Gas Prices - Major factors?!?

[dmcoco84 4]

What would you says are the main factors in the rise in gas prices? I have heard many different reasons but I’d like to see the general consensus from the forum.

Also, what happened to the Oil for Food program in Iraq?

[wmw999 2,160]

At the moment, I'd have to say it's a combination of "because we can" and "we're going to have to pay a LOT more for the next lot, so we need to have the funds for it"

I'm sure there's more to it than that, though.

Wendy W.

There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

[gravitational 0]

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Also, what happened to the Oil for Food program in Iraq?

Corruption, but everyone involved will deny that as they hide their offshore accounts.

------
Michael

[masterrig 1]

Hell, I think, it's just the oil companies getting greedy, once again. I guess, what I don't understand is, we have all these oil fields in Texas, Oklahoma and other states, the Alaska pipeline... where does all that oil go? I'm thinking... the Orient? I'd better cool it or this will get (shudder) moved to SC.


Chuck

[dmcoco84 4]

From what I understand and have heard:

- The damn dune coons in Saudi Arabia is a big reason. I say kill them all! They are ripping us a new one charging us 74 dollars a barrel so that is the biggest factor. Also heard that this is due to their feelings about our involvement in Iraq.

- The U.S. will not use any of the Oil fields here at home because they keep them in reserves for times of crisis. Like a WW2 kinda deal. We did use oil reserves back then. Also they don't wanna drill in Alaska due to environmental reasons. Damn tree hungers are up their asses about the potential for oil spills and risk to the ecosystem.

- Also heard something about the fact that because we are at war we are using more oil in Iraq which is lowering the supply.


Feel free to add or comment.

D

[Skolls081102 0]

Didnt GW release a little from our oil reserves yesterday? I thought I heard that- but can someone confirm that it's true?

Just a side note- a buddy of mine got back from Iraq about 6 months ago- he was telling us that price was .05/gallon over there. Dont know how true it is- anyone else thats been there care to confirm that?

The sole intention, is learning to fly.Condition grounded, but determined to try.Can't keep my eyes from the circling skies.Tongue tied and twisted, just an Earth bound misfit.

[dmcoco84 4]

Yea but it had something to do with New Orleans. It was to help the hurricane some how.

[pincheck 0]

I think its mostly to do with lack off refining capacity in the industry but opec sure isn't going to cut its own profits just like every time the price goes up so do the taxes gained rise.
With the cost in the uk it is daylight robbery by the government they take about 2/3 of the price in tax they where going to increase that at the last budget but delayed it till prices come down

Billy-Sonic Haggis Flickr-Fun

[dmcoco84 4]

Yea I gotcha but I have heard OPEC is the major reason. They are producing less and charging more.

I forgot also. I think with the change from summer to winter season they are preping and changing the type of oil they produce. More for heating and less for cars.

[PurpleBadger 0]

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Yea I gotcha but I have heard OPEC is the major reason. They are producing less and charging more.

Supply and Demand...

[gemini 0]

Speculation.

Winter may be colder than normal requiring more heating oil. Raise the price now.

Arabs may reduce production and cause a shortage in the future. Raise the price now.

A refinery is shut down which will cause a decrease in refining capacity/output nationwide as soon as what's already refined runs out. Raise the price now.

The price doesn't have anything to do with what your buying today actually cost. It's the replacement value if all the "what ifs" happen.

Not a bad deal because if the "what ifs" don't happen, hey my profit margin increased and I don't have to give you a refund!

Blue skies,

Jim

[AndyMan 7]

Wow. I'm absolutely amazed at some of the ignorance here.

OPEC has never produced more. They are producing as far more than they ever had, and are adding capacity daily. OPEC has committed themselves to a $30/barrel price of oil. Right now it's approaching $70. OPEC will try to add capacity until the price returns to $30.

The problem is that analysts don't think OPEC can do that. Think think that the OPEC countries are already at max production, and that these countries physically can't tap much more oil. By any indication, OPEC is trying their best.

Meanwhile, Americans have never consumed more, and even now are continuing to increase their thirst. Even with the high oil prices, Americans are still consuming 3% more than last year. Even with the high oil prices, American demand goes up every month.

