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Old 07-23-2008, 11:56 AM
 
55,137 posts, read 43,954,649 times
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Quote:
Originally Posted by neil0311 View Post
Well that's the implication, but I wanted to see if anyone can provide another side that makes sense. So gas stations owners are ripping us off?

Sorry, I don't buy the "you notice it more..." theory. The fact remains that when oil spiked in the $140's a few weeks ago, the prices began rising hours later. Now that it's dropped nearly $20, where's the corresponding eagerness to drop prices at the pump?

I get that gas currently in inventory on hand costs more so pump prices take time to lower based on FIFO...what I don't get is how the cost of inventory magically jumps (and prices at the pump jump) in an hour when the price of crude goes up. Please don't insult my intelligence by telling me I'm imagining things.
Ok, so make your case then instead of anecdotal stuff.
Put of the oil price information against average national gas prices and compare the two.

I'm not saying you are imagining things, its just that you are obviously sensitive to gas price increases so its not hard to imagine that when they go up you take notice more than when they go down.

I'm certainly open to hear a reasoned case, I might learn something. Again, just post up average oil prices vs. average gas prices. (Probably removing seasonality from the gas prices if you can find such info would be a good thing.)
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Old 07-23-2008, 01:08 PM
 
Location: Ohio
21,311 posts, read 15,089,573 times
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Quote:
Originally Posted by neil0311 View Post
Sorry, I don't buy the "you notice it more..." theory. The fact remains that when oil spiked in the $140's a few weeks ago, the prices began rising hours later. Now that it's dropped nearly $20, where's the corresponding eagerness to drop prices at the pump?
They will, as soon as the inventory is gone.

If you buy a gallon of milk at $2.50 and sell it for $3.00 you make a $0.50 profit.

If the price of milk suddenly rises to $3.50, and you sell it of $3.00, you're taking a $0.50 loss. Logically, you raise the price to $4.00 so you can still maintain a $0.50 profit per gallon.

If the price of milk suddenly decreases to back to $2.50/gallon, you can't lower your prices until you have sold off the inventory of milk that you already purchased at $3.50 gallon.
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Old 07-23-2008, 05:25 PM
 
Location: Great State of Texas
86,068 posts, read 74,761,325 times
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Quote:
Originally Posted by Mircea View Post
They will, as soon as the inventory is gone.

If you buy a gallon of milk at $2.50 and sell it for $3.00 you make a $0.50 profit.

If the price of milk suddenly rises to $3.50, and you sell it of $3.00, you're taking a $0.50 loss. Logically, you raise the price to $4.00 so you can still maintain a $0.50 profit per gallon.

If the price of milk suddenly decreases to back to $2.50/gallon, you can't lower your prices until you have sold off the inventory of milk that you already purchased at $3.50 gallon.
Yes but if they have the older cheaper inventory why did they raise the price sometimes twice in the same day ?

Raising the prices at the pump has a different set of rules then lowering the prices at the pump....they shoot up but take a long time to barely slide down.

In this past week with oil dropping as it did prices only came down $.04/gal by me. I remember when oil was skyrocketing (futures here) the pump prices where changing daily in the upward direction.

Can someone please explain that ? The government already did their "study" and said the gas companies were not at fault for anything.
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Old 07-23-2008, 06:00 PM
 
Location: Drury Lane
823 posts, read 2,582,947 times
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Default It's more complicated than station owners "ripping us off"

Quote:
Originally Posted by neil0311 View Post
Well that's the implication, but I wanted to see if anyone can provide another side that makes sense. So gas stations owners are ripping us off?

Sorry, I don't buy the "you notice it more..." theory. The fact remains that when oil spiked in the $140's a few weeks ago, the prices began rising hours later. Now that it's dropped nearly $20, where's the corresponding eagerness to drop prices at the pump?

I get that gas currently in inventory on hand costs more so pump prices take time to lower based on FIFO...what I don't get is how the cost of inventory magically jumps (and prices at the pump jump) in an hour when the price of crude goes up. Please don't insult my intelligence by telling me I'm imagining things.

Let me attempt to add some perspective. U.S. oil companies really don't have that much of the world's oil in reserves. If one oil company needs more oil due to demand they can always buy it from another oil company. This how ExxonMobil earns a large portion of it's business and it only has something like 10% of the world's reserves. Its humorous to hear about the "gas out" days because it makes no difference. Gas consumption is a small part of what oil is used for. Oil has a multitude of other uses...heating oil, natural gas, jet fuel, and cleaning products to name a few. Here's a pretty interesting list of products made from oil. I suppose if millions boycotted these products that would get noticed but then it would probably put our economy in the toilet...oops, we're already there on that one

ANWR Feature - Products Made From Oil

The oil price you hear on the news and the gas price you pay don't give you a full picture without the gas and oil futures. These are limited resources so the futures market helps to reduce the unknown about what the price will be in the future. Many things affect oil and gas futures...climate, world events and of course demand. The oil prices jumped a little bit with the chance of Hurricane Dolly causing damage to oil drilling operations but it didn't affect things too much it seems.


