Gas prices: to what extent...

In your opinion, to what extent are gas prices influenced by:

a) The costs of exploration, extraction, refining, transportation, and marketing–in other words, the costs that we “classically” think should drive the price of most goods?
b) Events and dynamics that are unique to the energy market, such as natural disasters, political unrest, the seasonal refinery changeovers, etc. ?
c) Direct and either covert or overt manipulation by petroleum product-producing companies, either with or without the assistance of world governments?

My analysis is that the market is too volatile for a), not volatile enough for b), and too volatile for c) to be primary forces, respectively. Therefore it must be a mixture of all three, as prices rise too swiftly and drop too slowly for a combination of a) and b), fluctuate too wildly for a combination of a) and c), and the fact that oil companies still massively invest in exploration suggests against a combination of b) and c). What do y’all think?

If by “petroleum product-producing companies”, you mean companies like ExxonMobil, BP, Shell, etc, then they have very little influence.

Most of the world’s oil and gas is under the control of state-owned petroleum companies. And several of those states form OPEC. So, to the extent OPEC determines quotas on member nations, yes, there’s some very well known and open manipulation of the market.

Of course, OPEC nations work to stabilize gas prices and keep them from being too high. Both excessively low and high prices work against them, too.

Pulled right out of my ass:

a) 50%
b) 30%
c) 20%

a) Exploration and production is not trivial
b) Although a fungible asset things like the Iran embargo do in fact inflate prices
c) Happens more than we probably know

As I said it’s just a WAG.

WAG=Wild-Ass Guess?

And before we dismiss your answer due to its origin, we should at least know how accurate your rectal oracle has been in the past. For all we know, it might have been quite reliable.

In a world economy with volatile currencies, much of the rise and fall of oil/gas prices is due to the value of the dollar. When the dollar is strong, the price of oil falls; when it is weak, the price of oil rises.

Given that most gasoline is paid for in currencies other than the dollar, can you explain why that might be? Also, can you show a correlation between weak/strong dollars and world gas prices?

Obviously drilling and explorations costs put a floor on the price of oil. However anyone who follows the news knows of plenty of examples where things like unrest in the Middle East boost prices, and news of a potential drop in economic activity depresses prices. OPEC has already been mentioned for C. In California, at least, gas prices are also influenced by refinery manipulations, such as several refineries just happening to go down for maintenance at the beginning of summer driving season. Just a coincidence? Given that it happens frequently, I don’t think so.

So a good chunk of the base price is A and C, but most of the variance seems to be B.

The trouble with option “a” is that not all oil is the same. If you just so happen to be filling up your tank with oil that came from an established Saudi field that’s been producing for decades, the actual cost to produce that gallon of fuel is probably a lot closer to the pennies per gallon they pay in that country. If you happen to be gassing up with stuff from the Alberta oil sands, then the price probably does come pretty close to reflecting the cost of production.

Gas is made from oil. Oil is traded in dollars. If the euro declines against the dollar, the price of oil rises for the Eurozone. If the Japanese yen rises aganst the dollar, the price of oil drops for Japan. If the dollar declines against other currencies (or gold), the price of oil rises for the US, causing the price of gas to rise, without any change in supply or demand.

Gasoline, however, is traded in a variety of currencies. The price of oil is only one component of the price of gasoline.

One gigantic component.
All of your variables a, b and c are factors in the price of crude oil.

  1. Supply
  2. Demand

The market for gasoline clearly does not follow the law of supply and demand, as controlled (non-free) markets tend not to do. Supply and demand are influences, but the relatively small amounts those two factors fluctuate do not account for the gigantic swings in the price of the commodity.

Many apologists for the industry have tried to assert that the price swings are due to the fact that demand for gasoline is greatly inelastic, but that’s been shown to be untrue. In fact, I surmise that the cartels, etc. underestimated how much demand would drop during the previous Great Gas Rape when U.S. domestic prices soared over $4/gallon (2008-09, if memory serves).

This is your opinion, correct?
You have a very bad habit of stating things you cannot prove as absolute fact.

You have a very bad habit of tendering gratuitous, misplaced criticism. And your poodle wears army boots.

If gasoline prices obeyed the law of supply and demand, then the price would go up when supply decreased or demand increased; it would go down when supply increased or demand decreased.

These things do not happen. And no, call me all the names you want, but I’m not going to CITE CITE CITE. That makes me a horrible person, a liar, and an idiot, I know, but I refuse to CITE CITE CITE what any fool can clearly see for himself. Unless you can somehow attribute the 100% rise in the price of a commodity to a 5% increase in demand, I’ll have to leave the burden of proof on you. Horridly unfair, I know. Feel free to speculate on my personality, ancestry, blood type, failings and flaws, etc. as to why I won’t CITE CITE CITE for you like a trained seal.

In any event, it’s foolish to assert that the market for petroleum products is anything resembling a free market, and the law of supply and demand only applies in such a market. Economists cite the New York City rent-controlled housing market as a prime example of an unfree market wherein the law of supply and demand is inoperative. My source for this is a textbook written in part by Ben Bernanke (I thought I’d throw you a bone).

I am done here.

Patently false. An outright lie in fact.

Just to be fair there sources state that supply and demade are seriously moving gasoline prices;


I admit this one seems very biased

http://money.cnn.com/2011/01/21/markets/gasoline_prices_rising/index.htm
CNN so probably a litte better

http://www.foxnews.com/opinion/2012/03/12/8-secrets-about-gas-prices-every-american-needs-to-know/
Fucking FOX even admits it’s supply and demand! Jeasus Fucking Christ!

http://www.usnews.com/opinion/blogs/on-energy/2012/06/13/supply-and-demand-the-key-indicator-of-gas-prices
US News And World Report, guess what they say?
Yep - SUPPLY and DEMAND!

See how that works?
We back up our statements with citations.

Care to give it a try?

Oh, good. One down.