As we watch gas prices approach 4.00/ gal, I have to wonder, who actually determines the price? Obviously the gas station doesn't, the distributor doesn't. The refiner it would appear does. But what determines the selling price? And, they certainly seem to do pretty well. Please discuss this.
Obama
No, I don't think you can pin that on him.
The price at the pump is a combination of the COST (defined by the supply chain), and what the market will bear, which is determined by each member of the supply chain from the refiner (who knows his distributors and their markets) to the distributor ( who knows who is is selling to and what the differences are regionally) to the local station (who looks at the guy across the street and understands that they have to try to match them).
oil speculators
The gubernment. Gas and road taxes make up a substantial portion of our end-of-the-line purchase.
But that's a consistent portion. It's not why gas is $2.95 one day and $3.15 the next.
In Ottawa, the gas prices used to change several times a day. Probably still do. The price change would be reflected across the city instantly. But the stations said there was no collaboration. Yeah, pull the other one, it's got bells on...
The cost of oil is also influenced by speculative investors who predict what the availability of oil will be in the future. There are several moving parts to what determines gas prices. One thing that seems certain........the consumer gets screwed.
It is in the oil industries best interests to keep costs high enough that they make a nice profit, but low enough not to reduce demand. After the price spike a few years ago, demand (in the U.S.) went down. Fortunately for them, China and India's gas demands are growing rapidly.
One thing I do think---------- letting drilling take place in ANWR or offshore won't reduce prices. It may make future supply more stable, but the oil industry won't refine oil that there isn't a demand for. Causing a glut of oil on the market would reduce prices, and they don't really want that.
That said, I don't really know for sure.....and I don't know of anyone who really does. You can try to put all of the pieces together, but the jigsaw puzzle always has a few missing spaces.
yea.. that's why the "Drill, baby, drill" call does not hold water. We do not have an oil shortage..
The oil companies raise the prices any damn time they please. Well maybe along with speculators. The increases now are due to the "talk" from Iran threatening to poo in everybodies corn flakes and the unrest in Syria. Nobody cares about Syria, but good Israel next door could get drawn into something that would pop the cork in the whole middle east. Like taking out Iran's nuclear facilities.
It all makes me mad that good Jimma Carter stopped development of the neutron bomb.
I've always wondered why the oil price for next month's contract, affects gas already in the ground...........and then how retailers milk the higher prices by bringing down the retail price more slowly than the wholesale cost.
Even when I worked at QT, no idea. We just a call from the big dogs that said, "Change the price to "x.xx."
Oh how I remember being 16 driving an '89 Escort (1998) and $5 gas would actually last me almost a week.
ABC said: For the three months ending Dec. 31, BP reported a profit of $7.69 billion, up 38 percent from the $5.57 billion posted a year earlier. Revenue was up 15 percent at $96.3 billion.
Don't confuse profit, with profit margins.
The oil companies do HUGE volume.
I got bored and "Googled" it: http://auto.howstuffworks.com/fuel-efficiency/fuel-consumption/gas-price.htm
pretty much says: "No easy answer"
I love the way rumors of oil price increases drive the price up instantly, but they have to use up all the higher priced gas in the tanks before they can lower the prices.
And it definitely doesn't follow the price of oil per barrel, except upwards, cause oil prices have been down enough to get gas below $3.00 a gallon and yet they've risen to $3.30-$3.49
DaveEstey wrote: oil speculators
Joe Gearin wrote: ....One thing I do think---------- letting drilling take place in ANWR or offshore won't reduce prices. It may make future supply more stable, but the oil industry won't refine oil that there isn't a demand for. Causing a glut of oil on the market would reduce prices, and they don't really want that....
Not only that (not that I fully agree with the collusion theory), but the amount of oil that would come out of ANWR in relation to the world oil market would be pretty small.
Along similar lines as the "Pipeline" that has been screamed about. People seem to forget oil is a GLOBAL market. Just because Canada pumps oil directly to a US refinery does not in anyway mean that refinery will sell the refined product below the global price. If you want that you would have to (gasp) nationalize the oil industry. Which wouldn't do much anyway, since the US would still be getting most of its oil from the Global market.
z31maniac wrote: Don't confuse profit, with profit margins. The oil companies do HUGE volume.
What incentive does any company have to post huge profits, when those could easily be filtered back into the company in the form of expanding, higher salaries, bonuses, etc..? My gut feeling is that companies want to post just enough profit to make the shareholders happy.
Mitchell wrote:z31maniac wrote: Don't confuse profit, with profit margins. The oil companies do HUGE volume.What incentive does any company have to post huge profits, when those could easily be filtered back into the company in the form of expanding, higher salaries, bonuses, etc..? My gut feeling is that companies want to post just enough profit to make the shareholders happy.
Apparently you have little idea how much is spent on finding, developing and refining oil. I'll suggest it's far more than you realize and dwarfs any perceived over-compensation to salaried/bonused employees and increased stock performance.
Sorry, I wasn't very clear. I'm not belittling the oil company in the least for its profits or compensation, etc.. $7.6 billion of profits on $96 billion of revenue just doesn't seem too terrible. I'm in another industry that has very small profit margins (grocery), so I realize how profit margins of the end product do not reflect upon the final profit margin.
From what I understand oil is one of the worlds most speculated resources. Geologists are never quite certain how much is left.
It's like having a Olympic swimming pool of M&M's. Your not quite sure how many you've got, but you'll start selling them at $5 a piece. Eventually someone tells you that you've actually got around 3,003,666,548.124 M&M's, give a take a few milion. But your customers are still buying M&M's like hot cakes at $5.
Eventually, on the other side of the pool, someone else has started selling M&M's for $3 a piece. You lower your prices to compete with him.
Others starting selling M&M at all kinds of different prices, and this constantly has you guessing about the price you should sell yours at.
Some countries are smart, they use taxes to keep the price of their M&M's are an outrageously high price, so while their flow of chocolate may be unstable, their dependence on chocolate stays the same. Their parents are denying them sweets. So they find their sweets elsewhere.
Other countries are stupid, they want M&M's as cheaply as possible, so their willing to piss into their end of the pool in order to claim all those M&M's for themselves.
Kinda gross...
I really can't answer that, but they should make up their damn minds.
Keith wrote: In Ottawa, the gas prices used to change several times a day. Probably still do. The price change would be reflected across the city instantly. But the stations said there was no collaboration. Yeah, pull the other one, it's got bells on...
It's still like that in SW Ontario. It starts out at max price in the morning, then reduces throughout the day. The further you get in the country, the more stable it gets. The station closest to me never changes, and is consistently 10 cents/L cheaper than in town.
z31maniac wrote: I've always wondered why the oil price for next month's contract, affects gas already in the ground...........and then how retailers milk the higher prices by bringing down the retail price more slowly than the wholesale cost. Even when I worked at QT, no idea. We just a call from the big dogs that said, "Change the price to "x.xx." Oh how I remember being 16 driving an '89 Escort (1998) and $5 gas would actually last me almost a week.
My understanding ( from a friend that owns a station) is that the margin for the station on a gallon of gas is only 5-10 cents on a gallon depending on how much competition they have. Having thousands of gallons of gas in underground tanks and how quickly they turn over that volume impacts how quickly they can respond to changes.
Most stations need to use the money taken in from the current tank to buy the next so any increase on the cost of next delivery needs to be paid for from the sales of current delivery. Therefore they need to mark up the cheaper gas in the tank to be able to afford the more expensive gas for the next delivery.
The slow drop is the reluctance to sell gas in their tank that was purchased at a higher cost for less than they paid. So they don't drop the price until they have purchase fuel at a lower price.
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