Sorry, I Didn't Want to Use Gas Pumps AGAIN !!!
Yes, I'm still alive... I'm feeling a bit better than last night. The aches are mostly gone, and I'm getting a bit of a cough. But, like the trooper that I am, I went to work today, and I've got some Thera-Flu and Minute Maid Pomegranate Blueberry Juice. It's isn't the greatest tasting stuff, but it works good.
Anyway, even though I'm under the weather, I still try ot help you guys out, and to answers the big question you might have. Bobby came up with a good one for me last week. Why are gas prices going up again? I was wondering myself. A month ago, i had predicted that gas would go for about $1.20 a gallon, based on crude oil prices. Instead, we're at 1.69 a gallon, even though crude oil dropped to $34 a barrel. So, the question is......... WTF ??!!
I think I have the answer. If you have learned anything from SC6's economics classes, it's that all prices are based on supply and demand. Normally, low demand for oil and a glut of supply would make prices continue to drop. However, what OPEC hasn't been able to do, those a bit further down the supply chain have...
The answer lies in one simple question: Can you pour crude oil into your car and drive? Of course not. It needs to be processed or refined. That is your answer. The refineries have very low margins of profit, and when there is too much oil available, they tend to slow down production, and when they do, there is less gasoline available. It's similar to last summer, when Hurricane Ike kicked Houston's ass. The oil platforms weren't the problem, it was that the refineries closed for two weeks.
Now, the good news. It can't last forever. The refineries have to make gas, or they don't make any money. It's a temporary act, and soon, they will be making plenty of gas again, the market will glut , and prices will drop. Short term tactics like these will work for a little bit, but eventually it all come sback to supply and demand, and time is on our side..
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5 comments:
West Texas sweet crude sets the price that the world follows. In the US they can make money at selling crude sweet crude at 25 per barrell. The imported stuff is a bit different quite a bit. It takes more money to process ok. Down in Chavis territory they have to make 85 or so per barrell to make money. The price could drop so low that you cant make money and the refinery will have to raise price at the pump. Here in the oil sands they have reached the point they are closing a lot of stuff down due to the low price as it takes more to make than the world market is willing to pay.
hope so
Did you see 60 Minutes this week? That piece on oil was great and very telling. Oil prices don't have anything to do supply and demand anymore. During the summer, as the price skyrocketed, the supply demand gap was leaning more and more towards the supply side. It made no sense.
They had one of the big commodities futures guys on there and he really knew his shit. Some rep for the petro sellers had a great line. It was something like:
I love to ask people who they think the biggest oil company is. They always answer Chevron, BP or something. They are always shocked when I tell them it's Merril Lynch.
Bernie Madolf and Geroge Soros are more to blame for the gas prices, though it is easier to blame Bush...
Yeah, speculators play a big part in it, especially when stocks are tumbling. When stocks drop, commodities generally go up, due to it's tangibility. But only so much - it's still mostly supply and demand.
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