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TEX 10-19-2011 09:42 AM

Gas Price Question?
 
I see that the price of oil went up a bit overnight and the price of gasoline immediately followed. Up a few cents from yesterday, which is up a few cents from the day before. And up about .10 cents since last week. I was wondering how come when the price of oil falls, it takes awhile for the price of gasoline to fall? A local TV station in Houston did a story on this and reported that the price of the gas at the station has already been paid for so when the price of oil falls, the savings at the pump is not reflected until the supply on hand is expired. Why isn't that the case in reverse?

pr_capone 10-19-2011 09:48 AM

how the hell is this DC worthy?

(I know you didn't post this here TEX, twas moved)

talastan 10-19-2011 09:51 AM

Quote:

Originally Posted by pr_capone (Post 8006092)
how the hell is this DC worthy?

(I know you didn't post this here TEX, twas moved)

Because I think the debate to follow will justify moving it here. Sorry TEX

Radar Chief 10-19-2011 09:54 AM

Quote:

Originally Posted by TEX (Post 8006075)
Why isn't that the case in reverse?

Because they can get away with it? :shrug:

Taco John 10-19-2011 09:56 AM

Quote:

Originally Posted by talastan (Post 8006105)
Because I think the debate to follow will justify moving it here. Sorry TEX

LOL!

This could potentially turn political! better preemptively move it!

There's nothing inherently political about the prices of gas. Whoever moved this is a moron.

Donger 10-19-2011 09:59 AM

HOW MANY ****ING TIMES DO I HAVE TO ANSWER THIS GODDAMN QUESTION!!!!????

Radar Chief 10-19-2011 10:26 AM

Quote:

Originally Posted by Donger (Post 8006134)
HOW MANY ****ING TIMES DO I HAVE TO ANSWER THIS GODDAMN QUESTION!!!!????

:LOL: ROFL

TEX 10-19-2011 10:28 AM

Quote:

Originally Posted by Donger (Post 8006134)
HOW MANY ****ING TIMES DO I HAVE TO ANSWER THIS GODDAMN QUESTION!!!!????

At least once more thanks. You have an answer for everything. They're usually correct when it comes to the economy. So please induldge if it's not too much trouble. I'm going send your answer to the ABC affiliate here in Houston. If one sends in answers, they check them out and send them back and tell you that you're usually wrong. So, if / when they tell me that you're wrong -I'll share...

Hydrae 10-19-2011 10:28 AM

Quote:

Originally Posted by Donger (Post 8006134)
HOW MANY ****ING TIMES DO I HAVE TO ANSWER THIS GODDAMN QUESTION!!!!????

How many users are there on this site?

Radar Chief 10-19-2011 10:33 AM

Quote:

Originally Posted by TEX (Post 8006199)
At least once more thanks. You have an answer for everything. They're usually correct when it comes to the economy. So please induldge if it's not too much trouble. I'm going send your answer to the ABC affiliate here in Houston. If one sends in answers, they check them out and send them back and tell you that you're usually wrong. So, if / when they tell me that you're wrong -I'll share...

Oh, I believe the gauntlet has been dropped. :popcorn:

Frosty 10-19-2011 10:38 AM

Quote:

Originally Posted by Donger (Post 8006134)
HOW MANY ****ING TIMES DO I HAVE TO ANSWER THIS GODDAMN QUESTION!!!!????

Until you give an answer that isn't bullshit.

Mr. Kotter 10-19-2011 10:46 AM

Corporate greed.

End of thread.

Donger 10-19-2011 10:49 AM

Quote:

Originally Posted by TEX (Post 8006199)
At least once more thanks. You have an answer for everything. They're usually correct when it comes to the economy. So please induldge if it's not too much trouble. I'm going send your answer to the ABC affiliate here in Houston. If one sends in answers, they check them out and send them back and tell you that you're usually wrong. So, if / when they tell me that you're wrong -I'll share...

Yeah, I could write it all out (again) or just give you a link. I'll do the later:

http://www.dailyfinance.com/2011/03/...t-fall-slowly/

It's a well-known law of physics that everything falls at the same rate. But as frustrated motorists have had reason to notice lately, that law doesn't apply to gas prices. You aren't imagining it: Usually, the price of gas rises much faster than it falls.

