Does big oil just throw a dart at a board to pick prices these days?!?

theclemsonkid

theclemsonkid

Member
I'm an analytical person by nature. I like knowing why things are the way they are. For the longest time, the price at the pump was tied directly to the price of a barrel of crude, or in some instances, global security issues. Over the past month, oil has been consistently between $84 and $88.50 a barrel. (It's currently at $84.25 as of 10:30am EST) There also, as far as I know, have been no major refinery or political reasons that oil production should have changed during that time. However, here in Ohio anyways, gas was down to $2.98 a gallon less than three weeks ago, and this morning, it's now at $3.59 a gallon.
Could someone please explain to me how gas prices can jump over 60 cents in less than a month, with no real movement in price of crude, or refinery problems? I don't normally call B.S. on big oil, but this last one has really got me wondering...
 
reefraff

reefraff

Active Member
Quote:
Originally Posted by TheClemsonKid http:///t/393493/does-big-oil-just-throw-a-dart-at-a-board-to-pick-prices-these-days#post_3500985
I'm an analytical person by nature. I like knowing why things are the way they are. For the longest time, the price at the pump was tied directly to the price of a barrel of crude, or in some instances, global security issues. Over the past month, oil has been consistently between $84 and $88.50 a barrel. (It's currently at $84.25 as of 10:30am EST) There also, as far as I know, have been no major refinery or political reasons that oil production should have changed during that time. However, here in Ohio anyways, gas was down to $2.98 a gallon less than three weeks ago, and this morning, it's now at $3.59 a gallon.
Could someone please explain to me how gas prices can jump over 60 cents in less than a month, with no real movement in price of crude, or refinery problems? I don't normally call B.S. on big oil, but this last one has really got me wondering...
The oil companies don't have a lot to do with gasoline prices. It the refiners and so called big oil aren't a major player there. Part of it is likely the switch to winter blend. Part of it is the storm and part of it is 0bama got re elected. In short, BECAUSE THEY CAN LOL!
 
darthtang aw

darthtang aw

Active Member
I'm an analytical person by nature.  I like knowing why things are the way they are.  For the longest time, the price at the pump was tied directly to the price of a barrel of crude, or in some instances, global security issues.  Over the past month, oil has been consistently between $84 and $88.50 a barrel. (It's currently at $84.25 as of 10:30am EST)  There also, as far as I know, have been no major refinery or political reasons that oil production should have changed during that time.  However, here in Ohio anyways, gas was down to $2.98 a gallon less than three weeks ago, and this morning, it's now at $3.59 a gallon. 
Could someone please explain to me how gas prices can jump over 60 cents in less than a month, with no real movement in price of crude, or refinery problems?  I don't normally call B.S. on big oil, but this last one has really got me wondering...
Iran. Also our election is over. Winter months are here meaning ethanol costs go up.
 
reefraff

reefraff

Active Member
Quote:
Originally Posted by TheClemsonKid http:///t/393493/does-big-oil-just-throw-a-dart-at-a-board-to-pick-prices-these-days#post_3500996
This is an interesting article...
http://money.cnn.com/2012/11/12/news/economy/us-oil-production-energy/index.html?iid=HP_River
I've thought that would happen for years. We abandoned a lot of fields prior to enhanced extraction methods that have since made it easier to get more oil out. Because of development over the old fields it wasn't viable to go after it. But with horizontal drilling they can come in from the side and get it. You can go in now and get as much daily production with one well as 20 vertical wells could get before.
But the real boom is natural gas. We really need to start pushing that as motor vehicle fuel.
 
farsight32

farsight32

Member
Quote:
But the real boom is natural gas. We really need to start pushing that as motor vehicle fuel
I think there is a better way to handle our gas surplus. We are currently extremely over supplied because of the shale gas boom. About ten years ago we found a way to extract natural gas from tight shale formations with horizontal drilling and hydraulic fracturing. This boom happened when gas prices were near $10 dollars per Mcf. Since then the Chesapeakes and other big E&P have started to greatly overproduce, driving the price down to its current price of around $3 per Mcf.
Using this gas to fuel cars is a waste, in my opinion. the shortage of natural gas in Europe has driven the price to near $12 or $13 per Mcf there. We need to take advantage of the arbitrage opportunity and make some good profit off sales to Europe, while also liquidating our excess reserves, and getting the gas market back to equilibrium prices.
For those of you who would say it's impossible to move gas across an ocean economically, there are currently massive capital projects on the east coast to construct gas cooling stations to compact it and transport it in barrels, like oil.
I just think the best way to bring our market back to equilibrium is to make a huge profit on the excess reserves, my humble opinion.
 
