Why is "lack of demand" being an excuse for lower gas prices?

[Deja Q]

I see the same amount of traffic when driving every day.

Or am I missing something?

[B Calm]

1. Must be higher demand for diesel now....

[Bernardo de La Paz]

2. You are missing something.

[achtung_circus]

3. The first thing that springs to mind

is your specific location.

What you see may be non-discretionary use. The first losses in demand are discretionary, what is called elastic demand, that extra trip to the store, the extended road trip, the non-really-needed use.

Non-discretionary and inelastic demand would include tranport trucks (consumer demand remaining constant), commuting for those who have no alternatives.

What is the scale you see? It is extraordinarily difficult to accurately count traffic.

[Paulie]

4. People are driving Time Distort 5 instead of 10???

Won't make a difference since I expect StarOne to fall any day now. :hurts: :nuke: :hide:

[Independent thinker]

5. fuel prices dropping

Bear in mind this is a very simple explanation, but it should provide
enough insight that you can understand the concept of supply/demand.

When there is a high demand for a product, the price tends to rise for
a number of reasons.

1a. factories work overtime in order to meet demand, increasing the
cost per unit due to overtime pay, etc.

2a. suppliers of raw materials increase their prices due to demand.
PLUS an increased in demand for the raw materials can cause their
production facilities to work overtime, which can cause an increase
in costs similar to item #1.

3a. Retailers can ask a higher price because the consumer is willing
to pay the higher price in order to get the product.


When demand goes down, the reverse happens.

1b. factories scale back production, minimizing or eliminating
overtime pay for workers.

2b. Suppliers of raw materials when faced with weaker demand lower
their price, just as they would have increased their price for the reverse reasons.

3b. Retailers when faced with less demand for a product lower their prices in an attempt to "move the product".


Now I would estimate that item 3a and 3b isn't in play here. What we
are seeing is the effect of the other two.

While you may be perceive there is no change in demand for ga
because you see the same amount of traffic, is that traffic during
peak rush hour?

And a BIG factor is the refineries. The refineries were at capacity,
they the hurricanes took several off line. Refineries have gotten
back online and the supply has caught up to demand instead of demand
outstripping supply. Add to this a measurable decrease in overall
fuel consumption and the prices can and will fall.

Total consumption is what is causing less fuel, people are driving
less, driving more fuel efficient cars, etc. That doesn't mean you
will see less cars when you are out driving. In fact the part of the
world you live in may not have changed the fuel demands drastic-ly,
but all it takes is a little bit under different factors.

[newyawker99]

10. Hi Independent thinker!!

Welcome to DU!! :toast:

[TheFarseer]

6. people aren't taking weekend vacations?

I think that's the official explanation.

[Neil Lisst]

7. Katrina and Rita drove prices UP. Now the downfall follows ...

For weeks, many in the Texas and Louisiana areas drove prices up with topping off, while production from refineries was down. As both those trends reverse, supply overtakes demand, and the price falls.

[B Calm]

9. Now explain the spike in diesel!

[nashbridges]

14. The spike in deisel

Is because it's produced by the same process that makes heating oil. Winter is coming, and heating oil stocks are rising because of anticipated demand.

There was a thread on this about three days ago.

[B Calm]

15. I wonder how many people heat their houses with oil? do you?

[B Calm]

19. Only 2 percent of homes in US use heating oil.

http://www.naturalgas.org/overview/uses_residential.asp

[tammywammy]

21. Also, the increased price is due to

the refineries already gearing up for the reformulated diesel that has to be out soon.

My uncle works at a refinery and specifically talked about how there was going to be at least a 50 cent increase in a gallon of diesel because of the new reformulation.

[Coastie for Truth]

20. We beat that up over in the "Environment/Energy" forum

at . I posted an engineer explanation at

Read the "Petroleum Refinery" examples in

1. "Linear Programming: Methods and Applications" by Saul I. Gass

2. "Linear Programming and Extensions" by George Dantzig

3. "GASP - a General Activity Simulation Program" by Phil Kiviat (one time neighbor and a good Dem), Julius Belkin (relative of a relative), and NR Rao (night school prof).

It's called "constrained optimization" - or "how do you twiddle the knobs in your refinery to maximize profits."

[Justsayin]

8. Low poll numbers for the chimp?

That is my guess although they have been low for quite awhile.

[spanone]

11. Didn't 'our president' ask us to conserve. So it's gonna cost us more.

Hey, the fucking Oil Magnates win either way. Demand is too high or too low, take your pick.

[teryang]

12. The lower prices are the result of european refined products...

...arriving in the US from their strategic reserves. In part, at least. There has been some reduction in demand. Smaller second car use where available. Less discretionary travel.

[lateo]

13. it is bs

[dsc]

16. They mean overall fuel demand

so it isn't just gasoline but things like heating oil, electricity, etc. This season has a low demand for energy due to not having to use air conditioning or heat in much of the country.

[ComerPerro]

17. Don't worry, they'll go back up after this weekend

And, I wouldn't exactly call them "lower".

Lower than what they were, yes.

But still unacceptably high, IMO.

[Coastie for Truth]

18. You are missing something

In my metro area - personal auto driving appears to be down (looking at traffic on the major expressways), transit ridership is way up (I live in a planned community - transit village, the Light Rail is a block away -- and it looks like transit ridership is up), and people do seem to be planning and combining trips.

It's all explained here -- , "supply and demand"

[CHestonsucks]

22. My question is

why does the price of gasoline that has ALREADY BEEN REFINED from oil purchased at a LOWER price rise when the price of CURRENT crude oil rises?

I smell capitalist pigs.

[Greyhound]

23. Your nose is correct...

The price of gas is based on oil futures not actual price of oil. Add in the quick rising - slow falling pricing scam and you've got an industry that should be nationalized.

[DemocratSinceBirth]

24. How Can We Nationalize What Isn't Ours...

The price of gas is a function of the price of oil and we get over sixty percent of our oil from overseas...

[Greyhound]

25. No. The price of gas is based on oil futures.

IOW it's based on what the gamblers in the commodities markets think it will be, and that can be manipulated as easily as putting out a false story about an impending refinery disaster, or an imminent stockholder revolt.

[DemocratSinceBirth]

26. Well- Anybody, anywhere can buy oil futures.....

whether they are in america or australia....

[Greyhound]

27. Of course anybody can buy them, but very few have the means to

manipulate the whole market. Basically the price is set by the largest brokerage houses, determined by how many commissions a given move will generate.