Gas Prices -- Would Someone Explain this to Me

[musclemom]

Okay, everyone remembers Hurricane Katrina, right?

Am I the ONLY one who remembers that within a VERY short time of the hurricane gas prices SKYROCKETED. The reason was supposed to be because of destroyed refineries or drilling platforms or something.

Now it's HOW long after Katrina and gas prices keep climbing and all I hear is mention of reduced supplies from the middle east with no mention of the hurricane.

Why haven't they rebuilt the damn things that got smashed three years ago? If they rebuilt those things wouldn't prices go back down, at least a little?

This is as confusing to me as why we went to war with Iraq when it was the Taliban that attacked us who, as far as I can tell, really weren't affiliated with Iraq in any truly meaningful way.

I'm not trying to debate, I'm just looking for a logical answer.

Signed, Confused

 

[heatherrae]

good questions.

 

[redsamurai]

don't even bother asking them, we're all along for the ride in a game we have no control over.

 

[needtogetarmy]

It is very complicated.

The bottom line is that the market controls prices based on what can be supplied and what people demand. The biggest factor that has caused the increase in oil consumption is China and other emerging economies that need fuel to grow their economies. China has 1.1 billion people and they are currently growing at over 10% per year. China used to be a net exporter of coal and oil - they are are forced to import because they need the resources. Demand has gone up so that increases the prices.

Domestically, there are very few refineries. I believe (do not quote me on this) there hasn't been a new refinery built in the US in over 20-30 years. Oil needs to be processed. When the oil come here to the US, and there are limited facilities to process it to gas, the supply doesn't properly match demand, thus causing higher prices.

There are other factors involved too but that is the gist of it.

I honestly do not think oil is going to go down any time soon. My wife and I are planning on buying an electric car, even if it costs us 80-100K. Most Americans didn't live in the 70's when gas was rationed and it was pretty nasty back then. Things could get very bad in the future and there is nothing we can do to stop countries like China and India from consuming more oil.

 

[Razorguns]

Refining is a VERY LOW margin business.

Oil companies make their money from extraction and transportation of oil, not refinement. Here is a list of the top refiners; it's pretty healthy mix of oil and non-oil companies. http://www.eia.doe.gov/neic/rankings/refineries.htm

Refinement of oil is a low margin business, because it is too close to the end user. Like supermarkets. Oil companies have no incentive to go into this when they can make money without it. If US demand flags, Exxon just ships to China.

The rise in prices is because of the COMMODITIES MARKET COUPLED WITH CURRENCY DEVALUATION.

I understand this is way too complex for the average CNN viewer to comprehend.

The iraq question has been discussed to death here. I can't give a cute 2 sentence answer to that.

r

 

[SouthernLord]

Taxes. How much money did Exxon Mobil pay on their record profits last year? Billions I suppose. Do you think the US government is going to want the oil companies to lower their prices? They will lose out on all that tax revenue. We are fucked.

 

[Raptorex]

if you can't beat them join em!

buy oil & gas ETFs ASAP

 

[fistfullofsteel]

i wonder if our war machines are sucking up alot of petro?

 

[Wulfgar]

if you can't beat them join em!

buy oil & gas ETFs ASAP

done broly

 

[Raptorex]

done broly

Likewise! why bang your head.

 

[jestro]

Taxes. How much money did Exxon Mobil pay on their record profits last year? Billions I suppose. Do you think the US government is going to want the oil companies to lower their prices? They will lose out on all that tax revenue. We are fucked.

The feds only charge .18 per gallon. That's not all that much. The little "gas tax holiday" they're talking about doesn't do shit.

 

[Wulfgar]

i got into the IYE, XLE and IX about 4 months ago

they are behaving very bullishly

good stuff

 

[needtogetarmy]

People need to recognize blaming the US oil industry for this mess and cursing them for making a profit doesn't solve anything. US oil companies are in a globally competitive environment. US firms are at a huge disadvantage because many nations have nationalized their oil reserves thus cutting off US companies supplies. Punishing the oil companies further by taking their profits will only give foreign firms a competitive advantage which will further erode the ability of US oil companies to provide oil to US consumers.

 

[DannoMight]

I thought the US got most of its oil from Canada?

 

[mrplunkey]

The feds only charge .18 per gallon. That's not all that much. The little "gas tax holiday" they're talking about doesn't do shit.

I think he was referring to corporate taxes.

 

[mrplunkey]

It is very complicated.

The bottom line is that the market controls prices based on what can be supplied and what people demand. The biggest factor that has caused the increase in oil consumption is China and other emerging economies that need fuel to grow their economies. China has 1.1 billion people and they are currently growing at over 10% per year. China used to be a net exporter of coal and oil - they are are forced to import because they need the resources. Demand has gone up so that increases the prices.

Domestically, there are very few refineries. I believe (do not quote me on this) there hasn't been a new refinery built in the US in over 20-30 years. Oil needs to be processed. When the oil come here to the US, and there are limited facilities to process it to gas, the supply doesn't properly match demand, thus causing higher prices.

Very well said.

