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Unit 5302 · 09-03-2005, 01:04 AM

OPEC and other oil producers pump a finite amount of crude out of the ground. Oil companies do not actually purchase barrels of oil, they purchase futures or the rights to barrels of oil. Just like a stock price, there is more demand to buy the futures which causes a general increase in the futures price. Oil companies are buying these futures at higher prices because there is a finite supply, and they want to make sure they have the rights to the oil they need when they need it. I think that oil is currently over-valued so to speak.

As far as markups, Exxon-Mobil is making approximately 2-3x as much pure profit on a gallon of gasoline as they were prior to their monopoly. Some states like Minnesota have passed laws requiring stations to price their gas at minimum wholesale price markups. Their profit margin is right around $0.60/gallon at the moment. Mr 5 0 is correct about federal and state gas taxes. In Minnesota, they add to $0.40/gallon.

In regard to the stations gouging people, the stations also lower their prices as futures fall, albeit not as quickly. Most stations make only $0.05 to $0.10/gallon on fuel sales, and their prices are largely controlled by a single strong position seller in a market. Super America has a nasty reputation for playing pricing games with gas causing pump prices to be quite erradic. Even so, I doubt we hear nearly as much complaining when oil and pump prices drop together, but as soon as they increase together, people start saying the filling stations are gouging. If stations didn't react to a dynamic market, they would literally have to wait until the next tanker showed up to change their prices and they could easily get caught with their pants down resulting in a net loss.

It's a crappy position for sure, but the only thing that is logical for us as consumers to do is to buy less. Quit spending money on gas and prices will fall.

09-03-2005, 01:04 AM	#10
Unit 5302 Registered Member Join Date: May 1999 Posts: 5,246	Re: Fuel Prices OPEC and other oil producers pump a finite amount of crude out of the ground. Oil companies do not actually purchase barrels of oil, they purchase futures or the rights to barrels of oil. Just like a stock price, there is more demand to buy the futures which causes a general increase in the futures price. Oil companies are buying these futures at higher prices because there is a finite supply, and they want to make sure they have the rights to the oil they need when they need it. I think that oil is currently over-valued so to speak. As far as markups, Exxon-Mobil is making approximately 2-3x as much pure profit on a gallon of gasoline as they were prior to their monopoly. Some states like Minnesota have passed laws requiring stations to price their gas at minimum wholesale price markups. Their profit margin is right around $0.60/gallon at the moment. Mr 5 0 is correct about federal and state gas taxes. In Minnesota, they add to $0.40/gallon. In regard to the stations gouging people, the stations also lower their prices as futures fall, albeit not as quickly. Most stations make only $0.05 to $0.10/gallon on fuel sales, and their prices are largely controlled by a single strong position seller in a market. Super America has a nasty reputation for playing pricing games with gas causing pump prices to be quite erradic. Even so, I doubt we hear nearly as much complaining when oil and pump prices drop together, but as soon as they increase together, people start saying the filling stations are gouging. If stations didn't react to a dynamic market, they would literally have to wait until the next tanker showed up to change their prices and they could easily get caught with their pants down resulting in a net loss. It's a crappy position for sure, but the only thing that is logical for us as consumers to do is to buy less. Quit spending money on gas and prices will fall.