reefraff

reefraff

Active Member
Quote:
Originally Posted by farsight32 http:///t/393493/does-big-oil-just-throw-a-dart-at-a-board-to-pick-prices-these-days#post_3501029
I think there is a better way to handle our gas surplus. We are currently extremely over supplied because of the shale gas boom. About ten years ago we found a way to extract natural gas from tight shale formations with horizontal drilling and hydraulic fracturing. This boom happened when gas prices were near $10 dollars per Mcf. Since then the Chesapeakes and other big E&P have started to greatly overproduce, driving the price down to its current price of around $3 per Mcf.
Using this gas to fuel cars is a waste, in my opinion. the shortage of natural gas in Europe has driven the price to near $12 or $13 per Mcf there. We need to take advantage of the arbitrage opportunity and make some good profit off sales to Europe, while also liquidating our excess reserves, and getting the gas market back to equilibrium prices.
For those of you who would say it's impossible to move gas across an ocean economically, there are currently massive capital projects on the east coast to construct gas cooling stations to compact it and transport it in barrels, like oil.
I just think the best way to bring our market back to equilibrium is to make a huge profit on the excess reserves, my humble opinion.
They've been using nat gas in vehicles for 50 years or more. Even before the boom here it was a little cheaper than gasoline. Every bit if that we use means we import less oil
 
farsight32

farsight32

Member
Quote:
They've been using nat gas in vehicles for 50 years or more. Even before the boom here it was a little cheaper than gasoline. Every bit if that we use means we import less oil
The U.S. is on the verge of becoming the worlds largest producer. We are increasing domestic production to cover a greater portion of domestic demand. Wouldn't it be easier to stabilize our market while taking huge profits on price differentials? Couldn't we subsidize a large portion of our imports with the margin we get on gas sales? And finally, at the end of the day, are domestic producers going to look at the situation and choose to sell gas domestically at extremely low prices, or will they choose to find the opportunities that promises the best return on investment? Capital markets will always seek to maximize profits and establish equilibrium between production and consumption. The nature of our economy predicts that gas will be sold to foreign markets.
 
theclemsonkid

theclemsonkid

Member
Quote:
Originally Posted by farsight32 http:///t/393493/does-big-oil-just-throw-a-dart-at-a-board-to-pick-prices-these-days#post_3501032
The U.S. is on the verge of becoming the worlds largest producer. We are increasing domestic production to cover a greater portion of domestic demand. Wouldn't it be easier to stabilize our market while taking huge profits on price differentials? Couldn't we subsidize a large portion of our imports with the margin we get on gas sales? And finally, at the end of the day, are domestic producers going to look at the situation and choose to sell gas domestically at extremely low prices, or will they choose to find the opportunities that promises the best return on investment? Capital markets will always seek to maximize profits and establish equilibrium between production and consumption. The nature of our economy predicts that gas will be sold to foreign markets.
And there is where the perils of capitalism are felt hardest... do you make as much money as possible while hurting the people of your country domestically? Or do you do the right thing and try to find a healthy balance that won't be quite as profit filled, but hey, at least the common folk in your country aren't suffering as much...
 
farsight32

farsight32

Member
Quote:
And there is where the perils of capitalism are felt hardest... do you make as much money as possible while hurting the people of your country domestically? Or do you do the right thing and try to find a healthy balance that won't be quite as profit filled, but hey, at least the common folk in your country aren't suffering as much...
I can't disagree with you. I hope you didn't take my prediction to mean I support this method. A little background, I am about to finish school as an external auditor for the energy sector. I have learned a lot about the industry, and you nailed it.
The whole problem of excess gas arose because companies everywhere rushed to take advantage of the high gas prices back then. Greed created the current problem (over supply), and those companies are waiting until greed can provide a solution. Its a messed up little industry we have. The goal is to gouge prices as much as the consumers can bear. No decision is ever made by energy companies based on what is best for you and me. I'll say it again, you are absolutely correct, greed is the problem here.
 
