Hmm, could we have been blindly led to believe that OPEC is solely to blame for high gasoline prices at the pump? I find it quite enlightening to see gasoline prices DROP dramatically JUST BECAUSE airlines aren’t flying as much! Now, what does THAT tell you? (or, so the media claims…)
Will the real “OPEC” please stand up?
Supply and Demand.
Big drop in demand, too much stock, prices drop. The recession that we have suddenly realized that we are in is causing demand to drop. Its not just the airlines.
Also, OPEC has to worry about other suppliers that are willing to keep their production up even if OPEC cuts theirs.
Actually, I heard that the reason the gas prices are so low right now is that Russia has turned on the proverbial spigot, much to the chagrin of OPEC in general and Saudi Arabia specifically. Now, I’m not much on anti-arab jingoism, but I ain’t to hip on the Saudis nowadays, either. And I’d rather be friends with Russia, anyways, seeing as they’ve got atomic bombs and stuff.
So it’s a bit more complicated than decreased demand from the airlines, although that probably has something to do with it.
It’s the old S&D. Also just to add to what vibrotronica said - Russia is entering their winter and if they shut down their equipment will freeze up knocking them out of the oil game until a spring thaw.
Also look at the price of kerosene and dsl. (much closer to jet fuel then gasoline) those prices are still up ($1.60-$1.80 range around here). You would think that a drop in airline traffic (esp w/ ramped up home heating oil - and higher then normal temp’s which again is closer to jet fuel then gasoline) would have a more significant impact in those prices then gasoline.
What is the General Question here?
Well, to create one - why aren’t they dropping all that much near me (Seattle area)?
Here, they seem to have gone from the mid $1.60s, to the high $1.50s. In other parts of the country (see this thread) prices seem to be dropping radically - but those chiming in from a few places (WA, OR, CA, ID) are still paying considerably more. Some of it is obviously cost of living differences, but there’s got to be another factor that I can’t see.
i just think it’s crazy that a gallon of bottled water cost more than a gallon of gas
manhattan you know, I really don’t know. I think it is something like who controls the price of oil? - or at least that’s how I took it.
While there is no one definitive reason for the price increases, there are several contributing factors. One of the reasons is the use of different “boutiques,” or blends, of gasoline. About 30 percent of gasoline sold in the United States is reformulated, which adds 5 to 8 cents to the price of a gallon of gas. There are at least 50 different blends of gas that are used in the country, which are not interchangeable with each other. The need for different blends of gas limits the capability of the refineries to mass manufacture gas, and increase the supply of gas in the marketplace.
For instance, gasoline that is made for Oregon can not be sold in California. Gas made in western Maryland can’t be sold in Baltimore. When gas companies constructed the supply and distribution system, they designed it to handle six different grades of gas. A recent U.S. Energy Information Administration report found that one East Coast pipeline operator now deals with 38 different grades. These additional grades add to the cost of distribution, which adds to the final cost of gas. With all these different grades that need to be manufactured, gas refineries and distributors don’t have the flexibility to move supplies of gas around the nation to respond to demand.
If the reformulated gas is mixed with non-reformulated gas, companies have to downgrade the gas or re-blend it, which slows the distribution process, and impacts the supply of fuel. Reformulated gas must also be made differently in summer than in winter, to help reduce certain emissions that contribute to making smog. Refiners must empty their winter mix of gas to produce the summer mix, which impacts supply and affects prices. The shutting down of one refinery for even a day can have an effect on gas supplies and prices across the region.
Last year, when gas prices soared through the roof in the Midwest, Members of Congress asked the Federal Trade Commission (FTC) to conduct an investigation of market manipulation. In March, they released their findings, which indicated that there was no illegal activity involved on the part of the gas companies. Recently, the FTC ended a three-year investigation of West Coast gasoline prices, and found no evidence of antitrust violations.
The FTC concluded that “unless gasoline demand abates or refining capacity grows, price spikes are likely to occur in the future in the Midwest and other areas of the country.” In recent years, refineries have been operating at close to their maximum capacity, and a decrease does not seem likely in the near future.
The problem with higher gas prices can not be solved overnight. It is easy to blame the Organization of the Petroleum Exporting Countries (OPEC) and the gas companies for high prices. However, we have an aging and overloaded refinery distribution system that was never designed to accommodate the various blends of fuels used across the country. We have not built a refinery in the United States in over 20 years, and until we improve our system, we can look forward to higher prices at the pumps.
Once we get a comprehensive national energy policy (H.R. 4 is a good start) this may solve some of the problems. Also- by trying to reduce the # of boutique blends we could help reduce the cost of gas.
…the price you pay does not reflect the true price of gas. Gasoline is the highest taxed thing you buy in America. So if there were not taxes or just the regular sales tax, it would be a lot cheaper.
I would argue cigaretts are but gas tax is too high too.
shulmahn has given a good snapshot of the supply and distribution scenario as regards gasoline. Incidentally, Reeder, in the U.S., tobacco, alcohol and income compete with gasoline for what is most heavily taxed. European gasoline is another matter (very heavily taxed).
Nobody controls the price of oil.
Companies such as Exxon Mobil, Shell, BP, ChevronTexaco and TotalFinaElf together account for less than 15 per cent of world crude oil production.
The Organisation of Petroleum Exporting Countries (OPEC) - effectively made up of state-owned outfits such as Saudi Aramco and National Iranian Oil Company - is a far bigger player, with about 40 per cent of world output.
But even OPEC has had only limited success in forcing prices up or down. This is because:
1.) Their market share is large, but not dominant - there are significant non-OPEC producers such as Mexico, Norway and, in the news most recently, Russia, who follow their own agendas (OPEC has recently said they will only cut production if the major indies do as well, and Russia has said they’ll only cut 50,000 BOPD as opposed to the 150,000 BOPD OPEC asked for),
2.) Aside from supply and demand, crude oil prices are determined by unpredictable factors such as the general health of the rest of the economy, weather, major political events and market sentiment,
3.) The largest consumer, the U.S., produces ~45% of what it consumes, and every year +/-95% of wells drilled in this country are drilled by independents of whom most people have never heard, and who couldn’t control the price if they tried, but who definitely influence it with their aggregate production, and,
4.) Market dynamics continually change - Asia, South America and even Africa consume far more than they did 20 or 30 years ago, but have undergone economic swings that can dramatically affect their consumption, and thus world prices, rapidly.
Their are multiple varied inputs into the price of oil that no one and no group of people can ever expect to control.
And if you compare the price of gasoline today versus 20 years ago with almost any other consumer product you can think of, gasoline is cheap, even at last summer’s prices.