And its part of a larger problem. Asia (primarily China and India) are growing quickly and not only does oil fuel their economy, their emerging middle class are getting their basic needs met -- so their moving-on into discretionary items. So they want cars and other consumer goods. On top of that, they want meat instead of grains -- so instead of four lbs of grains going to a person, they go to an animal which only produces at best one lb of meat. Yeah, we lose 75% of the food supply every time that happens.

When you have a couple billion people willing to work for less and under tougher conditions than us, you have a problem. As those people emerge from poverty and form a middle class, they are going to compete for resources that were exclusively ours.

Only two choices here: 1) Let our standard of living slide downward and let theirs rise upward until we reach equilibrium (that's what we're doing now, but no one wants to talk about it) or 2) Implement a rapid growth strategy ourselves and let our own standard of living continue to rise at rates comparable to those in Asia. Obviously I'm a fan of plan #2, but the smart money says we'll take the next 30-50 years and tacitly implement #1. Ever wonder why the dollar is sinking like a rock and will continue to? Its all part of plan #1.

 

[bigmann245]

they charge more because...... they can and we will pay not matter what it costs.

 

[mountain muscle]

they charge more because...... they can and we will pay not matter what it costs.

Lol. I bet that is what most people really think.
How youse doin' Biggie?

 

[bigmann245]

Lol. I bet that is what most people really think.
How youse doin' Biggie?

doing good. had a long weekend camping and then paintballing yesterday. how bout you???

 

[mountain muscle]

doing good. had a long weekend camping and then paintballing yesterday. how bout you???

Going shooting a few times this week, competition this sat. Waiting on an interview to get back in the patch. Yard and garden work seems never-ending. BP is down though, just need to get my skinny-fat ass back in shape. Cheering up though now that it is warm.

 

[GoldenDelicious]

lots of reasons, but mainly because oil is a need not a want, and it hasnt risen in price to a point where people are willing to change their usage habits.

you guys still drive v8 cars ffs!!!!

 

[musclemom]

I appreciate everyone's input. I'm just really trying to understand what the hell happened between now and about 2005 or so.

Unfortunately, I don't have the cash to invest in commodities or futures or stocks or bonds. My husband and I basically live paycheck to paycheck. If he didn't have a company car with a gas card I'm really not sure what we would be doing (probably give up the cable t.v., that's our last luxury). Public transportation is not an option for him or his job and my work is delivered. Our (only) car has six cylinders, is 13 years old and has over 200K miles. It's not like we have three cars and one of them is an SUV, the other a Hummer and the third a 12 cylinder sports car. We are middle class people trying to figure out how to continue to function in a very different world. And as I said before, it's not the gas so much, it's the home heating oil.

Anyway, what you all are basically saying is that it comes down to the fact that as long as people continue to buy oil/gas the oil companies will continue to charge whatever they can. Sort of like some twisted monopoly, whatever the market will bear and if America stops buying it, oh well, some other country will. Sad.

I honestly can say I'll never understand greed. It would be nice not to worry about paying the bills but more than that how much does anyone really need? Stuff is just stuff, it doesn't bring personal contentment.

Ah well, c'est la vie.

 

[mrplunkey]

I appreciate everyone's input. I'm just really trying to understand what the hell happened between now and about 2005 or so.

Unfortunately, I don't have the cash to invest in commodities or futures or stocks or bonds. My husband and I basically live paycheck to paycheck. If he didn't have a company car with a gas card I'm really not sure what we would be doing (probably give up the cable t.v., that's our last luxury). Public transportation is not an option for him or his job and my work is delivered. Our (only) car has six cylinders, is 13 years old and has over 200K miles. It's not like we have three cars and one of them is an SUV, the other a Hummer and the third a 12 cylinder sports car. We are middle class people trying to figure out how to continue to function in a very different world. And as I said before, it's not the gas so much, it's the home heating oil.

Anyway, what you all are basically saying is that it comes down to the fact that as long as people continue to buy oil/gas the oil companies will continue to charge whatever they can. Sort of like some twisted monopoly, whatever the market will bear and if America stops buying it, oh well, some other country will. Sad.

I honestly can say I'll never understand greed. It would be nice not to worry about paying the bills but more than that how much does anyone really need? Stuff is just stuff, it doesn't bring personal contentment.

Ah well, c'est la vie.

Saying "greed" is still over-simplifying.

Used to be, OPEC controlled the supply of oil (which was still only a portion of the world's oil source) which set the price. Now, the world can use as much oil as anyone can pull out of the ground, so the price is now set by pure demand.

Ironically, being the good, union-teacher educated US students we are, we'll get mad at OPEC now instead of 20 years ago when they still had a real impact on the price of oil.

 

[cindylou]

I appreciate everyone's input. I'm just really trying to understand what the hell happened between now and about 2005 or so.

