Who is financing Our Artificially Low Gasoline Prices?

[althecat]

Received the following by email.. tis a good point and one that has been bothering me too... here in NZ the price rise has been offset a bit by a rising NZ Dollar vs USD...

Would be interested if anyone has any clues on this question.

Al

********

Back in the early summer oil prices peaked in the $41 a barrel range and
the average price of gasoline hit some where near $2 a gallon. Boy Howdy,
consumers got concerned. Then, thankfully, the price of oil trended back
down and we all took a breath.

That breather though only lasted a short time. The price of oil has been
trending back up since August. In fact, oil, at over $54 a barrel, is now
about 1/3rd higher than when gasoline prices peaked at around $2 a gallon.

If the ratio of gasoline to oil prices were the same today, the price of
gasoline would be some where around $2.66 a gallon.

How is it that the ratio has changed? Why aren't American consumers
paying that much?

Is it possible that Oil companies have been eating that increase in order
to influence the election? Do you think that Oil Companies want George
Bush to be reelected? Do you think they that might forgo a little extra
profit in order to help reelect George Bush?

It isn't like they are losing money right now. Far from it. In fact Oil
companies are making money hand over foot right now.

Conspiracy theory? Well. we'll see sooner than later. If, after the
election, oil prices lunge forward there will be no need to even question
it.

Written by Angie Pratt ( http://www.politicalposts.com). Please run as a
Letter to the Editor, guest editorial or PoliticalPosts column.

[0007]

1. You can bet that right after the election the Americans will be

taking it in the shorts big time.....and ..

[leftofthedial]

7. right after the election

gas will go up a buck a gallon

[Randi_Listener]

2. Low?

I saw regular 87 octane for $2.18 today. Gas has NEVER cost that much in Palm Beach County.

[pscot]

3. In yesterday's Market thread

there was an article about Iran's planned switch to Euro pricing for its oil. Apperently Russia is also considering a switch to the Euro. In that event any fall in the value of the buck vs the euro would mean higher oil prices for us in addition to whatever oil prices do in real terms. Think hyper-inflation.

[phantom power]

5. There's lively speculation about the possibility that

the threat of the rest of the world going to the Euro-petrol system is what sparked the Iraqi invasion. And the corrolary is that we may invade Iran to prevent them from doing just the same thing.

In the end, this is just a finger in the dike. We might be able to pick on Iran or Iraq, but we can't occupy Europe, Russia and Asia.

If you haven't seen this, you'd probably find it interesting:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x78384

[pscot]

9. I had not seen that post

Thank you. I now have a broader and more perfectly depressing understanding of the morass we're wading into. It really seems that our best hope would be to establish some sort of cooperative relationship between oil producers and consumers to manage the dwindling resource for the long term benefit of everyone. Not bloody likely with the neo-cons in the saddle.

[HereSince1628]

4. Well, it seems you are paying the globalization tax

to the robber barons.

If Americans can't raise the money, the rest of the global consumer class will be expected to do so.

Frankly, this is interesting but only fair. American workers shouldn't be the only one to suffer for the sake of global feudalism.

The reality that _all_ workers in developed nations are suffering ought to bring "us" together in a way not seen since the labor movements of the early 20th century.

We are NOT ignorant OR powerless. We are only outside the elite investor class.

Life to the Revolution!!!!!!!!!!!!!

[bobbyboucher]

6. That's what I want to know. We had this price when it was $35 a barrel, n

it's $54? Something strange is going on.

[loudsue]

8. I'm SOOO glad you brought this up, Althecat....

I was just about to ask the same question. Not only that, but since gas prices have been RELATIVELY stable, it would appear that there is some PRICE FIXING going on, no?

If the oil companies were all charging almost $2.00 per gallon when a barrel of oil was $40.00, and they're also charging just barely over $2.00/gal when oil is at $54, then it looks a little bit like they're all in collusion....NO??? Isn't that ILLEGAL in most countries? I mean, that's a pretty wide spread in the cost between what they're buying the oil for, and what they're selling it to consumers for. So, if we didn't have some sort of collusion going on, wouldn't there be MORE COMPETITION in gas pricing with a spread like that?

Kerry REALLY needs to bring this up during the debate tomorrow night. It also REEKS of repuke/oil company election campaign manipulation.

