Price of oil down, but gas could hit $2.50 before spring
cc by taberandrew
You may have noticed that the price of gas has been going on an upward creep following its dramatic collapse last autumn. The climb is happening despite a continuing drop in the price of oil. There are estimates that the price of a gallon at the pump may even reach $2.50 before spring, which may be better for consumers than predictions we heard last winter, but may not spell good news for attempts to revive the economy.
What's the reason behind the seeming discrepancy? It's not an Al Gore-led conspiracy (at least, we don't think it is). Apparently, the price of oil that is quoted in most places is from oil drilled by in west Texas by West Texas Intermediate (WPI) which, in a weird market price inversion, is now cheaper than the oil that reaches our refineries from places like Venezuela and Canada. The refineries, for their part, don't see demand increasing any time soon and have cut their production levels. That limits supply and, voilà, we get higher prices. While we don't enjoy paying more for gas than we have to, perhaps a moderate rise from current levels may keep some folks from needlessly buying vehicles the size of container ships to commute in.
[Source: Associated Press]
Reader Comments (Page 1 of 2)
jharlan 10:34AM (2/16/2009)
We're not stupid. We know that the price of gas at the pump is the result of market manipulation and doesn't strictly follow the law of supply and demand because of the egg sucking bastards.
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ecd4me 11:11AM (2/16/2009)
eggs? I dont think so.
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Brn 11:30AM (2/16/2009)
It's always one convoluted BS excuse or another. As long as demand is down, the price should remain down. Anything else is garbage.
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why not the LS2LS7? 11:48AM (2/16/2009)
Oh, I see. By some weird fluke (i.e. a scam) the price of gas isn't going to drop to match the price of oil.
What were Exxon's profits last quarter? Oh yeah, that's right, $45 billion.
Yeah, sounds like a results of a flukey price inversion, it's not that we're being soaked.
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michael pettibone 12:48PM (2/16/2009)
Gas will soon be 2.50 in cal because the state is putting 12c additional tax on it.I just wish it would stabilize somewhere so that Detroit and the buying public has some idea what to expect.
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moogy 12:56PM (2/16/2009)
The price of gas is set but a few companies... that's all. They want to make more... we loose.
Gas should be a fix price and regulated buy the government.
I already know what the price is going to be this summer. It doesn't take a rocket scientist to figure this one out.
In Canada they are going to push the cap from 1.50$ to 2.00$ a litre. Don't know what this will represent for the rest of the world, but expect 25% increase from last summers high.
Getting ready to be a psychic. lol
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Charles S 2:26PM (2/16/2009)
Did anyone here read the article?
I'm all up for the conspiracy theories and yes, no doubt that someone is making money off our backs, but it's equally naive to think that crude prices and refined gasoline prices should ALWAYS go hand-in-hand. It has NEVER been that way and people should give up such a notion and move on.
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noz 3:16PM (2/16/2009)
We need high priced fuels. This is the only way we'll force ourselves to get off the stuff.
The oil companies face a dilemma. Keep prices artificially low and keep us on drugs? Or jack up prices to make even more profit at the risk of us telling them "FK U".
I hope they hike prices...they'll kill themselves in the long run and that's what we need.
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SteveO 5:06PM (2/16/2009)
I'm pretty sure that when gas prices spiked about 6 months ago it led us into the recession/depression we are still trying to recover from.
But yeah, high gas prices are great. Lets make the economy even worse; we'll have more foreclosures, less spending (i.e. putting money back into the economy) and everyone will be completely stressed! It'll be wonderful!
SteveCT 10:52PM (2/16/2009)
Gas prices didn't help, but they were a symptom, not the disease. What happened was, traders were already starting to lose money on securitized mortgages and other crazy financial schemes, so they bet big on oil. Granted, high oil prices made it harder for people to pay their mortgages, but they were by no means the only factor. Anyway, eventually enough people were defaulting that the bottom fell out of a number of securities markets, a panic ensued. Now people are buying less stuff, forcing companies to lay people off, which leads to even less consumer demand. It's a vicious cycle that we need to break out of before it does too much damage.
The root cause of all this is the stagnation of the minimum wage, combined with Wall Street's obsession with quarterly earnings growth, both of which have forced ordinary people to work harder and harder (and in many cases, go deeper and deeper into debt). The more you squeeze the little guy, the more money he has to borrow to maintain his standard of living (because he and his wife, if he has one, can only work so many hours during the day). And then once the creditors start losing money and stop lending, the whole house of cards starts to come crashing down.
noz 1:07AM (2/17/2009)
SteveO:
Tough sh^t if it hurt people who bought huge cars that needed filling twice a week...too bad.
But nevertheless, the $3K a month mortgage or the $700/month car payment does hurt does it now? Just fuel prices.
Are you one of those losers who lost your house because you couldn't fill up your 8 passenger SUV?
If so, let me play my violin for you.
