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Who Controls Fuel Prices?

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
It is interesting that CNN and a bunch of "blogs" are blaming the GOP for lower gas prices as we go into the next election cycle. Being that I follow the fuel industry, I thought this was an interesting perspective and while Junkman doesn't like when I post whole articles so I'm only posting the first half of this one.


Issue Date: CSP Daily News, September 25, 2006


Gas Prices in Consumers’ Hands
Alon CEO offers retailers sympathy, says drive less, consider diesel
morrisjeff.jpg
Jeff Morris
MIDLAND, Texas -- Before he even entered the ballroom at the Petroleum Club in Midland, Texas, this past week to address the Permian Basin Petroleum Association, Jeff Morris joked that he was asked at least twice a day about gasoline prices.

"The public always thinks gasoline prices are too high, but they forget that they have more control over prices than they think,” said Morris, president and CEO of Alon USA, according to the Midland Reporter-Telegram. “If people would drive 14,850 miles a year instead of 15,000 miles a year, gasoline would be $1.50 a gallon and oil $25 a barrel."

Demand, he said, has exceeded refinery capacity growth, which has averaged 1% annually for the last 20 years. In fact, he said, the nation imports 18% of the gasoline it consumes. At current rates, he said, the nation would need new capacity equaling 16 new refineries to meet demand.

What will help, he said, is for the nation to follow Europe's lead, where 80% of all top-end vehicles use diesel fuel. Alon, owner of the Big Spring Refinery and 7-Eleven convenience stores throughout West Texas and southeastern New Mexico, just converted its refinery to produce ultra-low-sulfur diesel and is giving serious consideration to a proposal to add the ability to produce biodiesel fuel. Diesel engines are 40% more efficient and have 40% fewer greenhouse gas emissions than gasoline and are certainly more efficient than the ethanol being touted, he said.

If, he said, 2% of all Midlanders bought E85 ethanol-fueled vehicles, the nation would need 26 new refineries to meet demand. But if 2% of all Midlanders bought diesel-fueled automobiles, the nation would need only six new refineries over the next 25 years. And if some Midlanders bought hybrid-diesel cars, there would be no need for new refineries.

Demand, Morris said, has been driving the current cycle that saw prices pass the $3 level. He noted that gasoline demand this year has risen 1.1% despite high prices.

"In 2004, when prices hit $2, I thought people would quit buying gas. I was wrong,” he said. “In 2005, when prices hit $2.50, I thought people would quit buying gas. I was wrong. When prices hit $3 this year, I thought people would quit buying gas. I was wrong. I don't know what the price is where demand will decline; this is staggering to me. We're going through the first demand-driven cycle in 50 years and so we don't know the point where people will use less."


 

jakki

New member
B_Skurka said:
“If people would drive 14,850 miles a year instead of 15,000 miles a year, gasoline would be $1.50 a gallon and oil $25 a barrel."
Refineries won't even consider hooking up their drills for anything less than $30 a barrel. It isn't economically viable

B_Skurka said:
Demand, he said, has exceeded refinery capacity growth, which has averaged 1% annually for the last 20 years.

OPEC quotas have regulated refinery output for the last 20 years.

 

HGM

New member
Its kind of ironic that people are still smoking ciggarettes and drinkng Starbucks coffee while they complain about gas prices rising.. We, as a nation are pretty resiliant..

So, I have a question regarding this as well..... Who is limiting the diesel options? I for one would have a diesel Ranger, or maybe even a diesel Focus if they were imported into the US...(they are sold in nearly every other country).. I firmly agree with this article and believe they would greatly reduce the problems..
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
jakki said:
OPEC quotas have regulated refinery output for the last 20 years.
Jakki many refineries are not owned by OPEC nations. Approximately 55~60% of our fuel does not even come from OPEC sources.
HGM said:
Who is limiting the diesel options?
The E.P.A.
 

DaveNay

Klaatu barada nikto
SUPER Site Supporter
HGM said:
Its kind of ironic that people are still smoking ciggarettes and drinkng Starbucks coffee while they complain about gas prices rising.. We, as a nation are pretty resiliant..

I read this article last week, and if you have the patience to read through the entire thing, it is very revealing regarding the relevance of gas in our regular purchases.

I will caution you that is is a little dry in some places, but it does contain what seems to be some very well thought out empiricle research. Don't blame me though if you fall asleep.
 

jakki

New member
B_Skurka said:
Jakki many refineries are not owned by OPEC nations. Approximately 55~60% of our fuel does not even come from OPEC sources.

Amazing, isn't it? yet OPEC has been regulating production for the last 20 years....:eek:
 

joasis

New member
Here is a link that is an article that some of you may find interesting, it is long, but food for thought. http://www.lifeaftertheoilcrash.net/ Another thing about oil prices...it is, no matter what anyone thinks, a supply and demand issue...and fueled by speculation and profit. Pit traders dealing with futures contracts will determine oil prices, as well as any change in demand knocks the price down.
 

jakki

New member
joasis said:
Here is a link that is an article that some of you may find interesting, it is long, but food for thought. http://www.lifeaftertheoilcrash.net/ Another thing about oil prices...it is, no matter what anyone thinks, a supply and demand issue...and fueled by speculation and profit. Pit traders dealing with futures contracts will determine oil prices, as well as any change in demand knocks the price down.

