Fuel Prices

[BaboonQueen]

People are getting to be like savages when it comes to buying gas. I was waiting in line today at a Citgo and I was next to the gas pump, I went to pull my car in, and some stupid Mexican in a gay-ass lowered truck 2 inches from the ground, whips in front of me. GRRR!!! People are going insane...CALM DOWN FOLKS!

[82 GT]

It's the the price of cigaretts...the tobacco companys know people will continue to buy them no matter what the price is.
Same with gas, they know we need it so they can pretty much set the price at whetever they want.
Although, they fail to realize, as I mentioned above, the consequences that come with outragous prices.......drive offs, stealing fuel, robbery etc....

[Unit 5302]

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.

[82 GT]

Originally Posted by Unit 5302

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.

That only works in theory. People can't spend less on gas because we need it. Sure, we can cut back and consolidate our necessary trips to the stores and such but that wouldn't be enough to dramatically drop prices.
It's like asking smokers to quit buying cigaretts so that the price will drop......they can't...they need them...there're addicted.

[Phillyfanfrombirth]

Originally Posted by 82 GT

That only works in theory. People can't spend less on gas because we need it. Sure, we can cut back and consolidate our necessary trips to the stores and such but that wouldn't be enough to dramatically drop prices.
It's like asking smokers to quit buying cigaretts so that the price will drop......they can't...they need them...there're addicted.

I disagree.

We are talking about the marginal buyer, not the masses. World oil demand since 1998 has gone up about 10%, while prices had gone from $10 to $70... valley to peak... a 600% increase.

We do not need 30% reduction... Energy numbers that came out in October (every Wednesday at 10:30 Eastern time), which have led to the pullback in oil from $70 to $60, showed a decrease in demand of less than 5%... that marginal buyer was the one that was the one driving that price higher, when they left, the price fell.

So yes, oil is an elastic commodity, though its elasticity is surely limited.