Oil prices will only continue to go up until Americans (and the chinese, but I'll get to that in a minute) cut back. Even if the US drills in ANWR, prices will continue to rise until it gets to a point where it's expensive enough that people actually stop buying it. This is basic economics 101. Americans must cut back, and high prices is a great way to make people think about what oil is actually worth.

Add in the fact that China is just now expanding into a real industrial economy, many people in China are buying their first car. Great for them, but China is burning far more fuel then they used to. Good for them, bad for the rest of us. It's unlikely China will cut back. Most Chinese are buying very fuel efficient cars, so trading in their Yukon XL for a Prius isn't an option, like it is here. Since they're very efficient already, high oil prices will not have a great effect on the Chinese economy. Americans, however - who love their Yukon XL's and F-150's, are screwed.

Supply and demand says that if demand does up while supply doesn't, prices rise. Guess what just happened to 30% Americans national supply? Hint, a category 5 huricane just went through the gulf region.

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I forgot also. I think with the change from summer to winter season they are preping and changing the type of oil they produce. More for heating and less for cars.

Close. It's actually "more for heating, and less for trucks, trains, and planes". Diesel fuel, JET-A, and home heating fuel are all called "distilates", and are very similar in chemistry. Heating oil is added at the expense of jet fuel, since airlines fly fewer miles in the winter. Prices for auto-fuel usually drop off after the labor day weekend since the demand drops, but supply doesn't.

Another part of the mix is that many state laws require a special "low sulfer" gas in the summer to help combat smog. Since summer is rapidly coming to an end, many oil companies are switching back to a "normal sulfer" which pollutes more, but works better in the cold monthes. It's a lot more painless to make the switch to the winter blend, though. There usually aren't state laws that mandate a switch over day like in the spring, so oil companies can continue to burn the summer blend until they run out.

Right now though, the single biggest cause of high gas prices is supply and demand. The labor day weekend is one of the biggest driving weekends of the year, meaning demand peaks. Worldwide supply is already very tight, which combined with worldwide peak demand explaines most of the high prices. The fact that America's reserves were effectively put offline by the storm is causing a short term peak. The "perfect storm" that wiped out New Orleans was the last straw of an economic "perfect storm" in supply and demand.

No conspiracies, no criminals, no ENRON. Just economics 101.

_Am

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You put the fun in "funnel" - craichead.

[hexadecimal 0]

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At the moment, I'd have to say it's a combination of "because we can" and "we're going to have to pay a LOT more for the next lot, so we need to have the funds for it"

I'm sure there's more to it than that, though.

Wendy W.

I'd say it's probably mostly "because we can".

Taking advantage of a bad situation... not that that's anything new for the oil industry.

[dmcoco84 4]

Great Explanation! Thank you!

[gemini 0]

I agree with your facts about increasing production, usage, etc., but I disagree with the timing of the price changes.

US oil refineries are operating at nearly 100% capacity. This means that the companies are afraid that any change that effects either production of crude supplies or refining capacity could have a detrimental effect on output of the finished products (gasoline, heating oil, distillates).

Therefore it is very critical to the oil companies to be able to anticipate when those changes may occur and react immediately in order to protect their supply of crude.

Unfortunately for the retail and wholesale consumer, a "anticipated" change in supply results in an immediate change in retail and wholesale prices regardless of current storage levels of the product that were purchased and refined at a lower cost.

The gasoline you are purchasing today at an equivalnet price of $70 BBL cost the oil company $40 BBL plus refining/transportation costs.

Even if demand was constant, the prices would change up and down based solely on the "anticipated" supply.

This is a bastardization of the supply and demand you are discussing.

Think of it this way:

Each time the market price of cattle changes, your local deli raises or lowers the price of your sandwich. Oops, today Canada has a mad cow so there may be a shortage of beef, Your sandwich today costs 2X what it did yesterday even though the deli did not purchase any beef today.

Blue skies,

Jim

[ChasingBlueSky 0]

Greed.

_________________________________________
you can burn the land and boil the sea, but you can't take the sky from me....
I WILL fly again.....

[billvon 2,448]

>What would you says are the main factors in the rise in gas prices?