The price of oil, traded on the NYMEX market, is part of a series of ongoing financial transactions. These transactions will close at a specified date in the future, hence "oil futures." Light sweet crude (the easiest to make into gasoline) is down to 124 or so a barrel. This means, refineries can buy oil at that price for delivery to their facilities in September. This price per barrel of oil will eventually become part of the gasoline futures market because the refinery buys the oil and now they want to make a profit.

Gasoline futures are the next part of this story. The price on gasoline futures allows the refinery company to earn back what they paid for a barrel of oil. Once the refinery buys the oil and turns it into gas, they have to earn that money back as well, hence the gas futures price. As the gas makes its way to a station, further charges are added in....marketing, trucking and of course taxes.

With oil this expensive, the stations don't make much money. Watch this broadcast clip. It shows where $1.00 of your money goes when you spend it on gas. Very interesting.

The Raw Story | Oil companies grab lion's share of money spent at the pump

This website below shows oil futures for the coming months....as the market fluctuates so will these numbers. There are different markets for different types of fuel....this one is for light sweet crude.

NYMEX Crude Oil Futures Price Quote

This article from the Telegraph across the pond gives a backgrounder on oil futures.

Oil price Q&A: What are oil futures and how are they traded? - Telegraph

I'm not an expert on this but I find the topic interesting and hopefully my post is informative.

Last edited by muffinman; 07-23-2008 at 06:28 PM..
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Old 07-23-2008, 06:12 PM
 
Location: Chicagoland area
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My gas was 4.23 last friday. Now it's 3.85. I guess it just depends on the area.
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Old 07-23-2008, 07:03 PM
 
Location: Great State of Texas
86,068 posts, read 74,761,325 times
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Quote:
Originally Posted by CHICAGOLAND92 View Post
My gas was 4.23 last friday. Now it's 3.85. I guess it just depends on the area.
Guess so. Here in central Texas it never hit $4.00 ..it was $3.99 (at the most expensive place) and holding.
The station I go to got as high as $3.93.
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Old 07-24-2008, 09:25 PM
 
48,509 posts, read 86,173,019 times
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Quote:
Originally Posted by neil0311 View Post
As I said in my previous post, I understand inventory on hand costing more. The difference is when they adjust their price not based on COGS but on speculation of future inventory cost.

If I own a gallon of gas that cost me $1.50 and I can sell it to you (net of taxes) at $2.00, then why would I raise my price if the wholesale price rose to $2.00? The gallon I own cost me $1.50, not $2.00. When I buy new inventory at $2.00, then I would raise my price.
For the same reason that gorcery stores raise the price of all stock on hand when the prices go up. Becuase to replace the item will cost you more. Why would you sell somethnig for less than it is now worth? normal business.
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Old 07-28-2008, 11:49 AM
 
55,137 posts, read 43,954,649 times
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Quote:
Originally Posted by neil0311 View Post
Now I'm a free trader...Reagan Republican...all for the free market. I don't have any problem with oil companies making profits if the free market price goes up.

My question though is simple and has probably been asked many times before, but as we see oil slip back under $130/barrel, I have to ask it again. Why does the price at the pump seem to rise the very next hour after the price of crude rises, but when crude comes back down, it takes weeks to see any change at the pump?

We all know that it takes a while for inventory to make its way from the ground, to a tanker, to a refinery, and then finally to the pump. So why do we tolerate and how can it be justified when prices at the pump jump immediately upon news of rises in crude costs and rising futures? Why does this same logic never hold true in reverse. It's been this way since I can remember in the 1970s, and no one ever seems to address it.
CNN article today showing the national gas price average has dropped 12 days straight. This is why I talk about people having selective memory towards things that bother them but tend to overlook contradictory information.
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Old 07-28-2008, 11:51 AM
 
55,137 posts, read 43,954,649 times
Reputation: 34480
Quote:
Originally Posted by neil0311 View Post
Sorry, I don't buy the "you notice it more..." theory. The fact remains that when oil spiked in the $140's a few weeks ago, the prices began rising hours later. Now that it's dropped nearly $20, where's the corresponding eagerness to drop prices at the pump?

Please don't insult my intelligence by telling me I'm imagining things.
I would like to hear your comments after the past 2 weeks activity.
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Old 07-28-2008, 03:31 PM
 
1,566 posts, read 2,842,684 times
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it isnt rocket science
lets say you owned a gas station
you paid 3.50 a gallon and sell it for 3.65
if the wholesale price goes to 3.65 you obviously need to raise your prices
now lets say instead the wholesale price drops to 3.35, why would you sell all of yours at what you paid for it? You would sell it first, then buy it at the new cheaper price and then lower your price.
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