Can anyone explain gas prices to me?

Posted: 5/2/07 at 1:58pm

Oil is $8 a barrell cheaper than it was a year ago, but gas Prices are 20 cents a gallon (or more) higher than last year. I read that lowered production and high demand are driving up gas prices but wouldn't that lead to shortages? Has anyone seen a station "Out of Gas"? (Don't laugh it happened in the 70's)

I am reading that experts project prices to hit $4 a gallon across the country this summer (I saw $3.99 in San Francisco last week) and the oil companies are making RECORD profits.

What I draw from this is that oil companies are abitrarily jacking prices as high as they want and making mountains of cash. Can anyone see any other scenario?

[tazber]

Posted: 5/2/07 at 2:06pm

I can explain it very simply:

GREED

[chicolini]

Posted: 5/2/07 at 2:08pm

It's not just the cost of oil that drives gas prices, it's also the refining costs. That's why prices jump so high when a hurricane comes through and destroys refineries. We don't really have adequate refinery capacity in this country to handle increased demand in the long run, but it's hard to convince people that no really, this big industrial complex will be just great in your backyard. (I know I wouldn't want to live next to one.)

- your friendly neighborhood chemical engineer

Oh, and of course the oil companies are out to maximize profits. That's the job of any corporation. The sad thing is we're stuck using gasoline and have to pay pretty much whatever they charge. We (as a society in general) have to drive everywhere because our culture has evolved to that point. We can get as fuel efficient as we like, but the majority of people still commute to work, shop, etc. by car.

[son_of_a_gunn_25]

Posted: 5/2/07 at 2:13pm

Stick it to the man!

[RadiGal2]

Posted: 5/2/07 at 2:18pm

You know..I've been thinking a lot about the refinery issue.
It's quite interesting, definite fodder for conspiracy freaks like me...it would been in the best interest of the oil companies to build more refineries a long time ago -- so why didn't they?
Greed absolutely factors in ...but I always get the feeling that there's more to it than that.....

Posted: 5/2/07 at 2:24pm

What I can learn about the refinery issue is that there is no incentive to build more refineries-- they are already making unimaginable profits. There would only be a profit in it if they could make & sell more gas. Supplies, demand and profits are already maximized.

No stations are out of gas--demand is being met. Why spend money to make more gas that you won't sell?

[RadiGal2]

Posted: 5/2/07 at 2:33pm

I don't know -- there have been a number of recent stories on people walking, biking, taking the bus and car-pooling...consumer revolt may in fact reduce that demand..however, probably not enough to scare the oil companies. Actually I think it is more likely there is a finite amount of oil to be produced ...so why invest in a short term venture. Afterall, what's a 150 years or so to a corporation?

[Calvin]

Posted: 5/2/07 at 2:41pm

I covered industry long enough to know that oil executives will blame cumbersome regulations and environmentalists on the lack of refineries.

Posted: 5/2/07 at 2:55pm

I can't find any reports that US Gasoline consumption has declined. World Wide consumption is up considerably. US consumption doesn't even decline when prices soar. Consumers buy less when prices climb, but buy gasoline more often. Meanwhile:
"Last week's U.S. Energy Department report showed an unexpected drop of 2.8 million barrels in U.S. gasoline stockpiles and said U.S. refinery use declined to 87.8 percent of capacity."

Refineries are runing at less than 90% capacity.

[Elphaba]

Posted: 5/2/07 at 2:58pm

it's greed, and a government who doesn't give a crap about the little guy, but wants to keep Big Business happy. There is NO excuse for prices.
When Hawaii has cheaper prices for gas than Palm Springs, you know something is wrong...

[chicolini]

Posted: 5/2/07 at 2:59pm

It's just fascinating how linked everything is. Regulations and emissions caps and that sort of thing are good for the environment, but cause price increases which are bad for consumers.

As more and more people buy cars with higher fuel economies that's again good for the environment, but many states depend on the money they get from gas tax for road repairs, etc. That isn't an easy revenue source to replace, so there's the potential for highways to fall into a greater state of disrepair, causing accidents which will make people spend more time in their cars on the road burning more gas.

Most of the oil companies are also global ventures, so even if American demand drops, there's no guarantee that demand worldwide would drop enough for them to change their behaviors significantly.

Problems like this really interest me, because they involve the intersection of seemingly unrelated arenas: science, business, and public policy. Sadly, not enough people are fluent across all three arenas for there to be an easy solution.

