Gas Price

[Warp Daddy]

3.93 yesterday for REGULAR

 

[Puck it]

Gotta love speculation!!!!!!

 

[hammer]

3.93 yesterday for REGULAR

That's what I just paid for 93 octane...

 

[ctenidae]

$4.35 for Super in Norwalk CT yesterday.

 

[legalskier]

3.51 (credit) this morning in NJ. Up from 3.43 on Friday.

 

[billski]

Here's something that can make you feel a little better about gas prices. Buy your gas in the north country when you ski. I'd rather eat and shop there too. They need the money more than you might think. I'd rather leave my coin there.

 

[legalskier]

 

[deadheadskier]

$3.59 this morning with cash, which I thought was a good deal. Same store was charging $3.65 credit, which is still cheaper than anything I've seen around the past few days.

 

[deadheadskier]

Gotta love speculation!!!!!!

Traders should be required to take physical receipt of the oil. The fact that any commodity can be traded as an investment instrument is ridiculous. End the games that benefit the few and let true supply and demand determine the price.

 

[ctenidae]

Traders should be required to take physical receipt of the oil. The fact that any commodity can be traded as an investment instrument is ridiculous. End the games that benefit the few and let true supply and demand determine the price.

While there is the potential for speculation to alter the market (the extent to which it can or does is highly debatable) , without the futures market and the ability to speculate it would be nearly impossible to develop new mines or drill new wells or plant new crops. Without the speculative market you would be forced to pay up front and immediately for your project, which is a massive capital requirement that locks up cash for a long time. With the futures market, you can sell next year crop to buy the seed today. You can sell the oil from the next well now to pay for drilling the well.

These "games" benefit everyone by allowing for the development of new supply, an important element in the supply/demand /price equation. Demanding physical delivery, while attractive sounding and a kneejerk palliative, isn't actually a practical solution.

 

[deadheadskier]

spoken like a true Wall Street guy. :lol:

Not that I 100% disagree with your statement having monitored with beef, corn and soy futures for my job , but let's be real, oil is traded primarily to make quick investment dollars today as an investment, not to finance the next well. There is a greater supply of oil TODAY than there was 3 years ago when prices dove below $2. Big Oil has made over a trillion in profit the last decade. They've got plenty of money for exploration and infrastructure development.

10 years ago, speculators controlled 30% of the futures market. Wells and infrastructure were built just fine and the price of gas was under $2. Now speculators control 80% of the futures market and we're closing in on $4 again.

 

[hammer]

spoken like a true Wall Street guy. :lol:

Not that I 100% disagree with your statement having monitored with beef, corn and soy futures for my job , but let's be real, oil is traded primarily to make quick investment dollars today as an investment, not to finance the next well. There is a greater supply of oil TODAY than there was 3 years ago when prices dove below $2. Big Oil has made over a trillion in profit the last decade. They've got plenty of money for exploration and infrastructure development.

10 years ago, speculators controlled 30% of the futures market. Wells and infrastructure were built just fine and the price of gas was under $2. Now speculators control 80% of the futures market and we're closing in on $4 again.

+1

Crude supply is up, the refineries are not running at capacity, but prices are going up nevertheless. I'm an engineer, not an economist, but something doesn't seem right.

 

[ctenidae]

+1

Crude supply is up, the refineries are not running at capacity, but prices are going up nevertheless. I'm an engineer, not an economist, but something doesn't seem right.

Crude supply (by which I presume you mean production) is up, sure- a whopping 8% 2010 vs 2000. Flat versus 2005, and up 1% vs 2007. So, not up by much. Consumption, on the other hand, is up 13% since 2000, 3% and 1% vs 2005 and 2007. So, using high school economics, the price should go up- demand is increasing faster than supply.

