OT: Oil goes down but gas goes up?

That was Don't Taze Me, Bro!

Bill Putney (To reply by e-mail, replace the last letter of the alphabet in my address with the letter 'x')

Reply to
Bill Putney
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Oil companies don't pay the spot price for their crude. They all have long term supply contracts with the governments or companies who own the well heads. The only time an oil company pays the spot price is if they have a short fall on their contracts and have to make up the difference on the spot market.

When their contracts expire the oil companies will have to buy new contracts at a higher price but a spike in crude price won't really effect their costs to any great extent. So the price of gas shouldn't fluctuate with the price of crude.

Another fact not pointed out by the news media is that there are two prices for crude. One is the price they report all the time and that is the spot price, the other is the futures price. The futures price is almost always lower than the spot price but it will vary depending on the delivery date of the contract. Oil companies purchase their oil on the futures market and try to lock in the price for 100% of their needs.

Jack

Reply to
Retired VIP

The gov't bailout of bond holders. The bonds that were rated A but later found out to be a blend of A with subprimes, also called toxic waste in the financials. Smoke and mirrors stuff and it worked until it quit working. Bears Stearns already took it in the ass, and LEH is talked about being the next big one to fall. Anyway the gov't is in the process of taking these bonds as collateral for loans to institutions, hedge funds, and banks to save the system. Where does the money come from? The full faith and credit of the US gov't. and it's evident there isn't the faith in the dollar there used to be. There are trillions and trillions of dollars worth of derivatives that could unwind. Money has flowed to tangibles, like oil, grains or metals, something that will hold value. All this happened in the last year and the bond market recovered somewhat last week but there is a long way to go. Connect the dots.

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Reply to
Moe

probablly the odds... the odds are gas prices arent going to tumble down...

Reply to
Don't Taze Me, Bro!

Imagine you run a business and the cost to manufacture and sell the product is $10.00 per unit and you sell it for $11.00 per unit. If volume decreases, will you sell the product for $9.00-$10.00 and take a loss or break even?

This only works if we are the only consumers.

Reply to
Foobar

I looked around but couldn't find this person named anybody.

Don't be a twit.

Reply to
Foobar

I don't care what what you think determines the price they pay for crude. The first quarter this year, Sunoco, Valero and the downstream operations of ExxonMobil made significantly less money than the same quarter in 2007.

Here is an article about the difficulties that the oil companies are having:

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and this too:
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That fails to explain why the reports that the companies file with the SEC show low profits in the refining end of the business.

Really?

Then explain their lower profits during the first quarter on refining.

Jeff

Reply to
Jeff

I don't know Jeff, maybe they are shifting their profits to the pipeline company or to the retail unit. When you own everything from the port to the gas station, you can put your profits anywhere.

I was trying to point out why spikes in crude spot prices should NOT effect the price of gasoline at the pump. If you want to argue that they should then that's fine with me. Go for it because I'm done.

Jack

Reply to
Retired VIP

Valero and Sunoco don't have much a pipeline company. ExxonMobil does, of course.

The price on the spot market should affect the price at the pump, but not for one to three months, more or less, depending on market conditions. In addition, there shouldn't be spikes related to the price of crude oil, though. (In physics terms, the process should act like a low-frequency filter.) But, the price of crude oil will eventually get passed on.

Jeff

Reply to
Jeff

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