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Old 04-27-2007, 06:47 AM   #104
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Quote:
Originally Posted by Slick32
Gasoline is produced based on supply and demand. That is a cornerstone of American business. In this case there seems to be some collusion with the major oil refineries across the country.

Another situation I feel is pertinent is the fact that we have not built a new refinery in the U.S. for almost 30 years. Either the regulations need to be reviewed to find out which of them needs to be revised or eliminated. Every refinery I've ever been around has hazardous waste and byproducts. There are safe ways to destroy both, but it seems like they are the hanging point when the topic of new facilities arise.

The closest I've heard of a new refinery is one that has been proposed near Cushing, OK.
Correct. There two reasons why the oil companies haven't built one: profit and red tape. A new refinery would be a huge capital expense. Sure, they presently have the cash, but realizing a profit from a new refinery would take years. Also, our government has made building (let alone getting one approved) a refinery an extremely painful process. Environmental regulations, politics, etc. Instead, they have chosen to expand existing refineries to meet demand (and import refined gasoline).

Quote:
Originally Posted by Slick32
I have one real question. Why is it that when the price of a barrel of crude oil goes up the price of gas at the pump immediately goes up and when the price of barrel of crude goes down it takes weeks for the price impact to "trickle" down to the consumer.

What makes the whole situation untenable for me is the fact that the major oil companies last year made billions of dollars of profit above their projections. They estimated their profits and exceeded them by as much as 60%.
The price goes up immediately because the retailers are considering what their replacement costs are going to be. They have to anticipate what that is going to be. For example, if the price of crude is going up and their next shipment needs to be purchased next week, they will start raising their prices in order to not lose money. They often don't raise it enough and actually lose money. Therefore, they try to make some back when prices drop by not dropping their prices as fast.

It all revolves around the price of crude, something that the oil companies do not control. They benefit from high crude prices, however.
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