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Crude oil dropping, but not gasoline?!?!?!
Published on October 6, 2008 By ShadowWar In US Domestic

OK I am at a loss (not really) as to why my gas price at the pump is not dropping gat the same rate as the drop in a price per barrel for crude. Crude prices have dropped to below $100 a barrel yet my gas prices are not dropping like they go up.

So I wanted to see this in a form I can understand so I found a place I could chart it with some accuracy. And here is what I found. I compared crude oil prices with the average US Gasoline at the pump price. And WOW was I surprised. While gas follows the crude fairly close, it sure does not drop when crude does. It likes to go up with no reason behind it, but drop? No way. Look at the charts I made below and see for yourself.

This chart is for the month of September, 2008.

 

 

 

 

September Crude vs. Gas Prices

 

While one month does not give a great view of the overall, look at it carefully. Next I did 6 months..this is what I got:

6 month gas/ crude comparrison

 

So I thought but what about the last time gas was below $100 a barrel, what was the gas price then? Should it be close to that plus inflation? So here is what I found:

1year compare

 

Now look at the crude and gas prices.. Hmm the last time crude was at its current price, gasoline was at about $3.00 a gallon. WHy does the price of gasoline follow the price of crude when it goes up, but not when it goes down?? GREED!! That’s why. this is from a CBS article that was posted yesterday:

Over the course of the past year, we've heard the complaints.

"20 dollars doesn't even give me a full tank. I fill up on 45 dollars," Lansing resident Samyah Abdulla says.

We've even heard the horror stories.

"A lot of people are choosing between eating and getting to work," Lansing resident Norma Coryell says.

Perhaps, finally, some relief at the pump comes with news of the prices of a barrel of oil dropping to 106 dollars. The thought of relief seems completely valid based on the news...right? Wrong. Prices have gone up this week from last by nearly 15 cents, leaving nearly everyone wondering why.

"If it's down then why are we still paying the high prices?" Abdulla asks.

The President of the Michigan Petroleum Association, Mark Griffin, says he has the answer.

"The primary reason is that while barrels of oil have come down 27, almost 28 percent in cost, the cost big oil retailers are charging gas stations has only come down 11 percent," Griffin says.

Griffin adds that wasn't the case last Spring when a barrel of oil was also going for 106 dollars. At that time though gas prices for motorists were just $3.25, which has a lot of people wondering where to place their blame.

Griffin says you probably shouldn't blame your local gas station for their high prices because they're actually losing money on the gas too.

"They're losing probably a nickel a gallon on gas right now," Griffin says.

But as for the question, who's fault is this? Griffin says the big oil companies.

from: http://www.wilx.com/news/headlines/27933034.html

So who is to blame?? Well you read the above and make your mind up for yourself. But I will tell you this, with prices going down on crude, but gasoline prices not matching them, someone is going in the tank for the profits, and someone will find out.

Hope this information helps you see the big picture.

 

 

 


Comments
on Oct 06, 2008

Well, looking at that chart, both trends seem to follow each other pretty well for the most part.  That spike in the end I believe has more to do with the recent hurricanes and their effects on the refineries.

Oil can go as low as it wants to, but without refineries to process that oil into gas, you're not going to see a corresponding drop.

on Oct 06, 2008

If thats the case then why was Gasoline at about $3.00 a gallon when crude was the same price last year? Nothing has changed. So logic (I know) dictates it shoudl be the same as last years price.

on Oct 06, 2008

Well, oil prices may be the same, but there may be other factors in play.  Several things can determine the market value of gas, not simply the price of oil.  I already mentioned refineries for one, but anything that also uses oil can influence the price as well.  If Oil's only use was to be made into gas, and refining and distribution remained constant, then we we would probably see the same oil prices having practically the same gas prices.  But this is not the case.

on Oct 07, 2008

Guys, you just have to look at the P/Ls of the oil companies to see.

When a company has billions of dollars in profit that means extra cash over and above every other thing: research, exploration, etc. But, oh yeah, according to some they need every tax break they can get so they will have the money to invest in new technology.  Right.

 Nice research, good article SW, thank you.

on Oct 07, 2008

Nothing sinister.  While Gustav was a pansy compared to the likes of Rita and Katrina, it disrupted the refineries and thus the supply.  Prices have fallen a lot around here in the past 2 weeks, and were falling a lot before Gustav.  But the disruption in the supply created a short term shortage.  Gas in California, always a lot higher than the east coast, was then selling for the same price.  Why?  Their refineries were not in the path of Gustav.

Since the feds have decided to "bail out" the weak, that will prolong the downturn, and you will see Gas in the Mid $2 range by this time next year (perhaps earlier).  It may get down to $2, but dont expect it to fall below that.

on Oct 08, 2008

Keep in mind you're looking at futures prices of crude oil and retail prices of refined products generally lag several weeks so you will usually see prices on the downside higher than they were on the upside.

Add in tight credit which means higher interest rates on retail outlets that need to borrow to buy inventory, We also have refineries that are just getting back into production after the recent hurricanes and have to raise both gasoline and heating oil stocks at the same time.

on Oct 12, 2008

Maybe it has more to do with where you live.....my gas has dropped quite a bit recently.  I saw it for $2.79 (plus 3 cents off if you have a gas card through them)

on Oct 12, 2008

Maybe it has more to do with where you live.....my gas has dropped quite a bit recently.

It does but the article is about average cost which takes into account regional differences.

on Oct 13, 2008

It does but the article is about average cost which takes into account regional differences.

Yea,it dropped like a rock here over the past week (we are part of the Gustav effect). From 3.399 to 2849 in just 7 days!  The refineries seem to be back in business - for the people who are still driving.