Totally agree, and would add that any restriction on supply drives the price up.
 

Av8r3400

Gone Flyin'
HGM said:
Who is limiting the diesel options? I for one would have a diesel Ranger, or maybe even a diesel Focus if they were imported into the US...(they are sold in nearly every other country).. I firmly agree with this article and believe they would greatly reduce the problems..

Blame-Storming session:

1. GM for souring the diesel mother's milk in the 80's with the worst engineered motors

2. EPA for measuring pollutants by gallon of fuel burned, instead of per mile traveled (diesels will get routinely 20% or better mileage - think about it...)

3. Lazy Americans that will not demand diesel powered vehicles (Where did the CRD Jeep Liberty go, anyway??)

4. Lazy manufacturers who will not get on with producing compliant motors and/or lobbying to have the ridiculous laws (#2) changed.

Need I go on? :pirate:
 

mla2ofus

Well-known member
GOLD Site Supporter
Big oil can always blame the price of diesel on heating oil,but what happens iffffff we go the way of Europe and have more diesel vehicles? What will happen to the price of diesel if demand for it goes up? It's already higher than gas.
He doesn't know how much the American people are willing to pay for gas,but I'm convinced the oil co's. are trying to find out!!!!! An arab sneezes,a rusty pipeline,not enough refineries. The list of excuses goes on and on!!!! Has anyone found a valid excuse for the record profits they are posting every quarter???What about our elected representatives in DC? They don't seem to be pushing too hard to find out.Makes me wonder why they're not.
Mike
 

HGM

New member
mla2ofus said:
Has anyone found a valid excuse for the record profits they are posting every quarter??? Mike


From what I understand, they make 8% profit on the product(gas, diesel, whatever).... As the base price goes up, $50 per barrel to $75 per barrel, the 8% will naturally follow as a larger profit... I can accept that, but what about the government taxing the fuel for roughly 15%(is the figure I heard) for doing nothing, just a tax.... That I have an issue with, because that money isnt being distributed to bettering the situation:myopinion: ... That money should be going toward future options in fuel, again IMO.. Unless I'm missinformed, that seems to be a bigger issue than an 8% profit for the guys that actually refine the oil and deliver the product..:my2cents:
 

joasis

New member
Everytime someone says "BIG OIL" and starts to think about how the public is at their mercy, think about this...Exxon Mobile posted record profits....who benefited? The stockholders...who are the stockholders? 96% or so are small investors and mutuals...meaning if you have a mutual fund or Roth IRA, or your grandmother may hold shares...they benefit from the profits...and it is a public company..anyone can examine their books. Now if they posted a loss....who would be affected? So everyome that holds stock, wants good management of their investment.

The prices in the market are driven by many factors, but big oil does not set the price....


As for diesel prices, I agree...completely ridiculous...but as diesel fuel keeps "cleaning up" to meet emmision standards (lower sulpher), few refineries want to deal with it, having to upgrade equipment, etc. There used to be 7 refineries in one city alone here in Oklahoma...now there are none in that particular area....environmental concerns....so we do need more refining capacity...you want it in your backyard? These are some tough issues coming forward.
 

LarryRB

Member
mla2ofus said:
Big oil can always blame the price of diesel on heating oil,but what happens iffffff we go the way of Europe and have more diesel vehicles? What will happen to the price of diesel if demand for it goes up? It's already higher than gas.
Mike
Very simply put, the states keep the rice of diesel high through state taxes, as a general rule, diesel, MA/CT/NY has been 30 cents per gallon higher than regular gas for six years straight. If CT gets 24 cents per gallon state tax on any vehicle that uses gasoline, and gets 54 for diesel,, just think how many planes leave Bradley airport any given minute, how many city adn long haul busses are running, any straight truck or tractor trailer is running, and then you see the pattern here.
 

HGM

New member
joasis said:
As for diesel prices, I agree...completely ridiculous...but as diesel fuel keeps "cleaning up" to meet emmision standards (lower sulpher), few refineries want to deal with it, having to upgrade equipment, etc. There used to be 7 refineries in one city alone here in Oklahoma...now there are none in that particular area....environmental concerns....so we do need more refining capacity...you want it in your backyard? These are some tough issues coming forward.

I think you hit it on the head here with the price of refining the ULSD.. I said it a year ago when the prices on diesel went above gas in our area.. The ULSD was on its way and it was going to cost more, everyone knew that.. When we had the shortage from Katrina and Rita, it drove the prices up.. Well, since they were already up, why not leave them there so when the ULSD comes out, no one will feel a difference? Has anyone noticed that the ULSD is more expensive than the LSD of earlier this year? Just a shell game to make the public less concerned over the new fuel cost, and all the while the oil companies made a little more money to fund the change.. I'm not pissed about it, it made sense...
 

