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Thread: Explain gas prices to me...

  1. #1
    Cyburbian KSharpe's avatar
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    Explain gas prices to me...

    Can someone explain how gas prices work? I know they are supposed to be based on the price of a barrel of oil, but where does that price come from? Obviously, an oil cartel controls the supply, but then, why don't they just keep the price at 3.45 (what I'm paying now) all the time? or higher?
    Do you want to pet my monkey?

  2. #2
    The supply and demand of publicly traded light sweet crude oil futures...

  3. #3
    Cyburbian Brocktoon's avatar
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    There are many factors that determine price of gas. The biggest factor is the price of light sweet crude which is the easiest to "crack" and make gas for your car. Other factors deal with refineries, pipelines and their capacity which affects the supply of the commodity. Other items that impact the price of gas are the futures market of oil and oil products. The final factor is the value of the dollar against other hard currencies. With the current administration sporting a weak dollar policy we are feeling the price increase of oil more acutely than the rest of the developed world.
    "If you don't like change, you're going to like irrelevance even less" General Eric Shinseki

  4. #4
    Cyburbian CJC's avatar
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    OPEC doesn't control all of the oil on the world market - not even close:

    http://www.eia.doe.gov/emeu/cabs/nonopec.html

    OPEC certainly controls enough supply to influence prices, but not enough to "fix" them at anywhere close to a static point. And even then, it's only been recently that OPEC members have been able to work together enough to maintain set quotas. The oil and oil products futures markets are some of the most fluid and heavily traded markets in the world - only the currency markets might be more so. Because oil is such a common commodity (hard to think of something that fits the definition of "commodity" more than oil), controlling supply is difficult because oil from one area of the globe is essentially the same as oil from another area (sort of). The weak dollar bears the most blame for the current high prices.

  5. #5
    Cyburbian Raf's avatar
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    The weak dollar, also coupled with tight supplies here in American and heavier demand from emerging markets such as China and India help drive demand. Simple economics, high demand, low supply, higher prices. Yes the Oil companies make billions in dollars of profit, however what people don't realize is that profit just gets dumped right back into producing oil, which is harder and harder to find, especially for light, sweet crude. Oh and not to mention states like mine (California) has special blends to fight pollution. My advice: live closer to work so you can walk or ride a bike!
    Men do dumb $hit... it is what they do to correct the problem that counts.

  6. #6
    Cyburbian imaplanner's avatar
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    Quote Originally posted by CPSURaf View post
    Yes the Oil companies make billions in dollars of profit, however what people don't realize is that profit just gets dumped right back into producing oil, !
    I thought that profit was after research, exploration and drilling costs were factored in?

  7. #7
    Cyburbian Plus
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    California Example
    Break Down as of Apr 14, 2008

    Distribution Costs, Marketing Costs and Profits...$0.09
    Crude Oil Cost .................................................$2.66
    Refinery Cost and Profits ..................................$0.37
    State Underground Storage Tank Fee.................$0.01
    State and Local Sales Tax ...............................$0.28
    State Excise Tax ............................................$0.18
    Federal Excise Tax .........................................$0.18
    Retail prices .................................................. $3.77

    Definitions of these terms at
    http://www.energy.ca.gov/gasoline/ma...dex.html#terms
    Oddball
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  8. #8
    Cyburbian ofos's avatar
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    I worked for an oil company for nearly 10 years and don't consider myself an expert by any means because this is a really complex topic but it starts with price of a barrel of crude oil at the well-head on the futures market. That is driven by costs of exploration and production and is subject to the vagaries of the futures market where traders bet on availability given all sorts of economic, political, and environmental (primarily weather related) variables. On top of that, add the costs of transportation to and from the refineries, the cost of refining based on the quality of the crude oil, the efficiency of the refinery, and octane and additive blends. That just gets you to the base price of the gallon of gasoline.

    On top of the refinery cost to produce, add profit margin for the refinery, more transportation costs to get the product to the wholesaler, profit margin for the wholesaler and transportation costs to get the product to the retailer. Several of those steps have already included various taxes to various taxing authorities and now it's your turn to pony up. Oh, that's after the retailer adds his profit margin and all applicable sales and other taxes and fees at the retail level.

    So why does the price fluctuate so quickly? Well, everyone including the retailer, is always charging what they hope will pay for their next delivery and still leave them with a profit. The bottom line is this. It's still pretty darn remarkable that you can get a gallon of gasoline for as little as you're paying for it when you consider what it really takes to get it to you.
    “Death comes when memories of the past exceed the vision for the future.”

