Back from Vacation, oil talk

[clavocat]

well im back from vacation, had a blast...heard oil is real low but the gas prices arent, whats the deal??? BTW glad i got out of the market cuz everything is down and cheaper for me now :D

[Thierry Martin]

Welcome back clavocat!

[aiki14]

Ain't it funny how the price of gas at the pump goes up 10 seconds after the price of crude goes up 10 cents and if crude falls 5 bucks gas goes down a nickel a month later? I paid 3.48 for regular in Lahaina tonight. Can't complain too much as tomorrow I'll be heading off to even more ridiculous prices, I think gas is around $7.50 gal in Tasmania.

[TonyM]

Why gasoline follows oil up but not down

The short answer: Service stations do it because they can. But the really big bucks are being made elsewhere.

By Steve Hargreaves (steve.hargreaves@turner.com), CNNMoney.com staff writer
January 12 2007: 2:19 PM EST

NEW YORK (CNNMoney.com) -- If it seems like gasoline prices are quick to skyrocket when the price of oil goes up, but then take their sweet 'ol time coming back down when crude prices sink, the answer is simple: They do.
"There is a rocket and feather aspect," said Tom Kloza, chief oil analyst at the Oil Price Information Service.



And the reason seems to be simple economics.
The service stations are still selling the same amount of gasoline when wholesale prices fall, said Kloza, "so there's no reason to drop."
"Human nature being what it is, [service stations] typically react [to a spike in oil prices] by pushing prices higher, even before they replace their inventories," said Geoff Sundstrom, spokesman for the motorist organization AAA.
"And [again] human nature being what it is, unless other stations bring their prices down, he's going to be very reluctant to bring down his."
But before you boycott your local Qwickie Mart, Kloza said to remember that gas stations typically make very little money off the gas they sell, maybe a gross of 15 cents a gallon.
Out of that, they have to pay all their expenses, including fees to credit card companies that can eat up half of that profit.
"[People] think of every sector of the business as being run by John D. Rockefeller or J.R. Ewing," said Kloza. "People don't realize how little profit there is."
Service stations pay their bills on money made when people go inside to get things like coffee and Ring Dings, which are often sold at a decent mark-up.
The real money in oil, he said, is made at the production, refining, and, especially, the trading levels.
"All these exchanges are setting records," in terms of the number of contracts changing hands at places like the New York Mercantile Exchange, where brokerage houses will take a cut for each transaction. "That's where the big bucks are made."
Eventually, the free market steps in and prices begin going down when other nearby stations reduce their price.
And as opposed to government controls that would prevent stations from charging a little more when they can, AAA says that's just how things should work.
"The best way to assure a stable supply of fuel is to allow a free market to operate," said Sundstrom.
With oil prices sinking some 15 percent since the beginning of the year, Kloza said gasoline prices are sure to follow, although it will just take a few weeks for the cheaper product to work its way into the system.
But Sundstrom warns consumers to not get complacent.
"We anticipate high prices over time, regardless of what they see in the short term," he said. "We'd hate to see consumers think our energy problems have been solved and jump into a new car that gets the same fuel economy, or worse even less, than the one they have now."

[madcowdisease]

Glad you all have made the same observation as I. I've literally been preaching this message for the past two years. I wouldn't be so pissed if it made any logical sense. They claim they need to raise the price as soon as futures push higher to cover the cost of replacing inventories. But, when futures tumble, like they have recently, they are in no hurry to offer a fair price. Seems like some bs to me.

[Lou]

gas is $1.99 per g in columbus.

[optimus25]

Glad you all have made the same observation as I. I've literally been preaching this message for the past two years. I wouldn't be so pissed if it made any logical sense. They claim they need to raise the price as soon as futures push higher to cover the cost of replacing inventories. But, when futures tumble, like they have recently, they are in no hurry to offer a fair price. Seems like some bs to me.

I share your sentiment. In my area, gas is still $2.50. It hasn't changed much since oil has gone from $60 to sub $55.

[madcowdisease]

gas is $1.99 per g in columbus.

Head a bit south to the Obetz area; it's $1.95/gl.

[englishman26]

Oil at $35 a Barrel? It Could Happen to You:

http://usmarket.seekingalpha.com/article/24219

[madcowdisease]

Oil at $35 a Barrel? It Could Happen to You:

http://usmarket.seekingalpha.com/article/24219

I'll $#!t

[bigzip]

I'll rush out and buy a gas guzzlin SUV. Gas is $1.89 here in Mich. I just can't believe oil will ever be that low esp. when Chinese/Indians get autos to the masses.

[cramerica1972]

I'll rush out and buy a gas guzzlin SUV. Gas is $1.89 here in Mich. I just can't believe oil will ever be that low esp. when Chinese/Indians get autos to the masses.they wre making $$$ when oil was $40/barrel,why is opec being greedy?

[aiki14]

they wre making $$$ when oil was $40/barrel,why is opec being greedy?

To quote the scorpion in the parable, "it's their nature"

[zyzzyva57]

May I remind one and all we were talking about this less than a year ago when oil was doing all this in the opposite direction

May I farther note you know what begins June 1st: the hurricane season

Oil is a commodity; ergo, Tipping Points in either direction is easy

Saudi Arabia is being smart: let oil go down in price, so we dumb Americans will go back to SUVs and then wack us again

The hurricane season, those pesky (albeit convenient) Nigerian rebels, OPEC, and our friends the Traders wait like thieves in the night to pounce, and MAKE NO MISTAKE THEY WILL AGAIN

[madcowdisease]

May I remind one and all we were talking about this less than a year ago when oil was doing all this in the opposite direction

May I farther note you know what begins June 1st: the hurricane season

Oil is a commodity; ergo, Tipping Points in either direction is easy

Saudi Arabia is being smart: let oil go down in price, so we dumb Americans will go back to SUVs and then wack us again

The hurricane season, those pesky (albeit convenient) Nigerian rebels, OPEC, and our friends the Traders wait like thieves in the night to pounce, and MAKE NO MISTAKE THEY WILL AGAIN

I've been overweight oil since it went below $55/bl down through $53. I'm pretty confident I'll be high on the hog in 6-18 months.

[englishman26]

I just thought the price was being manpulated down so that the traders can make money off it on the way up all over again. But what do I know!

[aiki14]

I've been overweight oil since it went below $55/bl down through $53. I'm pretty confident I'll be high on the hog in 6-18 months.

Ditto

[madcowdisease]

I just thought the price was being manpulated down so that the traders can make money off it on the way up all over again. But what do I know!

If that's the case I hope your buying. No matter the cause for the decline it's going up in the future.

Ditto


About 30% of my capital is now invested in oils of some form or another: speculative, high yield, and growth. As crude keeps tumbling I am eager to buy more but how much is too much concentration? I'm quite confident oil will be back up in the time frame mentioned above. Does anyone recommend going 50%+ oil stocks assuming they range the whole sector?

[madcowdisease]

I'm posting this in the oil threads for discussion:

http://www.msnbc.msn.com/id/16691568/