95se said:
Stoker- In the instance that crude oil prices shoot up and gas prices quickly follow, why is it that when crude prices decline back to previous levels, the gas prices very very very slowly decrease, and usually not all the way to their previous levels? I don't typically get too irritated with rising gas prices, becaues I can see the reasons why, but it seams they make large profits by turning small spikes in crude prices into long spikes in at-the-pump prices....
I'm not bashing, I'm just curious about how that works.
I don't know how it works down in the USA but up in Canada it usually takes 90 days for gas prices to go up or down as this is how long it takes for the oil priced today to go through processing and then hit your local gas station.
I wish I could say that it is as easy as that but there is thing called local market conditions. The price of fuel can priced differently between cities and towns as much as $.10/ltr. I recently took a road trip to my favourite ski area in Fernie B.C and the Shell station at the entrace to the pass was selling gas at $.07/ltr less than in Calgary ( about $.30/gallon less) so again market conditions can drive the price
It also depends on how much storage there is at the refineries or pipeline tank stations. If the system is flush with gas the price should go down due to market conditions. I know on the east coast you guys are still using fuel oil to keep your house warm. To produce this type of fuel oil distillate the refinery will make more home heating oil instead of gasoline. This usually happens in the fall after the summer driving season as the refineries gear up for the winter .
But again it still boils down to the price of the oil and the precived consumption of oil. You can imagine what the price of oil would be if the demand for oil dropped by 5%, interesting question. Imagine also that if we drive 5 miles and hour lower and you reduced your fuel consumption, this would go all the way back up the oil chain back were the price is set in the NYMEX and there would be a sharp drop in the price of oil and maybe the hedge funds and the marketers would lose for a change. My opinion only but what a message to send to them.
The report I get on a daily basis which includes a report from your Dept of Energy indicates for the week ending Feb 25th that crude oil stocks increased by 2.4MMB to 229.4 MMB (MMB means million barrels) Distillate inventories decreased by 1.8 MMB to 110.0 MMB. Gasoline inventories, at 224.5 MMB have increased by 1.0MMB since last week. Residual fuel oil inventories decreased by .2MMB and now stand at 38.2 MMB. Overall, US inventories have increased by .4 MMB, at 951.0 MMB
So as you can see the price of oil is very senseitive to alot of things. I could go on but I hope I was able to answer your question