  9. #9
    Super Moderator kjel's avatar
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    Quote Originally posted by ofos View post
    The bottom line is this. It's still pretty darn remarkable that you can get a gallon of gasoline for as little as you're paying for it when you consider what it really takes to get it to you.
    Agreed. I paid the equivalent of $1.25 per liter for gas in Sri Lanka which rounds out to be about $4.75 a gallon
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

  10. #10
    Cyburbian DetroitPlanner's avatar
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    I would assume that specualtors on the open market are helping to increase the cost as well. With the stock market being in such bad shape as well as returns on vehicles such as CD's the only place left to go are commodities. You are seeing this in the cost of metals and food as well.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  11. #11
    Cyburbian michaelskis's avatar
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    [Sarcasm]
    You see, the evil republicans are friends with the greedy oil companies, so they allow them to raise the prices a high, as they want. Republicans can show their “GOP” card and get half off the list price. [/Sarcasm]

    In reality, it is because Americans use too much foreign oil.
    Not my monkey, not my circus. - Old Polish Proverb

  12. #12
    Cyburbian ofos's avatar
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    Quote Originally posted by michaelskis View post
    [In reality, it is because Americans use too much foreign oil.
    Starting to go
    Off-topic:
    Not just foreign oil but ALL oil. Let's not forget that gasoline/petrol prices go up for everybody, not just Americans either. As bad as we continue to be, China has the potential to make our consumption and resulting pollution look miniscule but we'll continue to be the posterchild for mass consumption for the immediate future.
    “Death comes when memories of the past exceed the vision for the future.”

  13. #13
    Cyburbian TexanOkie's avatar
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    Are Canada and Mexico members of OPEC? Because they're the top importers of oil into the U.S.

  14. #14
    Cyburbian CJC's avatar
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    Quote Originally posted by TexanOkie View post
    Are Canada and Mexico members of OPEC? Because they're the top importers of oil into the U.S.
    No. People also many times forget just how much oil the US still produces.

    We need to simply use less oil - it really doesn't matter all that much where it comes from, because oil is such a global commodity used by everyone and priced by international futures markets.

  15. #15
    Cyburbian zman's avatar
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    Quote Originally posted by CJC View post
    We need to simply use less oil - it really doesn't matter all that much where it comes from, because oil is such a global commodity used by everyone and priced by international futures markets.
    YES! If we shift the focus to greater exploration of domestic oil, you can kiss our beautiful public lands (owned by ALL OF US) goodbye in the name of prospecting and easy motoring.
    There was an article in this morning's Rocky Mountain News about how Colorado will be experiencing a great influx of Land Rapists as a by-product of the Great Global Mineral Rush.

    Sad, the beautiful sage country of Northwest Colorado will be forever changed.


    And yes, the exploitation of land and people around the world weighs heavily on my mind as I walk to work.

  16. #16
    Cyburbian jmac's avatar
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    On a related topic, I'm kind of excited about tomorrow's (4/22/08) episode of NOVA:

    Car of the Future: Join the "Car Talk" guys as they hit the road in search of a new breed of clean, fuel-efficient vehicles.

  17. #17
    moderator in moderation Suburb Repairman's avatar
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    Quote Originally posted by TexanOkie View post
    Are Canada and Mexico members of OPEC? Because they're the top importers of oil into the U.S.
    That's one of those interesting things that folks tend to forget. It is also one of the forgotten reasons for NAFTA's existence.

    It'll be very hard or possibly impossible to get off our oil addiction. With the right steps, however, we can become selective on who we import from. Though I'm no energy expert, I really don't think reaching that level is particularly difficult to achieve.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

  18. #18
    It's all about Market Manipulation. The oil companies, after under-cutting each other for years, finally realized that they can keep the price propped up by keeping the supply low, even as demand goes down. This keeps the stock prices up and enables CEOs to retire with $400 million and all the goddamn stockholders can make millions of dollars while millions upon millions of people suffer.

    The big oil companies are all in collusion, and in bed with the Bush White House. Nothing anyone can say will convince me otherwise. Their goal is $5/gallon gas in perpetuity. Exxon Mobil is the worst but they're all evil.

    Oil. Tobacco. Health Care/Pharmicudicals: The Big Evil Three.

    May the all burn in Hell

  19. #19
    Cyburbian ofos's avatar
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    Quote Originally posted by Super Amputee Cat View post
    The big oil companies are all in collusion, and in bed with the Bush White House.
    Hmmm, Hugo Chavez in bed with Satan...wonder if he knows?
    “Death comes when memories of the past exceed the vision for the future.”

  20. #20
    Cyburbian TexanOkie's avatar
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    Quote Originally posted by Super Amputee Cat View post
    The big oil companies are all in collusion, and in bed with the Bush White House. Nothing anyone can say will convince me otherwise.
    Hmmm... nice open-minded, thought out, academic approach to the subject.


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