D

dragonzim

Active Member
There were 2 refineries in NJ that were shut down due to hurricane sandy. That certainly affected prices and supplies here...
 
reefraff

reefraff

Active Member
Quote:
Originally Posted by farsight32 http:///t/393493/does-big-oil-just-throw-a-dart-at-a-board-to-pick-prices-these-days#post_3501032
The U.S. is on the verge of becoming the worlds largest producer. We are increasing domestic production to cover a greater portion of domestic demand. Wouldn't it be easier to stabilize our market while taking huge profits on price differentials? Couldn't we subsidize a large portion of our imports with the margin we get on gas sales? And finally, at the end of the day, are domestic producers going to look at the situation and choose to sell gas domestically at extremely low prices, or will they choose to find the opportunities that promises the best return on investment? Capital markets will always seek to maximize profits and establish equilibrium between production and consumption. The nature of our economy predicts that gas will be sold to foreign markets.
It's easier not to export it. Not the best option UNLESS we show we aren't going to utilize it here.
 
theclemsonkid

theclemsonkid

Member
This is where I throw up in my mouth a little bit every time someone calls capitalism the best system the world has ever known. Does it make some people money? Absolutely. And what people are those you ask? The people who own the businesses. And yes, I know, I am a small business owner. However, look at oil. You have an industry that is making close to enough product to supply it's own people with cheaper fuel, yet they will undoubtedly go overseas to where they can get more money for their product.
Capitalism is great until someone stabs their own mother in the back for more money.
 
reefraff

reefraff

Active Member
Quote:
Originally Posted by TheClemsonKid http:///t/393493/does-big-oil-just-throw-a-dart-at-a-board-to-pick-prices-these-days#post_3501112
This is where I throw up in my mouth a little bit every time someone calls capitalism the best system the world has ever known. Does it make some people money? Absolutely. And what people are those you ask? The people who own the businesses. And yes, I know, I am a small business owner. However, look at oil. You have an industry that is making close to enough product to supply it's own people with cheaper fuel, yet they will undoubtedly go overseas to where they can get more money for their product.
Capitalism is great until someone stabs their own mother in the back for more money.
Um you do know we export very little oil, right? What we do export is the dirty stuff (high sulfur) that is very expensive to refine here because of environmental laws. And we don't come close to producing what we need. We are in sight of "American" oil independence which is Canada and South America too.
 
beaslbob

beaslbob

Well-Known Member
Supply and demand determine the price of oil and gasoline.
to me it is one of the most competive things on the market.
First the product is the same station to station brand to brand and so on. In fact when I worked at a 7-11 we would get gas for tankers with many different brands.
Second the price is well known to the consumer.
So the consumer gets to choose what price they want to pay and not worry about brand.
If you think even for one milisecond that is not true please remember (if you can) the '73 gas crisis. the Feds controlled the price below market, started an allocation system and as a result I waited in very very long lines. Once at Luke Air force base west of Phoenix they opened the base gas station. Word spread and there was literally a line miles long 4 wide waiting to buy gas.
All of which would have been avoided by not touching the market to begin with.
 
darthtang aw

darthtang aw

Active Member
Why is it always with oil? Jesus.....no one ever complains and starts long discussions when milk jumps from 1.99 a gallon to 4 dollars a gallon. Or when oranges jump from 2 dollars a lb. to 4 dollars a lb. Your electricity has increased in cost, but we don't have Power company threads...and that is a true monopoly...
But god forbid gas raise 10 cents a gallon and everyone wants to know why.
 
theclemsonkid

theclemsonkid

Member
Quote:
Originally Posted by Darthtang AW http:///t/393493/does-big-oil-just-throw-a-dart-at-a-board-to-pick-prices-these-days#post_3501173
Why is it always with oil? Jesus.....no one ever complains and starts long discussions when milk jumps from 1.99 a gallon to 4 dollars a gallon. Or when oranges jump from 2 dollars a lb. to 4 dollars a lb. Your electricity has increased in cost, but we don't have Power company threads...and that is a true monopoly...
But god forbid gas raise 10 cents a gallon and everyone wants to know why.
Because no one spends $2,500-$2,800 a year on milk or oranges...
 
reefraff

reefraff

Active Member
Yeah. Our last electric rate increase was due to Excel buying more "renewable" energy. Water is expensive too, about 50 a month.
 
darthtang aw

darthtang aw

Active Member

Because no one spends $2,500-$2,800 a year on milk or oranges...
Because no one spends $2,500-$2,800 a year on milk or oranges...
The average grocery bill for a family of four is 12,000 dollars a year.
 
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