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Thread: Oil prices question

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  1. #1
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    Default Oil prices question

    How is it that despite such dramatic price increases in crude oil per barrel the prices at the pump have not gone up? I remember before the prices at the pump used to go up the same day as the crude.

    Can it be that someone is holding the prices down now or maybe brought the prices up artificially in the past? I am suspecting both and the fact that now the prices have not increased I am attributing to a hold off due to unstable economy due to a housing crisis to a large extent. Another factor is the holidays are coming up and the authority wants people to confidently spend money shopping as good consumers are expected to do at this time of the year.

    Oil prices are not manipulated? Think again!

  2. #2

    Default Re: Oil prices question

    Have you been watching the rise in fuel oil prices?

  3. #3
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    Default Re: Oil prices question

    Quote Originally Posted by hardcore View Post
    Have you been watching the rise in fuel oil prices?
    The prices at the pump are the same as they were when crude was $70 per barrel. Yet crude today was $88 per barrel.

  4. #4

    Default Re: Oil prices question

    The refineries switched gasoline production from summer mix to winter mix which is less expensive to produce. Normaly we would expect to see a price reduction as they switch but higher prices for crude have cancelled out the cheaper cost for the winter mix. As I stated earlier, the steady increace in the price of home heating oil is a better indicator for rising crude prices at this time of the year and yes they are rising.

  5. #5
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    Default Re: Oil prices question

    You don't get it hardcore. The price at the pump at the gas station I get gas hasn't moved a cent one way or the other. Somebody is holding it steady.

  6. #6

    Default Re: Oil prices question

    Prices at the pump are set by supply and demand. Oil prices are not quite like that, since the OPEC cartel decides to artificially influence prices by altering production output.

    An analogy would be the corn side dish at KFC. At my local KFC, the side of corn has not changed price in years, but the market price of corn has more than doubled in the last 4 years (demand for ethanol is one reason).

    Does that eman that there is someone holding corn prices down at the KFC? No -- it merely means that the price came to rest at the current price and neither supply nor demand changed enough to move the price.

    There are so many factors that go into gasoline production that I couldn't pretend to know half of them. But, those producers have just as much right to ask whatever price they like for their gasoline as you have the right to ask whatever you want to sell something of yours.

  7. #7
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    Default Re: Oil prices question

    I guess nobody can answer my question why the price at the pump used to go up the same day crude went up a year or two ago but now it doesn't. Ok.

  8. #8

    Default Re: Oil prices question

    I think it has already bee nexplained to you a number of times. The end-user prioce is a supply-demand issue. Part of the price increases in the past were supply concerns -- refinery capacity, oil output form other countries, oil output from this country, etc., etc.

    So, there are a lot of factors that go into pricing. If any of them differ from one situation to the next, you can not be assured that the outcome is the same. Plus, human beings do set prices, which leaves the prices of assets up to the owner. Perhaps the status of oil doesn't seem to be as unstable as it once wss. Perhaps demand has changed, or supply has changed, or (more importantly), the perception of ANY of the factors has changed, since the owner's perception is that main factor here.

    If you are looking for a concrete answer, only the owner of the gasoline can tell you that. There are just so many factors that are considered and the owner's perception of those factors may be different than another perosn's perception. That's what happens when people are free to manage their assets as they see fit.

  9. #9
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    Default Re: Oil prices question

    Sure skipster, oil companies will buy crude for much higher than before and will lose profits by not increasing the price at the pump accordingly because there is no demand. That makes a lot of sense. Sure.

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