed to be doing? The only other alternative to them not making as much money as they possibly can — is to limit their ability to make as much money as possible by enacting laws and regulations that prevent it or else redistribute the money that they make. And that doesn’t seem to be a popular idea on Free Republic.
I would think that most people on Free Republic would be glad that these companies are making a windfall amount of money, because that fits precisely into the “program” that most people think here — that this is what a company is all about and not about being regulated on what they can or cannot do or in how much money they should be able to make. The idea is that people don’t have to buy from them if they don’t want to (and people can make “alternative products” if the price is so high — thereby “putting them out of business” if they try to make “too much money”...).
That’s the idea, anyway. So, why are people upset about them making so much money?
Fine. Then using your logic, the oil companies should be able to raise the cost of a gallon of gas to $25.00. If that’s the universal plan you wish to advocate, be my guest.
I don’t think I’m going to have to explain the problem with this to too many people.
And if you think it’s okay for gas, then why not food and other necessities?
With so many people believing crap like that it's no wonder Obama got elected.
"We now know that when the cost of crude goes down, the cost of gas trails far behind..."
Reminds me of Twain's quote:
"It's not what you don't know that gets you in trouble, but it's what you do know that isn't so."
You said — “Fine. Then using your logic, the oil companies should be able to raise the cost of a gallon of gas to $25.00. If that’s the universal plan you wish to advocate, be my guest.”
It’s not a “plan” of mine — it’s an observation that people here support the idea that companies should be free to charge whatever they want and to fail to sell it if they sell it for too high a price. And also, people here advocate the idea that if the price is too high, then the “market” will correct itself automatically, without any intervention — because someone else will come along and sell a product, some goods or services for cheaper, because the original business was selling at too high a price. Therefore, the market and the choice of people themselves (in buying or not buying, or working for a company or not working for a company) would be *self-correcting* without any government intervention to “make it correct itself”. That’s the idea that I’ve gotten about it.
So, in that instance — the answer is *yes* — if they can sell it for $25.00 a gallon — the by all means *do so*. And that will mean that people will buy less, and someone else will come out with something “better” than gasoline — and everything will “self-correct”.
The primary aim of business — as I understand it here — is to be free to make whatever they want, sell it for whatever price they want and to make as much money as they want — if — they can actually do it in the marketplace — since the “marketplace” will either “affirm” their business decisions or “deny” their business decisions.
So, that’s why I say *yes* — sell gasoline for $25 a gallon *if* they can...
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And you asked — “And if you think it’s okay for gas, then why not food and other necessities?”
The same thing applies (as I said above) for all products — if one is to maintain a marketplace free from government intervention. That’s exactly what they should be allowed to do — double or triple the price of food — if — they can do it — thereby making *all the more money* for the company — which is the sole and total aim of the company in the first place... (from what I understand here)...
You’ve got a chart that pretty much shows things year to year. People don’t buy gasoline year to year — but day to day. You need to break it down to the day and then see what the chart says. And it’s true, prices do spike upwards on increases of crude oil for the most part. I’ve seen it on a day to day basis in watching these prices and the price of gasoline in the local market. That’s what does happen. And it’s also *slow* to come down on the downside.
Now, there are business reasons for the owners of these companies to do that — but, nonetheless — that’s what happens...
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