Thread: The price of gas?

Can anyone explain to me how the price of gas can fall so fast. I am certainly not complaing but after all the talk of driling or not driling and that it would take years for the price to fall a nickle...the price has suddenly crashed down lower than I thought I would ever see it again. I do understand that it is not the oil company really setting the price...more a problem of speculative buying. How does the speculator profit by driving up the cost.

It's because I don't drive as much as I used to. Therefore I project my personal change in oil usage over the entire world's population and assume that overall demand has dropped.

If I start driving more, watch out

Also, just for fun: gasoline this morning was at $1.87 / gallon in Tulsa. To drop another 75 cents or so would be great

Crude oil per barrel fell longtime ago,the gas stations in the other hand where in no hurry to drop the price to make up for the last couple of years where (due to competition) they had to sell it almost at cost.
Now in order to sell more gas than the neighbour gas station , gas stations can allow themselves to drop the prices(because there is a room for profit), what naturally happens is that the neighbour will drop it even more....so there we go...
Oil per barrel was double last year than what it is now, but gas has only dropped around 30% , so they are still packing great amount of profit.
We should see it at $2.50 soon and for a while, who knows whats gonna happen next......but check out what they did....by raising the gas prices to $5 in some places now we feel comfortable paying $3 for it...this a few years ago would have been outrageous.

It's below $2 at an awful lot of stations around here - houstongasprices.org is showing a low of $1.74/gal for regular with an average price of $2.04.

There isn't a linear relationship between the barrel price and the gas price, because there's a fair chunk of that price that is relatively fixed (taxes, shipping, refining, additives, etc), and refiners can adjust their percentages of the various products by switching crude stocks or fiddling around with the refinery configuration or blending ratios. Oil rose from about $17/bbl to about $140/bbl at the peak, and gas prices rose from about $1.20/gal to about $4/gal over the same time period, so the drop in gas prices we're seeing now aren't out of line.

As for why prices fell so fast, I suspect it was the threat of increased drilling followed by the collapse of the financial markets. The initial run-up of crude prices early in this decade was caused by increased consumption in asia (india, china) that was outstripping production and refining capacity. As the real estate market started collapsing last year, and the dollar weakened further, the speculators started moving their money into the only market that was both big enough to hold that kind of money and was also increasing in value. This surge of money into the crude market created a bubble. Earlier this year it was becoming evident that production was outstripping refining capacity yet the price kept going up. This bubble started deflating after the Republicans started pushing the "drill here drill now" line and Bush rescinded the executive order banning offshore drilling. Oil dropped from about $140 to about $110, then once the financial markets melted down nobody had any money to speculate anymore and the price collapsed. This collapse was also aided by the realization that the recession would be decreasing demand worldwide. The natural pre-recession price for a barrel was probably around $90/bbl, the decrease since then is partly psychological and partly pricing in the reduced demand compared to normal economic times.

disclosure: I have spent the last decade or so writing software for oilfields and refineries. I'm not an economist or petroleum or chemical engineer, I just listen to them talk.

haha i remember the first tank of gas i bought when i got my first car it was 98 cents a gallon, the second time i filled up it was 1.01 and i dont think i have seen it under a dollar since then. prices are looking good now though

-dan-

There is a station here that has it at $2.01 now. I don't understand it but I sure hope it stays like this for awhile.

They could still cut the price in half!

Obviously the extra $2 a gallon you were paying all summer long was pure profit for the oil companies!

It's not like they all of a sudden discivered a huge oil deposit. It's disgusting, and why there NEEDS to be some sort of government oversight of oil industry pricing.

After Katrina they said "oil production was affected", and thus the era of >$3 gas ensued. Katrina went away, but there was no impetus for them to lower the prices. Every bomb that went off in Iraq caused another "reason" for gas prices to escalate, again with no reason to lower them. People bitched and moaned, but they still went to the pumps. Next thing you know we were at over $4 a gallon.

Originally Posted by Seraphim

It's not like they all of a sudden discivered a huge oil deposit. It's disgusting, and why there NEEDS to be some sort of government oversight of oil industry pricing.

There is, actually. Some very high level elected officials are in bed with these oil companies.

Originally Posted by Seraphim

Obviously the extra $2 a gallon you were paying all summer long was pure profit for the oil companies!

Its my understanding that the oil companies don't set the prices, that the price is actually driven up by the people speculating on it.

Don't get me wrong though, the oil companies made some hugh money.