And didn't the Saudis promise Geedubya to "keep oil low" until after the election? Didn't that come out in one of the hearings (was it 9/11, or what? I can't remember) or on the news?

:kick::kick::kick:

[Egalitariat]

10. This isn't the fun answer, but....

it is the economically sound one.

The price of a barrel of oil most commonly quoted in the news is not how much a gallon costs today, but a couple of months in the future. It is a futures contract. So the gasoline in your car now was probably shipped to the US a couple of months ago, and it was probably bought (with a futures contract) a couple of months before that. So the gas in your car might have been made with $40 oil or $43 oil or whatever (some price lower than the $54 futures price quoted in today's news).

Of course, everyone knows that crude oil prices are set by the supply and demand of the world market. Crude oil is, after all, one of the very few true perfect market economies.

The price of unleaded gasoline, however, is also influenced by the supply and demand of regional refinery markets in the US. Gasoline standards are not the same across the US, and if your particular refinery is at peak production, then you are going to pay more than people who live in areas whose refinery has excess capacity.

In other words, there's more to it than the price of oil.

And if the oil companies are taking a hit right now on costs to keep prices low in hopes of re-electing *, you'll really be able to tell when they release quarterly financial statements, because they will have hemorhaged massive amounts of cash.

[phantom power]

11. Q4 statements won't be released until Jan 2005

Will any of this be evident from Q3 statements?

[Egalitariat]

12. It depends on the particular oil companies' fiscal year....

and also depends on when they started taking the hit on absorbing higher costs on oil, if indeed that's what they're doing.

The hobby economist in me says there's no way the big oil companies could pull off such a conspiracy from a logistical planning or financial standpoint. The Nothing-The-Right-Wing-Does-Surprises-Me cynic in me says it's something that can't be overlooked.

[phantom power]

13. The futures angle would also explain it. The price spike started

within the last couple months. So, we might expect a price surge in gasoline soon. There have been a few reports of rising prices today in DU.

[althecat]

17. While this is true... for as long as I can remember we have been told...

That the price that we the consumer gets to pay is calculated by the oil company on the basis of what it costs the oil company to replace the gallon of gas that I just bought.

That is. While the gas they sold me may have cost them less... because it costs them $54 a barrel to stick another gallon in their inventory that is what they charge.

This is why in the past oil prices have gone up as soon as crude goes up...

[w4rma]

14. Big oil companies were price gouging us before and probably still are at

these prices. They just aren't price gouging us as much, because they want Republicans to retain control.

[IdaBriggs]

15. Prince Bandar was on television promising to keep prices low

before the election back in July as a "personnal favor" to the Bushies. Anyone have the reference? :)

[supernova]

16. Wow! So does Bandar

want * gone, if prices are going up before the election?

[althecat]

18. Ok... now some graphical evidence of the disconnect...

Here's the price of crude..



Now have a look at these two graphs..





These show that the disconnect between gasoline and crude oil began in May. What else happened in May?

[althecat]

19. Latest petroleum report.... there is no excess in Gasoline supply

that might explain the disconnect in prices...

From
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt

"With refinery production increasing
significantly last week, motor gasoline inventories rose by 0.6 million barrels,
but remain in the lower half of the average range. Distillate fuel inventories
continued to decline last week, dropping by 2.1 million barrels, and are in the
lower half of the average range for this time of year. Total commercial
petroleum inventories remained flat compared to the previous week, putting them
slightly above the lower end of the average range."

[althecat]

20. Finally... what petrol should cost if there was no disconnect $2.50 a gal

Between May and Now diesel has risen 19%...

If gasoline rose by the same margin it would now average $2.50 a gallon.

[Soup Bean]

21. Gas probably needs to cost more...a lot more.

Jon Stewart once said that we "get the employee discount" because our army protects most of the oil fields. He's right.

If you factor in the military budget, which goes mostly to hold our Empire together, gas probably REALLY costs $10 - 12 per gallon.

People don't really see that cost because most of their tax dollars go for military activities, through one conduit or another. Our gas prices ARE artificially low.

If we didn't think that we were paying cheap for gas, I don't think our country's infrastructure could function. We don't really have anything BUT roads out here in rural areas. How in the world would our current economy absorb the blow?

We should have changed our economy 40 years ago. We messed up, and we'll pay the price soon enough. It's going to hurt. This war is just the first symptom of the end of the industrial era.