Add into the mix the difference between light sweet crude and heavy sour, andthe sources, supply, and refining requirements, and you begin to see the refining element of teh situation. Refineries that can only process light sweet crude are not running full, since light sweet crude is in shorter supply. Heavy sour, which trades at a $10-$15 discount to the benchmark Brent Crude (which has itself been trading at a premium to US benchmark WTI (which is trading at a premium to Gulf Coast, but I digress), is tougher to process, and the refineries capable of processing it are running at much higher rates.

So, supply is up, but the mix has changed substantially (Canadian tar sands, anyone?). Demand is up more, but refining capacity isn't set up to process the changed supply slate. Demand up more than Supply equals increase in prices.

 

[deadheadskier]

Crude supply (by which I presume you mean production) is up, sure- a whopping 8% 2010 vs 2000. Flat versus 2005, and up 1% vs 2007. So, not up by much. Consumption, on the other hand, is up 13% since 2000, 3% and 1% vs 2005 and 2007. So, using high school economics, the price should go up- demand is increasing faster than supply.

Add into the mix the difference between light sweet crude and heavy sour, andthe sources, supply, and refining requirements, and you begin to see the refining element of teh situation. Refineries that can only process light sweet crude are not running full, since light sweet crude is in shorter supply. Heavy sour, which trades at a $10-$15 discount to the benchmark Brent Crude (which has itself been trading at a premium to US benchmark WTI (which is trading at a premium to Gulf Coast, but I digress), is tougher to process, and the refineries capable of processing it are running at much higher rates.

So, supply is up, but the mix has changed substantially (Canadian tar sands, anyone?). Demand is up more, but refining capacity isn't set up to process the changed supply slate. Demand up more than Supply equals increase in prices.

cten, we have seen gas prices fluctuate over 100% during the past 5 years. That isn't supply and demand forces at work.

The recession didn't cut demand enough in 2008 to drop gas down to $1.68 a gallon nationally that winter when it was at $4 in some markets 6 months prior. The economy hasn't improved enough and demand hasn't increased enough to put gasoline back up near $4 today.

While I can appreciate that you have infinitely more knowledge regarding economics than I do, one need only to look at the history of gas prices http://www.randomuseless.info/gasprice/gasprice.html and know that speculators control a vastly larger percentage of oil futures today than they did in 2001 to come to the accurate conclusion that his is a money grab by Wall Street. You just don't want to admit it because you play on their team.

The fluctuations in prices from 79 through 2005 seem reasonable. Since 2005, not so much. WAY too much market manipulation going on.

 

[hammer]

Crude supply (by which I presume you mean production) is up, sure- a whopping 8% 2010 vs 2000. Flat versus 2005, and up 1% vs 2007. So, not up by much. Consumption, on the other hand, is up 13% since 2000, 3% and 1% vs 2005 and 2007. So, using high school economics, the price should go up- demand is increasing faster than supply.

Add into the mix the difference between light sweet crude and heavy sour, and the sources, supply, and refining requirements, and you begin to see the refining element of teh situation. Refineries that can only process light sweet crude are not running full, since light sweet crude is in shorter supply. Heavy sour, which trades at a $10-$15 discount to the benchmark Brent Crude (which has itself been trading at a premium to US benchmark WTI (which is trading at a premium to Gulf Coast, but I digress), is tougher to process, and the refineries capable of processing it are running at much higher rates.

So, supply is up, but the mix has changed substantially (Canadian tar sands, anyone?). Demand is up more, but refining capacity isn't set up to process the changed supply slate. Demand up more than Supply equals increase in prices.

Don't trouble me with details...:wink:

Good arguments for the supply/demand part of prices but I somehow doubt that the increase is all due to that. Prices are going up because somehow they can, not because they should.

 

[hammer]

One thing I always wonder is if anyone ever tries to determine what the price of gas should be to make it reasonably profitable to extract/produce and also to invest in infrastructure and technology. I doubt that $2/gallon at the pump is enough and my guess is that $4/gallon at the pump is too much.

 

[ctenidae]

cten, we have seen gas prices fluctuate over 100% during the past 5 years. That isn't supply and demand forces at work.