What Andy said. Also futures pricing. The prices of many things in the US are set by their futures prices. Here's how it works:

You believe gas prices will go up. So you invest in gasoline futures, which is essentially an agreement to buy (or sell) an asset (like oil or gas) at a given price. If you believe that gas prices will go up, you might buy gas futures at a fairly high price, because that means you will be able to buy them at that high price and immediately re-sell them at an even higher price. Now, that doesn't mean you will actually do that. Someone might think gas prices will go even higher and buy _your_ futures contract; he is willing to give you money for your deal. Which is how people make money on futures trading (mostly.)

Of course, people who are selling gasoline _now_ can see those futures contracts. And if the futures pricing is going up like crazy, it is essentially a guarantee that if they raise prices someone will buy their product. After all, a futures contract is an agreement to do just that. So prices go up. To a large degree, futures pricing _determines_ current pricing. That's one of the reasons you are seeing a rapid increase in gas prices, because investors _predict_ a large increase in gas prices.

Now, these aren't just greedy corporate people doing this. Many 401k's include a component of futures trading. Which means that your desire to save for retirement might just be one of the things driving up gas prices.

[AndyMan 7]

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Greed.

You say it like its a bad thing.

Greed is the basis of the market economy. Greed is what separates capitalism from socialism.

Greed is often (but not always) what makes capitalism and market economies work.

_Am

__

You put the fun in "funnel" - craichead.

[jumprunner 0]

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Hell, I think, it's just the oil companies getting greedy, once again. I guess, what I don't understand is, we have all these oil fields in Texas, Oklahoma and other states, the Alaska pipeline... where does all that oil go? I'm thinking... the Orient? I'd better cool it or this will get (shudder) moved to SC.
Chuck

They havent been domestic drilling since the '70s/ early '80s. This was due to cheaper prices from the middle east...it costs a lot more to drill for oil in Texas than it did to ship it over from middle east

The oil boom back in the 70s/ early 80s was due to tariff protections that were in place that kept middle east oil from competing with domestic drilling operations, however, Reagan removed the tariffs on imported oil, which immediately put everyone out of business. This is the reason why Texas was hit by a big recession, but this also marked the beginning of the "Recession Age" we know today.

The removal of oil tariffs was a political move pulled by the Repulbicans as a quick (but not lasting) remedy to cheap oil prices. It was basically a political stunt to make them look better, however, it also caused dependancy on middle east oil.

[dmcoco84 4]

So to make a long story short, all those with hummers and shit need to sell and buy a regular car!!!

FYI I drive a 2004 Camry that gets great gas mileage.

[AndyMan 7]

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They havent been domestic drilling since the '70s/ early '80s. This was due to cheaper prices from the middle east...it costs a lot more to drill for oil in Texas than it did to ship it over from middle east

A much bigger reason for the fall-off of drilling in the US is that for the most part, all of the easy oil has already been drilled.

It's poignant that the only new American drilling being discussed involves tearing apart a wildlife refuge over 2000 miles north of Seattle and 3000 miles from a big gas market.

What's more amazing is the by most standards, ANWR isn't even that big.

_Am

__

You put the fun in "funnel" - craichead.

[jumprunner 0]

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Greed.

You say it like its a bad thing.

Greed is the basis of the market economy. Greed is what separates capitalism from socialism.

Greed is often (but not always) what makes capitalism and market economies work.

_Am

How about 'competition'?

Competition is the basis of the market economy. Competition is what separates capitalism from socialism.

Competition is often (but not always) what makes capitalism and market economies work.

You sound like Gordon Gecco...

[billvon 2,448]

>How about 'competition'?

Competition is greed applied to more than one person/company.

[AndyMan 7]

Of course.

What's the point of competion without greed?

"Yah, it's ok. You can take the hundred bucks, I'll be happy with $10. I really don't need the money...."

or more appropriately, "yah, our tandem video only costs $6. that's enough to pay for the gas in the plane... As a videographer, I like taking pictures so much I really don't need any compensation".

_Am

__

You put the fun in "funnel" - craichead.

[Elisha 1]

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What's more amazing is the by most standards, ANWR isn't even that big.

_Am

And what's even more amazing then that to me is all the protesting the left makes about drilling there, while the state involved (Alaska) WANTS it to happen and thinks they can do it w/o major effects to the area.