Thoughts on Price of oil and U.S. Economy

I was sitting at a gas station today eating a sub, when I stared thinking about the price of gas. You know, for the price of a barrel being over $90 now, the price hasn't really gone up. Then I started thinking about when katrina hit New Orleans. The price of oil hit $70 and during and the first 2 weeks after katrina I was paying $3.50 where as before it $2.80 or ruffly 70 cents increase. When I was paying $2.80 oil was only $60 a barrel. If this is the case, why are we not seeing a large increase in the price of gas now? If $10 dollars cause a 70 cent increase in gase, then $30 should have put $2.10 on the gas. This being said, at $90 we should actually be at $4.90 per gallon not at $3.00 which we are now. I'm not one to complain about this, but if the refineries are absorbing the cost and not passing it on to the consumers, wouldn't this impact there bottom line? I thought this was interestign so I desided to find out what the top refiners stock was doing. I found this list:

www.eia.doe.gov...

On page 5 is the list. I then decided to look at there stock tickers.

www.investorguide.com...
stocks.us.reuters.com...
stocks.us.reuters.com...

With alot of them you'll notice the start of a downward stance.

My question is this, is it possible that the government has put pressure on the Oil companies to keep prices down in order to allow the consumer the ability to deal with the current liquidity crisis in the bond market?

I.E. try to keep the population unhappy, vs revolting due to loosing there house and having to fill up a 12 gallon gas tank @ $60 a pop vs$34 or $36?

Additionally, what happens if the the refiners can't continue to absorb the cost? Wouldn't that impact spending? Would that mean that people would have less money to buy junk with? just some thoughts of mine. Some people on the news have been saying oil will hit $100 a barrel, if this is the case, shouldn't the price of gas be $5.60?

After all we can't expect the price to stay the same, if it cost more, because of demand, then it should be passed on all the way through? Could this be a conspiracy to possible delay the economic collapse of the U.S.

Just some thoughts, I'm curious to see the replies.

Cheers,

Camain

The price of oil in barrels does not immediately affect supply of Petrol at the pumps. There is a lead time from getting the oil to the refineries and then to market. The price today of a barrel of oil may take many months to filter through to the pump. It may well be the case that if you bought a barrel of oil today, it is probably still in the ground.

The price increase you saw after Katrina was because the already processed Petrol was in short supply, not the oil and that refineries in the area were unable to process any new oil into Petrol.

MMM, o.k., well even if this was the case should the price of gas still be going up significantly higher? Right now we are paying $3.00 in the U.S. If say there is a 3 month or 6 month deferment on prices as you say, then wouldn't this go against the main philosphy of a stream lined industry, which the refiners are. They don't want to hold an inventory, they want to get it in and out as fast as possible. I still think the price is artificially depressed, however, I am interested in what everyone else is thinking. BTW, Thanks for your imput.

Cheers.

Camain

Originally posted by camain
MMM, o.k., well even if this was the case should the price of gas still be going up significantly higher? Right now we are paying $3.00 in the U.S. If say there is a 3 month or 6 month deferment on prices as you say, then wouldn't this go against the main philosphy of a stream lined industry, which the refiners are. They don't want to hold an inventory, they want to get it in and out as fast as possible. I still think the price is artificially depressed, however, I am interested in what everyone else is thinking. BTW, Thanks for your imput.

There is limited refining capacity, so your right, they don't hold a huge inventory, but your Government should. It has been known for the Government to release the strategic reserve in order to alleviate price hikes as a result of things like Katrina.

Like I said though, if you bought oil on the market today, you won't get a barrel of oil tomorrow. It is more than likely still in the ground waiting to be pumped.

looking at the charts and it would seem that the price of oil and your gasoline prices have, until the past couple of months, been in lock step. Lately, they do look like they have been depressed. Which is even more mysterious, considering the dollars falling value.....

In fact, another thing comes to mind looking at the charts. You get immediate price increases for fuel that the companies paid less for, if you catch my drift. I would have expected some delay in price rises...

You may be right, something is up.....

Impressive find on the charts! I think that sums it up better then anything else. Until a couple of months ago, the price of gas and oil were pretty much locked in step, that being said for around the last 6-7 months it has stayed the same. Only a couple cents of a change. I think this is due to the powers that be recognizing that the liquidity crisis in the U.S. has resulted in the possiblity of a crash. Since there try to theoretically "keep us over the Barrel" with out tipping it, they kept gas the same in order to keep the impression of inflation down. If americans had to deal with both there house costing 1/3 more, and gas costing 2X as much they'd be riots in the streets. I know I for one don't have alot of extra, and tend to live paycheck to paycheck. Almost every american is like this. We live at out means, if our income goes up, our standard of living goes up. Its the "keeping up with the Jones" philosophy. If they had to spend more in gas, that money would come out of spending money, which corresponds to trade, and the service industry, like walmart.

Not only would people buy less, but the cost of the products would go up as well because the transportation costs, and therefore people would buy less

To Summarize, I think the government is keeping the price depressed in order to deal with it after christmas. This way people would have already spent a ton of money that they didn't have, and since there cutting back anyway, they'd just cut back more. I "foresee" a 5-10 cent a week increase for several weeks, starting in Mid January. Instead of paying off debt, from christmas, they'll just pay a little less, hold the debt a little longer, and therefore give the bankers a little more money. This, while still paying high prices for gas. It catches the consumer in a trap. They spent the money on presents, which they can't give back. They have to pay off the debt, or make the minimum payments in order to maintain credit, and all while having high gas prices.....

Cheers,

Camain

I find it interesting the a couple days after I post my remarks, the price of oil goes up and gas follows course.

$3.69 for regular unleaded in San Fransico.


Have fun paying the mortgage in three months...

You SERIOUS! I'm paying 3.20 in Pennsylvannia. You guys in Cali always get rapped though on gas.

My guess, your going to see us stay in this recession, followed by a depression starting in the second or 3rd quarter of next year.

We'll elect a demacrat to office, because of the Cluster, they'll be unable to do much though, and shortly there after the depression will get worse.

Just my opinion. In 2012 we'll elect a republican, and all hell will break loose.

Cheers,

Camain