SteveO 3:40AM (2/18/2009)
SteveCT:
I think that we are pretty much on the same page. High gas prices were the straw that broke the camel's back. I also agree that it is in our best interests to get off our dependency on foreign oil, however I do not believe that spiking gas prices is an instantaneous fix to this problem. I highly believe that if gas prices spike again that we would have many of the same effects as the last time they did. While I think it will be many, many years before we stop needing gasoline I also support that we need a viable energy alternative NOW to start switching over to.
noz:
Actually I'm the college student whose car is the SUV he was "forced" to buy off his parents; and who worked all last summer for a little more than the cost of gas to get to work and back. And while my family has been very fortunate that we haven't been affected by this situation, I still feel terrible for those who have. And higher gas prices again would just make things worse...again.
noz 3:44AM (2/18/2009)
SteveO....
That's too bad. I had to make do without any car while going to college. So you won't mind if I don't feel to badly for you driving around in a car you can barely afford to fill up. You're a college student....figure out another way.
SteveO 3:50AM (2/18/2009)
Like many other Americans I did figure it out. I cut out spending money on going out, or on new stuff. Funny how that led to the recession/depression we're in.
Now assuming you meant another way besides driving at all, how would you propose traveling 40 miles (one way) from a rural town without public transportation to the city with the jobs?
noz 3:52AM (2/18/2009)
If you have to drive, then doing so with a more efficient car comes to mind...pretty simple really.
SteveO 4:08AM (2/18/2009)
The cost of trading in an SUV for a more efficient car outweighs the amount I would have saved in gas.
My solution was to carpool when feasible, and borrow a 24 MPG car [for the carpool] when possible.
gorr 3:36PM (2/16/2009)
I remember these folks working in the energy domain. They had provoked the end of the planet before this one with human experimentation like the germans did. Since the beginning of the reconstruction of capitalism, industrialisation and arts & civilisation beginned by jesus more then 2009 years ago, these chaps in the energy domain can only understand one energy source only, own by them only,
sold to humans with toxicity and traded hard each day. They want to find the human genome too because they think the human race is an anormality so they have to control it
like they control energy. They have to study endlessly humans bodies( medicare, us army, zone 51, irag, guantanamo) capitalism( wall street, opec, irs, white house, GM, subsidies) ,
natural ressources( crude oil, coal, uranium, gold, platinum, iron, natural gas, lithium )
They despise water, corn, vegetation, animals, planet earth, women, men, uncontroled chatting website. inventors, musicians, arts.
Peoples have surrender to them 85 billions years ago and since then have lost everything and never had a normal fullfilled life. Since then im the only one believing endless energy and millions of peoples have suggested to me to die in pain like them.
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blah 5:29PM (2/17/2009)
Steal gas. Not from car gas tanks because that hurts the consumer, but straight from the oil companies.
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Carney 3:08PM (2/18/2009)
There's a lot of confusion about who's to blame about gas prices.
Let's check the source.
In November 1999 the Saudi oil minister Ali al-Nami told the Houston Forum that his country's 'all inclusive' cost of producing petroleum was $1.50 per barrel, and its cost for discovering new reserves was bout $0.10 per barrel.
http://tinyurl.com/cssopn
The rest of the world's equivalent price averages about $5 a barrel.
But OPEC exists solely to artificially increase the price by reducing production below market demand. Which they do.
The oil companies, gas station owners, and so on that get idiot congressmen, media, and man in the street yahoos yelling at them are just passing on their high costs to the rest of us. Their profit margins at around 8% are far below the pharmaceutical industry (which has to eat the cost of regulations, R&D, and foreign price controls), or Apple Computer which has incredible 30% profit margins on its iPods and computers.
Yelling at an Exxon executive while ignoring the Saudis is, to put it charitably, a demonstration of one's ignorance.
Need I mention that at the most recent OPEC gathering, the cartel decided to drastically choke down production still further so as to spike the price back up again, after prices had fallen in large part thanks to the world economy collapsing under their heavy burden?
The culprit is OPEC, people! Non OPEC oil production has closely tracked world population and economic growth, doubling just as those two factors have since the late 70s. But OPEC's production gyrates wildly according to the cartels' arbitrary whims, jacking up prices, then collapsing them again to profit-take or punish the USSR or hurt the synfuel industry. Last year OPEC production was UNCHANGED since 1978, despite, again, the world economy and population doubling since that time, and OPEC having the deepest, easiest to access, and cheapest reserves anywhere.
That's like a cruel master putting a tight collar on a puppy, and refusing to remove it as the puppy grows and begins to choke.
THE CULPRIT IS OPEC.
And we must break them, by switching away from oil. The most practical, affordable plan to achieve that is switch from a petroleum to an alcohol economy by mandating that all new cars be flex fueled (alcohol compatible), a mere $100 per car expense for automakers, and tariff OPEC oil if they try to crash the price to kill alcohol.
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hie 5:41PM (2/22/2009)
The answer to this problem is so simple that it annoys me. The Government it going to spend a trillion dollars to save the economy, which some doubt will be effective. My solution is simple.....have the US Government build FIVE refineries and have them refine the crude. Then, who cares is one of the OTHER ones go off line and they would supply a steady supply and keep prices stable. Come on, how much do they expect us to take. I do believe it is all a matter of greed.
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