In 2008 oil spiked to $147 a barrel. Gas at the pump spiked as well to $4.11 national average Today, oil hovers around $106 per barrel, but the price of gas is approaching $4.50 and is still going up. The dollar hasn't devalued all that much and it's reported that demand in down. Does anybody have a reasonable explanation for this disparity?
Gas in Virginia is an average of $3.50. Perhaps everyone in California should move East. All but the illegals that is.
That is a very good question and I don't think anyone has an answer. I noticed this week that gas in Montreal is at it's highest price since it reached $1.44 a litre in 2008. I suspect greed however. It's strange also that this week Michael Douglas is in an advertisement stating that when he portrayed Gordon Gekko in 'Wall Street' and claimed 'Greed is Good', he was acting a part and not reflecting a philosophy.
Those who sell the oil want the highest price possible. Those who buy it want the lowest. It is a constantly evolving negotiation. At the moment, the sellers are doing better than the buyers.
It's because of refining capacity that went off line. Although I don't know where you are buying gas! It's $3.57 here. But in any event, there is now less worldwide refining capacity than there was in 2008, so the supply of gas is lower.
I will say "Welcome To Virginia" because "Virginia is for Lovers" (but only in the missionary position).
I believe that there are two causes; somewhat intermingled: 1) Obama has obviously publicized his desire to keep fuel prices high. Regardless of what Obama has done or not done, this causes the commodities market to gamble on factors and policies remaining in place that will continue to put upward pressure on fuel prices: from extraction, to delivery, to refining, to distribution - even taxation. Obama's own words are doing this. Who knows what percentage increase this creates, but - since the speculation market takes many factors into account - this is a big one, as it's one of the few that is quite certain. I believe the price of gas drops if it becomes public knowledge that Obama's chances of winning a second term are dwindling. 2) Long term, demand will still increase. While there are downward fluctuations in demand short term, it doesn't have as much of an effect on the speculation market, as long term trends will be hard to buck.
Gas prices aren't directly related to the barrel price. Wall street speculation also drives gas prices. Sometimes, one precludes the other. If speculators are buying options on higher barrel prices (being bullish), then it indicates that barrel prices are likely to go up soon, which can drive pump prices before it actually happens. The other side of things is that since 08, inflation has taken a toll due in a lot of places. Sometimes inflation is felt more at the retail level while wholesale doesn't hurt that badly. The price to produce crops hasn't gone up significantly lately, yet we've seen grocery bills and goods nearly double since the crash of 08. There is not always a direct correlation where barrel prices move before pump prices move. However, if the barrel price doesn't go up much from here, expect gas prices to take longer to come back down. Speculators hate being wrong and will continue for a long time to push and manipulate prices to reach their profit goals. The longer it takes, the more losses they incur. The longer they take losses, the more they punish the middle and lower classes. Aren't you glad we've got a casino atmosphere in our financial industry and that they can affect the entire population with their greed for no logical reason other than making a slightly higher return this year?
Because our demand dipped and so they are shipping our supply overseas where they can make more money from it. http://www.huffingtonpost.com/2012/02/23/us-motorists-gasoline-mexico-outbid-refinery_n_1297527.html
Some of it is instability int he Mid-East, uncertainty that supply will be there, so that helps drive it up. But the dollar actually has devalued to some degree, too. You see that when QE and Fed 0% Interest Rate policies start taking effect, commodity prices rise lock-step.
Interesting. If Obamas actions in the speculation markets can have an effect on raising gas prices...then it would stand to reason that he could reverse that. When is the election?
Yikes....you people have expensive gas. Here in Colorado I am seeing $3.05...I just filled my car up at a Bradley station yesterday for $2.98.
As others have pointed out, speculation is probably the primary reason---right now there's a whole lot of things that can/will happen to pressure oil upwards...and not a whole lot of things that can be speculated to help reduce prices. ...we might not be able to thank Obama for the former, but we sure can for the latter.
Are you in a time warp area?? Gas this morning Chevron..Paradise Ca. $4.29.9 I'd literally kill for $2.98..$77 to fill up and I'll have to repeat that Monday cause I have some necessary traveling to do over the weekend. Dat's a hunurt an fiddy bucks in 4 days. My neighbor commutes and does that every week. That's $600 a month....just to roll from point A to point B. WE have no buses here..no trains or trolleys or lightrail.
Their called options. A very confusing investment vehicle, and a dangerous one at that, but a very large and real part of our economic structure. With options, buyers buy "calls", which are speculations that they will buy a commodity or shares of stock for a certain price, but aren't required to do so. They pay a commission to own the "call", but don't have to put forth the money to buy the actual investment unless they decide to act on it. The sellers agree to sell at that price, no matter what the value of the investment is when it is called. Let's say that oil is valued at $100. I can buy a "call" for 1 barrel of oil at $110, paying a small fee to the seller if he agrees to sell to me for $110 whenever I want (within a limited time frame, a few days or months). Now, tomorrow, oil might be valued at $90, or it might jump to $120. I wouldn't activate the call at $90, but you can bet I would at $120. Because it means I can buy the barrel from the seller at the promised $110, and then immediately sell that barrel for $120 for a $10 profit. After shaving the commission I paid for the option, I come out ahead. There are also "puts", where sellers agree to sell their shares at a certain price (usually lower than the value). In that environment, If a stock drops from $100 to $80, but I own a "put" to sell at $90, then I can "put" to the buyer of the option and force them to buy from me at $90 if they signed the contract. It's downside protection and can make people very rich in a sinking environment (ask the newly minted 2008 millionaires that drove the sinking market as far down as possible). In both cases, options allow speculators to literally gamble on companies and commodities prices. The true value and production, and the true supply and demand curve of the company or commodity don't matter at all, only the price matters. Options are what drove tech companies to be grossly overvalued. Options are what drove housing investment vehicles (CMO's etc) to be overvalued, and options are what drives the prices of commodities to crazy volatility even in stable supply environments. It's made the economy no longer work the way it did 100 years ago, when investing meant going into a local company with some money and walking out with a certificate of shares in that company. Individual investors are at the mercy of the options speculators in everything, as they can drive businesses and markets any way they want to collectively. All about greed, not production and creation.