MadReferee

New member
LarryRB said:
Very simply put, the states keep the rice of diesel high through state taxes, as a general rule, diesel, MA/CT/NY has been 30 cents per gallon higher than regular gas for six years straight. If CT gets 24 cents per gallon state tax on any vehicle that uses gasoline, and gets 54 for diesel,, just think how many planes leave Bradley airport any given minute, how many city adn long haul busses are running, any straight truck or tractor trailer is running, and then you see the pattern here.
As of 7/1/2006 CT actually gets 45 cents in taxes per gallon of gas and 41.5 cents per gallon of diesel. Here is a link to the REAL taxes on fuel state by state.

State by State Fuel Taxes
 

DaveNay

Klaatu barada nikto
SUPER Site Supporter
MadReferee said:
As of 7/1/2006 CT actually gets 45 cents in taxes per gallon of gas and 41.5 cents per gallon of diesel. Here is a link to the REAL taxes on fuel state by state.

State by State Fuel Taxes

Holy crap?!! That explains the hig price of diesel in Illinois! $0.70 per gallon taxes!
 

joasis

New member
And remember to note the states with the highest taxes, and the historical party preference in those states.

When I was involved in the trucking industry, I followed this closely...and since it is a hidden tax, the public can turn a blind eye to it. Now that trucking is paying half of their revenue for fuel, rates have gone up, and the public is finally seeing the results in the stores, reflected in higher prices. Maybe they won't be so quick to hammer the trucking industry now, if they know the truth.

I owned 3 trucks...average mpg was 6.1 across the board. Average daily run was 600 miles per truck and diesel was running $1.45 when I got out of the business. Fuel per day, per truck ran between $120 and $160 a day for revenue of $500 a day.....now the trucks make 4800 a day and fuel can be $600 a day....see where this is leading? A crisis is still over the horizon in the transportation industry.
 

DaveNay

Klaatu barada nikto
SUPER Site Supporter
joasis said:
I owned 3 trucks...average mpg was 6.1 across the board. Average daily run was 600 miles per truck and diesel was running $1.45 when I got out of the business. Fuel per day, per truck ran between $120 and $160 a day for revenue of $500 a day.....now the trucks make 4800 a day and fuel can be $600 a day....see where this is leading? A crisis is still over the horizon in the transportation industry.

Ummmm....

$120/$500 = fuel costs are 24% of gross revenue.

$600/$4800 = fuel costs are 12.5% of gross revenue.

That sure sounds like an improvement to the bottom line IMHO.
 

LarryRB

Member
re-read the chart, diesel is 45 plus under "other" is county and underground storage tax of 1.2 cents per gallon... in either case, my point is, very few realize what is being collected on any given day for state taxes through diesel alone....
 

MadReferee

New member
LarryRB said:
re-read the chart, diesel is 45 plus under "other" is county and underground storage tax of 1.2 cents per gallon... in either case, my point is, very few realize what is being collected on any given day for state taxes through diesel alone....
I did re-read it and payed close attention to the column headings for gasoline and diesel. Not to be picky but CT state excise tax on diesel is 26 cents per gallon, the "other" taxes amount to 15.5 cents per gallon for 41.5 cents per gallon total. When you add in Uncle Sams taxes you get 65.9 cents per gallon total taxes for diesel in CT.
 

joasis

New member
DaveNay said:
Ummmm....

$120/$500 = fuel costs are 24% of gross revenue.

$600/$4800 = fuel costs are 12.5% of gross revenue.

That sure sounds like an improvement to the bottom line IMHO.
Typo on my part, sorry...should have been $800...and you know how the typo occured...4 and $ are the same key...my bad.
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Just to add a little more fuel to the fire of pricing . . .


csp_mini.gif
Issue Date: CSP Daily News, September 27, 2006

An Election-Year Ploy?
Poll shows many believe politicians are manipulating gas prices




FPFlogo150.jpg
WASHINGTON -- There is no mystery or manipulation behind the recent fall in gasoline prices, analysts say. But try telling that to many U.S. motorists. Almost half of all Americans believe the November elections have more influence than market forces, according to a report from the Associated Press. For them, the plunge at the pump is about politics, not economics.

Retired farmer Jim Mohr of Lexington, Ill., rattled off a tankful of reasons why pump prices may be falling, including the end of the summer travel season and the fact that no major hurricanes have disrupted Gulf of Mexico output. “But I think the big important reason is Republicans want to get elected,” Mohr, 66, said while filling up for $2.17 a gallon.

“[The Republicans] think getting the prices down is going to help get some more incumbents re-elected,” Mohr added.

According to a new Gallup poll, 42% of respondents agreed with the statement that the Bush administration “deliberately manipulated the price of gasoline so that it would decrease before this fall's elections.” Fifty-three percent of those surveyed did not believe in this conspiracy theory, while 5% said they had no opinion.

Almost two-thirds of those who suspect President Bush intervened to bring down energy prices before Election Day are registered Democrats, according to Gallup.

White House spokesman Tony Snow addressed the issue Monday, telling reporters that “the one thing I have been amused by is the attempt by some people to say that the president has been rigging gas prices, which would give him the kind of magisterial clout unknown to any other human being.”

“It also raises the question, if we’re dropping gas prices now, why on earth did we raise them to $3.50 before?” Snow said.

 
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