Oil is cheaper, why is gas still so high?
- Thread starter bob4432
- Start date
You need to realize that greed drives everyone. Singles Gas stations gross BILLIONS in a year. The Saudi's charge $100 ish for a barrel of oil, which costs about $2 to produce. Why lower prices when you can continue to build 2 mil high skyscrapers?
Hate to tell you but gas stations are not profiting like the oil companies are.
These stations are always having to keep prices down to compete with other gas stations.
Its a known fact that gas stations make their money from the convience food/stuff they sell instore.
In fact alot of gas stations were losing money when gas prices were >$4 because people weren't buying anything after filling up.
boomerang
Lifer
- Jun 19, 2000
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Our economy has been in the toilet for years in Michigan. They're building gas stations like there's no tomorrow here. I'm sorry, but I'm never going to buy that explanation. Nobody invests large sums of money for very little return. If you have any proof, I'll concede.
The wife and I went out to breakfast the Saturday morning that Ike was hitting Texas. During the course of 45 minutes while we had breakfast, gas at the corner station went up $.48 to $4.39. Other stations in our area went up the same. We have a refinery about 55 miles from where we live. Our gas is not refined in Texas. Why did the price go up? Because they can raise the price and there is no one to tell them they can't. 5 gas stations within a 3 mile radius all raise their prices at the same time. All served by the single refinery.
They don't have to concern themselves with whatever price the market will bear. They determine what we'll bear.
The scenario I described above is not isolated to Michigan, it can be found all across the country.
Not quite.
When oil was at $140+, gas were in the $4.10 range so it has dropped quite a bit more than .20. Average gas prices are now $3.50
Gas prices have always lagged behind oil prices going up or down.
Just to compare, oil prices were at around ~$80-85 a year ago and gas prices were around $3-3.10.
$80 mark, gas prices will drop close to the $3 mark too.
http://www.eia.doe.gov/oil_gas...p/mogas_home_page.html
shortylickens
No Lifer
- Jul 15, 2003
- 80,287
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YES!
I cant believe you even have to ask this. Of course they wanna be rich. Damn near everybody does. They are in a position to make assloads of money and they dont have to do anything more than they've been doing. They just have to raise prices and keep them there.
When you have the chance to be a billionaire you're not going to pass on it just because a couple hundred million people are hurting.
This kind of thinking is called ignorance. We could debate, but I think the ignorance would remain.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
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Dropped from $4.30 to $3.30 where I live. A 25% drop. How much has oil dropped percentage wise? From $130 to $90..... About the same in terms of percentage.
BoomerD
No Lifer
- Feb 26, 2006
- 66,413
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A quick look at gasbuddy.com shows that gas prices range from a low of $3.29 to $3.79 here. Most of the stations near me are between $3.50-$3.60. A whole lot better than the ~$4.50 we were paying just a few short months ago, but still WAY too expensive.
Originally posted by: JDub02
Yep. And gas is getting cheaper. The price stays the same/drops a little, while inflation runs rampant and the dollar collapses.
Gas is dropping, it can lead or lag oil, depending on the futures contracts purchased.
Inflation isn't "running rampant", nor is the dollar "collapsing". If anything, inflation is being tempered and the dollar has had huge gains against world currencies.
dullard
Elite Member
- May 21, 2001
- 26,130
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1) Gas is falling. Average gas prices fell for 20 straight days in September, then rose a tiny bit, and has been falling ever since.
2) Oil is ONE COMPONENT of gas. Just because one cost falls, does NOT mean the whole price falls (for example, if the price of a rubber eraser falls the price of a pencil doesn't necessarilly fall, especially if wood prices increase). You also have refining costs, transportation costs (to the refinery and to your gas station), regulatory costs, heavy taxes, merchant costs, labor costs, and transaction costs. Not to mention overhead and profit (if any). Usually the cost of oil is less than half of the total cost of producing a gallon of gasoline. Only oil is falling - the majority of the other costs are staying the same or increasing.
3) Supply and demand. There can be a decrease in demand for oil (for example, power plants that burn oil for electricity) while there is an increase in demand for gas (for example, holiday driving). Similarly the supply of oil doesn't necessarilly match the supply of gas (for example, switching refining for more diesel and less gas production when oil might not have moved or may have moved in the opposite direction). Thus, the true determinant (supply and demand) of the price of oil and the true determinant of the price of gas are only loosely correlated.
4) Profits. Profits were sky high on oil production companies, but they were lagging severely for gas stations. Gas stations almost always lag in dropping prices since they were just hurt by the previous high gas cost.
2) Oil is ONE COMPONENT of gas. Just because one cost falls, does NOT mean the whole price falls (for example, if the price of a rubber eraser falls the price of a pencil doesn't necessarilly fall, especially if wood prices increase). You also have refining costs, transportation costs (to the refinery and to your gas station), regulatory costs, heavy taxes, merchant costs, labor costs, and transaction costs. Not to mention overhead and profit (if any). Usually the cost of oil is less than half of the total cost of producing a gallon of gasoline. Only oil is falling - the majority of the other costs are staying the same or increasing.
3) Supply and demand. There can be a decrease in demand for oil (for example, power plants that burn oil for electricity) while there is an increase in demand for gas (for example, holiday driving). Similarly the supply of oil doesn't necessarilly match the supply of gas (for example, switching refining for more diesel and less gas production when oil might not have moved or may have moved in the opposite direction). Thus, the true determinant (supply and demand) of the price of oil and the true determinant of the price of gas are only loosely correlated.
4) Profits. Profits were sky high on oil production companies, but they were lagging severely for gas stations. Gas stations almost always lag in dropping prices since they were just hurt by the previous high gas cost.
Tremulant
Diamond Member
- Jul 2, 2004
- 4,890
- 1
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This is the truth.
My father owns 4 gas stations and for a while he was either breaking even or losing money on each gallon that was sold. Lately he's been making a few cents per gallon.
Also, gas stations make their money from the in-store sales. The gas is simply the means to get them to go into the store.
Capt Caveman
Lifer
- Jan 30, 2005
- 34,543
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