[RadiGal2]

Posted: 5/2/07 at 3:00pm

Perhaps, but we still have comparably lower gas prices than the rest of the industrialized world.

Joe...any good conspiracy worth pursuing or believing is utterly unprovable.

[tazber]

Posted: 5/2/07 at 3:23pm

Solar power people! we need alternate fuels stat!

Posted: 5/2/07 at 3:36pm

Oh yeah the other thing that confuses me-- Why are all gas prices basically the same in a given geographic area? I have Thornton's, BP, Citgo, Shell and Clark in my vicinity. All of them are around $3.15 right now. Thornton's had closed, remodeled and reopened with prices about a dime below the others but now it is in step with the rest of the Neighborhood.

I can get a gallon of milk for $1.99 at Thornton's. The local Jewel charges me $3.49. WalMart is $2.49. Why is there a $1.50 variance in Milk prices and less than a nickle in Gap Prices?

[Gothampc]

Posted: 5/2/07 at 3:40pm

Have you seen the amount of tax the government slaps on gasoline? Cut the taxes and the price will come down.

[StickToPriest]

Posted: 5/2/07 at 3:42pm

And so will incentive to find alternative fuels.

[chicolini]

Posted: 5/2/07 at 3:42pm

That's probably because the prices at the gas stations are displayed so you can choose at a glance before you even drive into the place. People will go to the cheapest option and the local market settles on a certain price.

If milk prices were displayed at the side of the road in front of the different grocery stores the same thing would likely happen. Once you're already in the store, fewer people will leave for the cheapest option. Of course if one store is always more expensive, you'll learn not to shop there.

[SweetQintheLights]

Posted: 5/2/07 at 4:07pm

Has anyone seen a station "Out of Gas"? "

Yes. When there is a threat of a hurricane, people run to get gas and before you know it, gas stations are, "Out of Gas"

"How bout a little black dress?"~hannahshule "I have a penis, not a vagina." ~munkustrap178

Posted: 5/2/07 at 4:13pm

"That's probably because the prices at the gas stations are displayed so you can choose at a glance before you even drive into the place. People will go to the cheapest option and the local market settles on a certain price."

But the reverse is true. Wouldn't you think that there was an incentive to lower your prices a dime or more and post it loud and clear and watch business pick up? There used to be such things as "Gasoline Price Wars" where competitors would slash prices hourly to stay below the guy across the highway. Now they go high and stay high.

And yes, Sweet Q, that does happen, but I meant barring natural disasters. In the 70's there was a shortage of gas and you could only buy ten gallons at a time and only on specific days- if your license plate was an odd number you bought gas on Odd days and vice versa. And stations ran out all the time.

[mejusthavingfun]

Posted: 5/2/07 at 4:39pm

Exxon posted a $40 billion dollar profit last year. That is the single largest property in the history of the world.

The Bush administration has used every single trick in the book tip the scales in oils favor.


Reducing gas mileage would make a WINDFALL of difference. Yet um... doesn't seem to be any momentum in that area.

[Mr Roxy]

Posted: 5/2/07 at 7:20pm

The problem with refineries are similar to power plants

Everybody wants more power & cheaper gas but no one wants either one built near them. It is the old NIMBY syndrome

Demand going up every year & no new refineries in almost 30 years. Case closed

Updated On: 5/2/07 at 07:20 PM

[chicolini]

Posted: 5/2/07 at 9:03pm

True, Joe, but not every individual gas station has that autonomy. Some have their prices set by corporate, while others have more freedom to price cut their competition. I forget how that is set up and the reasoning behind it- next time I talk to my friend in the petroleum industry I'll ask and get back to you.

And mejust, obviously the Texas oil president isn't going to go out of his way to stop the oil profits, but the solution is not as simple as an administration change.

[Gothampc]

Posted: 5/2/07 at 10:13pm

People of all political viewpoints are driving SUVs. The demand drives the price. If everyone would turn in their SUVs, prices would begin to drop.

[muscle23ftl]

Posted: 5/2/07 at 10:23pm

The president is an oil-man. Simple explanation.

Posted: 5/3/07 at 11:40am

OK let me update: Gas in my area (Chicago) is more than 20% higher than one year ago ($3.25 vs $2.60). Demand is higher than a year ago. The crude oil price has dropped more than 10% since a year ago. Prices in my immediate area range from $3.15 to $3.25.

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