Oil hits $83, Dubai takes stake in NASDAQ
The price of a barrel of crude is making record highs, ending the day yesterday at $83.32. In other news only connected if you were in the smoky back room, Dubai announced a deal to become the biggest stake holder in the NASDAQ. Senator Schumer is concerned but other than him, no one seems to care. The president was asked about it and said "we're going to take a good look at it." Sadly, even if the conspiracy does work, crude oil is traded on the NYSE. So prices at the pump should go up soon. Even though it has been going down recently. Gas is made of crude, so it has to go up at some point. Does anyone understand how gas prices work?
[Source: CNN and tipster Henry]
Reader Comments (Page 1 of 1)
Don 12:35AM (9/22/2007)
Ooo, Ooo! I know, I know!
A butterfly farts in Thailand, and prices go up!
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Joseph 1:48PM (9/22/2007)
"Gas is made of crude, so it has to go up at some point. Does anyone understand how gas prices work?"
Supply, demand, refiniries, and a whole bunch of other stuff no one really understands. :)
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T2 11:36AM (9/22/2007)
"Does anyone understand how gas prices work?"
Nobody will deny Gas prices aren't 'worked' alright. This year its been a little more blatant.
Up here in the True North I've been wondering the same thing. Prices were still sitting a few cents below $1 per litre yesterday I noticed, I'm mystified how they could be that low just now. Last time when oil first broke the $55 a barrel mark we saw a an instantaneous rise to $1-10 pricing here. Some stations caught on the hop had to use cardboard signs as their electronic signage maxxed out at 99cents !
Here's my take, the last weeks of September experience a peak in returned leased vehicles together with a surge of buyers as the 2008's are now in. It seems far fetched, but a big rise in gas price to $1-20/litre at this point would dampen enthusiasm for 3.5L V6 vehicles and may be the tipping point to move many leasees and buyers
towards smaller engined options or hybrids. This of course is not in the short term interest of the oil companies who are probably not averse to gradual downsizing but don't want to give the movement a sudden shove that would promote a financial blowback in their own industry.
Those who wish to ensure a constant cost per mile can make the switch those who don't can pay the price. Above all the oil industry needs to show that the market is not so captive. You coulda'
bought a Prius/Altima nobody was stopping you, they would say. Their aim is to maintain a gradually increasing constant dollar input while
putting out less product from their depleting reserves. Fuel efficient vehicles must be in their longterm interest but just not right away.
"In the meantime mass marketing will continue to work because of the lack of a learning curve."
I expect by the the end of October we'll start to see where prices are heading at the pump for $83/barrel oil.
T2
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rgseidl 11:45AM (9/22/2007)
Does it really matter who owns the exchange itself? It's just a place for traders to buy and sell listed companies. Dubai isn't exactly Iran.
As for gas prices - presumably, you mean gasoline rather than natural gas - they go up in summer because US refinery capacity cannot meet demand. Finished gasoline has to be stockpiled in spring, which means capital is tied up for months.
Even so, roughly 1 in 7 gallons still has to be imported at elevated cost, mostly in summer and mostly from Europe. The oil may be traded in US dollars, but the refinery overheads there accrue in strong currencies such as the Euro.
All of this, plus the perennial Hurricane risk to the many refineries lining the Gulf of Mexico, plus increased demand due to vacation travel, drives up gasoline prices in summer. The premium is even higher in states that follow CARB air quality rules, where ethanol has to be brought in expensively by rail or truck from the Midwest to reduce summer smog.
The higher oil prices now actually are already showing up in US gasoline prices. It's just that the superimposed drop due to the end of the summer driving season is temporarily masking the effect. Look for prices at the pump to rise again soon.
http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
In particular, check out the History tab and the link to inflation-adjusted real petroleum prices.
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