Unfortunately, I don't have the cash to invest in commodities or futures or stocks or bonds. My husband and I basically live paycheck to paycheck. If he didn't have a company car with a gas card I'm really not sure what we would be doing (probably give up the cable t.v., that's our last luxury). Public transportation is not an option for him or his job and my work is delivered. Our (only) car has six cylinders, is 13 years old and has over 200K miles. It's not like we have three cars and one of them is an SUV, the other a Hummer and the third a 12 cylinder sports car. We are middle class people trying to figure out how to continue to function in a very different world. And as I said before, it's not the gas so much, it's the home heating oil.

Anyway, what you all are basically saying is that it comes down to the fact that as long as people continue to buy oil/gas the oil companies will continue to charge whatever they can. Sort of like some twisted monopoly, whatever the market will bear and if America stops buying it, oh well, some other country will. Sad.

I honestly can say I'll never understand greed. It would be nice not to worry about paying the bills but more than that how much does anyone really need? Stuff is just stuff, it doesn't bring personal contentment.

Ah well, c'est la vie.

we are tying to sell my husbands gas guzzling truck but no one will buy it and we are insulted by trade in offers and they explain that people are not buying these cars anymore. i'm spending 550 bucks amonth in gas right now lol that just seems like so much but I have no choice but to get used to it i guess. Sooner or later we will have to be humble and take a lowball offer from some dealer and get something more efficient.

i live 10 miles from work so thats mostly his driving that is costing so much. thank god i live close to work. who knows much much i'd be paying!

i know that if gas prices reach 5 bucks a gallon that will frighten me. i will cut back like crazy.

 

[heatherrae]

thank goodness i live within 2 miles of work.

 

[cindylou]

thank goodness i live within 2 miles of work.

2 miles? I thought I had it good!@ lol

 

[heatherrae]

2 miles? I thought I had it good!@ lol

Yeah.

At one time I lived in downtown cincinnati and worked in downtown cincinnati. I didn't drive at all, then. I hate driving.

 

[velvett]

thank goodness i live within 2 miles of work.

I'm almost 10 miles from town alone...

I'm less worried about gas and more concerned about home fuel oil.

I don't see fuel cost going down and next year our tax on fuel will be rising as well. LP is not an option because it's just as expensive and like most people in my area there is not enough direct sunlight to have solar energy as a viable option.

I have two jobs that have come to a screeching halt mid construction - even my wealthier of clients have grown conservative in their spending.

In a town that has always had parking problems that past 7-10 days during the mid afternoon you can drive down Main Street and there less cars parked than there are available parking spots.

 

[gotmilk]

lack of refining. God forbid we open a new refinery. In fact, there are closed and mothballed refineries that could be restarted fairly quickly.

As for LNG terminals for heating, we can't buy enough LNG because Japan and China outbid us constantly.

I'm putting a solar panel on my house next month. I'm right on the ocean and get serious reflective light as it is.

 

[Razorguns]

I appreciate everyone's input. I'm just really trying to understand what the hell happened between now and about 2005 or so.

The dollar fell. The amount of goods and services you can buy for $1 dropped. So basically you got a paycut. Go blame stupid wars voted in by stupid citizens in 2004, along with stupid banks that offered loans to everybody, making housing expensive for EVERYONE.

And now they engage in currency devaluation - so your mortgage can be bought cheaply by foreigners, while you pickup all the losses. ("I loan you $10, foreigner buys loan for $8, you still pay $10, foreigner gets interest, I get off scott-free").

Unfortunately, I don't have the cash to invest in commodities or futures or stocks or bonds. My husband and I basically live paycheck to paycheck. If he didn't have a company car with a gas card I'm really not sure what we would be doing (probably give up the cable t.v., that's our last luxury). Public transportation is not an option for him or his job and my work is delivered. Our (only) car has six cylinders, is 13 years old and has over 200K miles. It's not like we have three cars and one of them is an SUV, the other a Hummer and the third a 12 cylinder sports car. We are middle class people trying to figure out how to continue to function in a very different world. And as I said before, it's not the gas so much, it's the home heating oil.

Anyway, what you all are basically saying is that it comes down to the fact that as long as people continue to buy oil/gas the oil companies will continue to charge whatever they can. Sort of like some twisted monopoly, whatever the market will bear and if America stops buying it, oh well, some other country will. Sad.

I honestly can say I'll never understand greed. It would be nice not to worry about paying the bills but more than that how much does anyone really need? Stuff is just stuff, it doesn't bring personal contentment.

Ah well, c'est la vie.

This is what happens when you set yourself up to live beyond your means.

Not much you can do about that now. What's happened happened.

Two options:

1) Increase your means (move up where him/you work - another job - entrepreneurial/investment tasks - ebay - make more money)
2) Lower your living costs (smaller house - live closer to work - cut out beer/weed/cigs/ann taylor outfits/sports tickets)

I engage all day in #1. Then again, I'm single, no kids, no debt, no mortgage, young, skilled, alpha-oriented - I can do all that. Most middle class folks - this is difficult due to their situations or work environment (insert my common theme about working a job you enjoy).

So you may have to engage in #2 in that case.

r

 

[rsnoble-im-back]

don't even bother asking them, we're all along for the ride in a game we have no control over.

Pretty much.