A frequent argument made for the cause of high pump prices is the old, "supply and demand." If Americans are soaking up motor fuel than it can be produced, they'll be punished with higher costs. Are we receiving the "full recompense due for our error" of driving too much? Far from it says a story carried by Bloomberg Business Week. If anything, American's are using far less fuel than in times past, and yet the pump prices are still shooting up. What's the deal?The US Energy Department confirms your fears: Gas prices are up 8% this year, the steepest hikes for so early in the year. If fuel prices keep up at this pace, it's possible $4 per gallon gas could be a pump reality by May or earlier. We haven't seen prices like that since the nasty summer of 2008, when this writer paid $4.99 for a gallon of diesel at a wide-spot-in-the-road in Nevada.
But fuel consumption is actually down, lower than any time in 15 years. So supply and demand charges are bogus. Bloomberg observes people are scratching their heads in wonder. The site quotes Tom Kloza, the chief oil analyst for the Oil Price Information Service who says speculators trying to cash in on fear are to blame. "We’ve seen about $11 billion of speculative money come in on the long side of gas futures," he says. "Each of the last three weeks we’ve seen a record net long position being taken."
Is it greed? We'll let you make your own conclusions. But adding to the price jacking misery is oft-cited refinery production hitch issue. Refineries are complaining that their profit margins are in the squeeze, paying a lot for crude oil, but not getting much for their completed product. Rather than "operate at a loss," some refineries are cutting down on production or shutting down entirely. Result, higher pump prices.
But gas prices aren't jumping everywhere. Up in Wyoming, says Bloomberg, the average price for gasoline is just $2.90. Contrast this to western Arizona where Quartzsite RV watchers have marveled at a runup on pump prices of over twenty cents in just two weeks. Hold on for the ride.
source: bloomberg business week
23 comments:
Not investing in our own natural recources by the current Washington administration just might be the real reason that there is "a runup on pump prices".
It's still partially supply and demand, only it's demand from overseas and Latin America.
This all about GREED! Big money investors wait until the price per barrel is low then they invest extremely large amounts of money in buying oil "futures", buy now at low prices and avoid possible price increases. This creates an artifical demand and the price of oil that is actually being sold now goes up because of this possible future increase.
This makes the producers cut production which also drives the prices up. When the price is as high as the speculators figure it can go they sell their futures at a huge profit. They never get close to actually doing anything with the oil, this is a "speculation" on the price in the future. This is oil still in the ground!
Who pays for their profits? You the consumer. We are being played to line the pockets of the rich.
That is pure b.s. This admin is drilling and pumping more than the previous admin ever did. Educate yourself. You won't get educated by watching Fox News or listening to Limbaugh. Also, we can't exploit every square inch of the planet, where would we drive our RV's to "get away".
I agree, that we need to tap our own resources. However, the activist and protesters seem to control what State and Federal Governments do and don't do.
It is all good old "GREED"
As a result of Americans buying less fuel, the oil refiners have mothballed refining capacity! This is not about the diminishing supply or the availability of crude oil, it's all about profits.
With fewer gallons being sold, the price needs to go up to maintain bottom line profit. In other words, the oil companies need to get more money from the people who continue to buy so they can maintain their profits.
On the contrary, oil refining capacity in Europe has been reduced because demand has reduced. PetroFina has offered diesel to US oil companies simply to keep its facilities running at full capacity.
Signed,
An insider who knows!
We keep buying cheap junk from China and they use the money to buy cars... and drive them, which drives up demand.... so we are our own worst enemy's.
In a nutshell, the following info is from several sources:
"Today on federal land, the area where the president has control, production in the Gulf of Mexico is down 30 percent. Lease sales in Rocky Mountains on federal lands are down 70 percent," Jack Gerard, head of the American Petroleum Institute said.
He says the president has put 85 percent of the outer continental shelf off limits and overall, is only making 3 percent of the areas under his control available for development.
Numbers from think tanks and the federal Energy Information Administration confirm those numbers.
Nevertheless, steadily rising gas prices are a political liability. That's why the president now takes credit for the results of policies he ran against in 2008. One ad lambasted McCain by tying him to the Bush energy policies, saying "McCain and Bush support a drilling plan that won't produce a drop of oil for seven years."
The president initially wanted to drive up oil prices to make renewable energy more attractive.