This phenomenon has held true for decades, and recent price trends have been no exception. On Thursday, the retail price for regular unleaded averaged $3.52 per gallon in the U.S., up a massive 37 cents in just one month -- and a whopping 60 cents, or 20%, since December. Several different factors have contributed to this trend.

In many cases, gas price hikes are tied to wholesale prices. Many gas stations have contracts that require them to raise their prices as soon as their suppliers -- often oil companies -- raise theirs. Some gas stations also anticipate higher wholesale prices and hike their prices in advance to make up for the expected gap.

Here's an example: If the price of oil increases $5 a barrel, it will typically cost an additional 10 to 12 cents per gallon -- in wholesale prices -- for the retailer's next delivery. Gas station operators know this, and often will immediately increase the pump price of gasoline 10 to 12 cents in response. When they do this, retailers are essentially basing their prices on the cost of replacing the gasoline that's being used, rather than on the price they originally paid for that gas, to help even out their cash flow.

Smoothing the Cash Flow

The opposite happens when gas prices are dropping, leading to slower decreases as gas station operators hold off on lowering their prices in order to cover the earlier costs of buying more expensive gas. Here's a simplified version of what happens (excluding taxes and the cost of environmental regulations that also affect gas prices): Say you're a gas station owner who buys 10,000 gallons of regular unleaded gasoline -- a month's worth -- at Wednesday's wholesale price of $2.85 per gallon. Your bill comes to $28,500.

Imagine that you sell 9,000 gallons over the next three weeks, but then the price of oil drops, bringing the wholesale price for gas down 10 cents to $2.75 per gallon. You'll be able to buy your next 10,000 gallons at the lower price and cut your pump price by 10 cents per gallon as a result, but if you reduce your prices right away, you wouldn't cover the cost of the remaining 1,000 gallons of gasoline that you already bought at the higher price. Most likely, you'd wait until you'd sold those 1,000 gallons before cutting your price.

In this way, as retailers wait to cover the costs of the higher-priced gas still in their tanks, gas prices decline more slowly than they rise.

Maximizing Profits

Other factors also play a role in this phenomenon, however. One of these can be considered either "profit maximization" or greed on the part of station operators, depending on your perspective.

Sometimes, even after a station has sold all of its expensive gas at that higher price ($2.85 per gallon in our scenario), it will keep pump prices high and pocket an extra 10-cent-per-gallon profit on the cheaper $2.75 per gallon gas. As station operators squeeze an extra dime, nickel or even pennies out of each gallon of cheaper gas, for as long as possible, that lengthens the amount of time it takes for pump prices to fall.

If stations are all inclined to keep prices high, what persuades them to cut them? Competition, of course. If an area contains multiple gas stations, all of which want to boost their market share, one or two will inevitably lower their prices by a penny or two (or more) in the hope of increasing sales. Others will respond by cutting their prices too, until the pump prices finally reflect the reductions in the wholesale price.

Gas stations equipped with convenience stores, which generally earn more money from store sales than gas sales, typically can afford to lower their prices first. Meanwhile, some stations keep their prices high for other reasons -- they might not have much competition, for instance, and might not be concerned about losing a few customers -- but in general, the rule of competition applies.

The Power of Customers

And that means that customers do, in fact, have an impact on prices. To start prices on their slow journey downward, you need to shop around.

That said, customers' control over prices is limited. The largest factor in gasoline's price is still the price of oil, which has remained above $60 per barrel for the last 20 months. Oil prices have been rising -- albeit with volatility -- since December 2008, when they hit a low of about $35 per barrel during the financial crisis.

Given the current global trends in oil supplies and demand, it appears that the best way to cut your gasoline bill for the foreseeable future is to drive less, such as by carpooling more, using mass transit or buying a more fuel-efficient vehicle.

Donger 10-19-2011 10:49 AM

Quote:

Originally Posted by Frosty (Post 8006227)
Until you give an answer that isn't bullshit.

I don't believe that I've ever given a bullshit answer on the subject.

Mr. Kotter 10-19-2011 10:55 AM

Quote:

Originally Posted by Donger (Post 8006249)
I don't believe that I've ever given a bullshit answer on the subject.

But you could have kept it concise, yet accurate: two words...corporate greed. :shrug:


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