The recession didn't cut demand enough in 2008 to drop gas down to $1.68 a gallon nationally that winter when it was at $4 in some markets 6 months prior. The economy hasn't improved enough and demand hasn't increased enough to put gasoline back up near $4 today.

While I can appreciate that you have infinitely more knowledge regarding economics than I do, one need only to look at the history of gas prices http://www.randomuseless.info/gasprice/gasprice.html and know that speculators control a vastly larger percentage of oil futures today than they did in 2001 to come to the accurate conclusion that his is a money grab by Wall Street. You just don't want to admit it because you play on their team.

The fluctuations in prices from 79 through 2005 seem reasonable. Since 2005, not so much. WAY too much market manipulation going on.

I'm not denying speculation moves the price around. I'm saying the solution is not a blanket "require delivery" because the futures market is required to keep development functioning.

Oil costs more now to produce than it used to. Try drilling a well in 5,000 feet of water to 10,000 feet below the sea floor. You can't use the same equipment you use to drill a 5,000 foot well on dry land. That's why, with volatility smoothed, prices have increased at a pretty steady normal rate. Gasoline prices have stayed remarkably consistent with oil prices, though the ratio has increased over the past 20 years- along with the mix of crude coming in to refineries.

As to "money grab by Wall Street," I find that phrase to be ridiculous. Guess who's money "Wall Street" is using, and who they're making the returns (or trying to) for? I'll give you a hint- look in the mirror. I agree that bonuses for poor performance are ridiculous, and need to be addressed, but you can, in fact, influence that- rather than cry and complain about "Wall Street fat cats," move your money to managers who you think are doing it right. If they don't have management fees, they can't pay bonuses unless they have performance.

I don't work on Wall Street, and in the end financial shenanigans and economic meltdowns make my life way harder than it needs to be.

 

[ctenidae]

One thing I always wonder is if anyone ever tries to determine what the price of gas should be to make it reasonably profitable to extract/produce and also to invest in infrastructure and technology. I doubt that $2/gallon at the pump is enough and my guess is that $4/gallon at the pump is too much.

Depending on the basin/region, finding and development costs can run from $30 to $60/barrel of crude. A deepwater offshore well can cost upwards of $150 million to drill. An onshore gas well in a well-developed play costs $8 to $12 million to drill.

 

[ski_resort_observer]

As it has everytime the price at the pump gets high, demand starts to decrease. In CA where the price is over $5 a gallon the purchase amount per customer has already dropped 25%. As it has been mentioned before there is no direct correlation between the price of crude and the price a gas station owner pays for unleaded gas. When a barrel of crude hits our shore it can be refined to unleaded gas(RYOB), diesel, heating oil, kerosene, white gas.

The end seller, the gas stations, have unreal low margins on the gas they sell. They are the ones most sqeezed when the price goes up. You have oil company owned stations, franchisees and stations owned by refiners. Right here in the MRV we have a Valero station which is one of the countries largest refiners. Technically, they could charge alot less but they don't because driving the other stations out of business would be a very bad thing in the long run.

Years ago the price of diesel was alot lower then unleaded gas. Not anymore. This has really hurt the trucking industry as their costs have gone way up. T. Boone Pickens has been pushing changing trucks from diesel to natural gas. That would be a game changer and I wish people would start listening to him.

BTW as I am watching the price of crude on the ticker right now the price of a barrel of crude has dropped from $110 to $105 the last couple of days.

If you want to really want to get the facts about this latest price spike, read this
http://money.cnn.com/2012/02/28/markets/gas_price_rise/?source=cnn_bin

Here is a comparison bwtween gas prices around the world right now. We pay less than most major countries, most of the countries that are much lower do so because of goverment subsidies
http://money.cnn.com/pf/features/lists/global_gasprices/

 

[deadheadskier]

I'm saying the solution is not a blanket "require delivery" because the futures market is required to keep development functioning.

.

how is it required when the oil companies are making the profits they do. none of them are hurting for cash.....