As the world’s oil prices continue to decline, gasoline prices continue to rise. What’s going on?
According to CNN Money, light crude was trading at $102.27 per barrel on Monday, which is down 4.06 percent over the last 30 days. However, gasoline prices are continuing to rise at the pump. They’re hitting $4.55 in Hawaii, compared to the lowest gas prices of $3.51 in Wyoming.
Again, what’s going on?
According to AAA, the average U.S. gas price rose by 1.3 cents to $3.911 a gallon. The gas prices continue to rise while crude oil, of which there is a glut, continues to fall. For example, Monday’s light crude oil prices for May 2012 contracts fell by $2.35 a barrel to reach that price of $100.96. Unleaded gas fell by 0.082 cents a gallon, down 2.45 percent for May contracts, according to CNN Money reports.
Take heart, because Minnesota and the Brainerd lakes area in particular, is among the lowest in the five state area. Brainerd/Baxter pump prices are down from last week’s high of $3.79 to $3.77 a gallon for regular unleaded. The state’s average is $3.78 a gallon, according to Minnesota AAA.
Wisconsin drivers are paying, on average, $3.92 a gallon, Iowans are forking out $3.79 a gallon, North Dakotans are paying $3.86 and South Dakotans $3.82 a gallon.
With a glut of oil worldwide, falling prices and rising gasoline prices, when is the dam going to break? Well, without a war in the Middle East, the price of a gallon of unleaded gasoline should begin to fall, if, and that’s a big if, the world’s political trouble spots remain calm and greedy wholesalers and retailers don’t gouge summer vacationers.
—Keith Hansen
Comments (13)
Add commentAnswer to "what's going on?"
Actually, Keith, the retail price of gasoline tracks quite closely the price of crude oil over time, because crude oil in the U.S. overall is 76% of the cost of gasoline. It doesn't track it day to day, because the oil in the gas you buy today may have been paid for months earlier by the refinery.
The rest of gas cost on average is 6% for refining; 6% for greedy distribution and marketing; and 12% taxes.
Prices vary some by region because different states have different content standards and for distribution costs. Some states vary about vapor pressure causing refineries to adjust the % of butane versus ethanol; sulfur content, etc.
As your letter notes, MN and Iowa have similar gas prices. This is because our big refinery at Rosemount supplies a lot gas to Iowa along with most of MN gas. that refinery spent $310 million on hydrotreaters to meet new low sulfur content standards, especially for diesel.
There is ample world oil supply, but I wouldn't call it a glut, as Asia keeps buying. You can try to make a bundle betting against the oil price in the commodity market. You have my best wishes on that.
Rolf W. member Amer Assoc of Petroleum Geologists
Speculators
How much do speculators in the futures market like big banks and hedge funds add to the cost of oil and gas, Rolf?
Speculators
The biggest players on the commodity markets are the oil and gas companies, trying to lock in a profitable price for their output. Over time, I suggest that speculators have NO significant impact on the price of oil and gas.
Oil and Gas Prices
Historically, financial speculators accounted for about 30 percent of oil trading in commodity markets, while producers and end users made up about 70 percent. Today it's almost the reverse. Financial speculators such as investment banks and hedge funds account for at least 65 percent of purchases of contracts for future oil deliveries, more than twice their traditional share, while buyers who intend to actually take delivery of the oil and use it, such as airlines, make up only about one-third of demand
"Speculation is now part of the DNA of oil prices. You cannot separate the two anymore. There is no demarcation," said Fadel Gheit, a 30-year veteran of energy markets and an analyst at Oppenheimer & Co.
According to Congressional testimony by the commodities specialist Michael W. Masters in 2009, the oil futures markets routinely trade more than one billion barrels of oil per day. Given that the entire world produces only around 85 million actual “wet” barrels a day, this means that more than 90 percent of trading involves speculators’ exchanging “paper” barrels with one another.
Pure speculators account for as much as 40 percent of that high price, according to testimony that Rex Tillerson, the chief executive of ExxonMobil, gave to Congress last year. That estimate is bolstered by a recent report from the Federal Reserve Bank of St. Louis.
http://research.stlouisfed.org/publications/es/article/9179
speculators
Speculators buy AND sell. The net result over time is no change in oil prices. Oil prices are in an irregular upward trend. It is because demand is rising and oil is getting more expensive to produce. That's called fundamentals.
I love it when
two lefties argue about which one of them is lying. Fight on boys, the pubby primary is over and we all need new entertainment!
Rolf
Were all your answers 4-6 years ago the same as now about the high price of gas, or did you spout the same thing all the democratic leaders like Pelosi, Schumer, Clinton and even Obama, that it was Bush's failed policies that caused the rise in gas and oil prices back then. Funny how back then it was politics and now it is the oil market.
You deerwoodieos
slay us!
P.S.
The old piece of junk foreign vehicle you used to brag about driving....... probably polluted Mother Earth worse that a Hummer or Dodge 4X4 no matter how little gas it used. Do you want to brag about that a little more? I'd bet a Rambler or Nash would pollute less.
Cool new words on the internet space, searchable...
DeerWoodIeos...
Includes Nash, those darned gas/oil consumer vehicles...
Shudder...Mother Earth put that stuff on the planet and it's now consumed? Shame on us...shame...
Rolf, this was in NY Times yesterday:
http://www.nytimes.com/2012/04/11/opinion/ban-pure-speculators-of-oil-fu...
So, eliminating "pure speculation" on oil futures wouldn't have anything to do with eventual price?
Bragging rights
Hopefully Mr O will be a one term just like your buddy Mr C there rolf. Both had gas prices double under there 1st & only term in office at least as far back as Carter. The price will really hurt this area.
I think Chairman Rush Limbaugh
May have given Mr. O his re-election.
Super unwise move with his commentary on the ladies a few months back...
Folks tend to forget things over 12 months. His comments won't be forgotten with less than 12 months to the November 2012 election...