His cap and trade plan was too harsh even for Democratic allies and failed. Nevertheless, Obama still seems to deny that drilling would reduce prices.
"You know there are no quick fixes to this problem, and you know we can't just drill our way to lower gas prices," he said at a speech in Florida this week.
Exploration and development do take years. But analysts argue the administration can't now take credit for decisions about drilling made years ago by President Bush and his predecessors.
"That production is a direct result of leases issued before this administration and as result of development on private and state lands," Gerard said.
When we have an Administration in Washington D.C. who has an energy agenda that does not include fossil fuels but rather focuses on alternative energy, we will be paying MUCH higher prices at the pump than ever before. The end of high gas prices is nowhere in sight and is actually the desired result of the current White House and its occupants.
You may also note that we are actually EXPORTING fuel as we speak. Supply and Demand! I say balogna. Price fixing at it's worst. The oil execs better watch out, if Nobama wins, he will see justification to own car manufactures AND the fuel they use. As my Mom used to say "mark my words."
We Americans have become VERY spoiled when it comes to low cost fossil fuels. We were in Turkey and Greece recently where the average cost of gasoline was $16.00 and $12.00 per gallon respectively. And think about how much closer to Mideast oil they are located than the U.S.! Sure don't mind having those energy stocks in my retirement accounts!!!
I don't know if you've noticed but the price of all commodities continues to escalate. The only thing that is losing its value in the US dollar and that's being caused by the Federal government's actions. If you are holding cash, you're going to be inflated out of its current value. Gasoline and diesel are just a couple of these inflating commodities; feeder beef that sold for $1.00/lb a couple of years ago are now closing in on $1.50. If you voted for these folks, enjoy!
One of the reasons no one is talking about is the newer clean air standards that the current administration has been putting into effect in the last 3 years. These older refineries (there has been no new one's contructed in 30 years. These cannot meet the standards so have to shut down or reduce production. The expense to comply is stagaring.Just go talk to your local power producing utilities.
You should get your facts correct. This administration has allowed more drilling than the previous one. The problem is supply and demand along with current speculative concerns over Iran,
Ever notice the opinions of each comment is mostly their own conclusions. Wonder how many really know the true story here. It's big whatever the program is and we are all getting shafted. Next will come hikes in utilities,food, water rates, and other transportation hikes. RV manufacturers started shutting down during last epidemic, is it going to happen again? We don't have to worry about 4.00 gas now-its here and gone, going to 5-maybe 6.00 by July.
Not true. This administration has been bound by contracts signed 7 years ago under Bush that have to honored. This administration has drastically reduced the drilling contracts and locations. Check the facts.
Gas prices would be going up even in the absence of speculation in the crude oil markets. There has been a lot of finger pointing about why gas prices are going up, but the explanation is really pretty simple and I’m surprised it hasn’t happened before now. Gas prices are going up because the U.S. is exporting gasoline. Why sell gasoline for $4 a gallon in the U.S. when you can get that much per liter overseas? Sell gas in the U.S. for $4 a gallon, or sell it in London for the equivalent price of $15 a gallon? If you’re Exxon it’s not a tough choice; simple free market economics in action.
I love it!
Give Obama a break on this one. Oil is an INTERNATIONAL commodity. Thus international price setting. The President doesn't control oil prices. If he did, the price would go down in this election year, not up.
Like Anon at 07.03PM said, we're exporting gasoline for higher prices overseas.
INTERNATIONAL. You know, the people who don't speak English.
Much of the fuel price in Europe and elsewhere is from taxes, which lessens demand and encourages development of alternative fuels. Why does no one mention conserving. More fuel efficency. Oil is finite. Our grandkids will benefit if we end our dependency on fossil fuels. Even animals know better than to foul their nest. Do you need an oil spill in your back yard too?
Not only are we EXPORTING oil, we are also importing it. Where's the logic in that? And with all the oil coming from the reserves in South Dakota. They are pumping like crazy there -- so where is THAT oil going? Just all seems very strange, if you ask me!
22 comments so far, all professors of oil and how it is used. Most hide their names in the name of they know it all to be fact. The truth is oil is high today because last year it wasn't high enough. All oil companies have to do is stop refineries from processing, close up some oil fields, continue to raise the price, and all will be happy. Eventually the oil companies will own all of us and tell us what to do.
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