Down, Down, Down. Price of oil is dropping, but not at the pump. Why?

Perhaps this has been discussed a few days ago. However, I follow the trends and I remember when the price of a barrel of oil hit $147 less than two weeks ago; I knew the speculators had crossed the line. This seems to be an area of high resistance. Not only that, they have now created DEMAND DESTRUCTION. GM and other car manufacturers are at the brink of bankruptcy. Demand for SUV/Pickups is low. People are driving less, etc. It seemed that for a long time these speculators thought the American people would continue paying thinking the price elasticity was infinite. Not this time.

Every day, with every dollar that the price of barrel rose, I followed the local gas stations and how they slowly, but surely, increased their prices. However, in the past few days the price of oil has gone down (relatively a lot). From $147, it went to $143, to $140, and today it is trading at $128. Where is the mainstream media? I really don't see that much focus on this. Furthermore, it is estimated that the barrel of oil should be hitting $75-80 and that's where it should stay. I say, more in the $93 range. And the price per gallon should be in the mid-high $2s.

To everyone's surprise, even with this decrease, the price at the pump has not gone down. I know it takes time before the price actually makes it to the market. But isn't it clever of the gas stations to raise the price, even before they get their new shipments based on the most current price?

To me, these are the most positive news in a long time. Oil is what keeps the economy going, as everything revolves around oil prices. I'd be curious to know of your comments on this. Thank you for reading.



[edit on 18-7-2008 by manticore]

Just as you said in this post, it takes a few weeks for the prices to reach the pump. I'm thankful this is the case as when gas was at it's peak earlier it translated to pump prices about 30 cents higher than it got up to here. My regular station never went higher than $3.99 but the trading price should have had it up close to $4.30.

If the price per barrel continues to drop, you can count on alleged shortages to manifest themselves. Gas prices won't be going down anytime soon..

yeah, not much of a decline today so far on the market

Just as I've said before, it has to do with the supply chain and FILO. Just as it took a while for the high oil prices to hit the pump (it did) it takes time for lower oil prices to hit the pump. One reason is because the gas station has to get rid of it's inventory, which is where the FILO comes in. I'm tired of trying to explain this, I'm also tired of insightful posts being stared and logical ones not being.

why arent' they dropping at the pump? you still have a little money don't you?

reply to post by yellowcard


Yellowcard, why is it that immediately after the price of oil goes up a dollar or two you see the gas stations changing prices accordingly? I'm only saying the same doesn't happen when it goes in the opposite direction.

Isn't it interesting that when the price of a barrel of oil is going up... the pump prices change immediately. When they drop, it takes time to "work through the system". It seems to me that either way, the consumer is totally SCREWED....

reply to post by manticore


the answer is so simple it might scare you.

are you ready?........

because they can.

And we can't do anything about it. the gas station owners can't do anyting about it. The price is set but the people who do that and they are in control. we can complain, we can even threaten to not buy gas. but when the tank is empty, we go back. We have more control over President Bush than we have over the price of gas.

Originally posted by manticore
Perhaps this has been discussed a few days ago. However, I follow the trends and I remember when the price of a barrel of oil hit $147 less than two weeks ago; I knew the speculators had crossed the line. This seems to be an area of high resistance. Not only that, they have now created DEMAND DESTRUCTION. GM and other car manufacturers are at the brink of bankruptcy. Demand for SUV/Pickups is low. People are driving less, etc. It seemed that for a long time these speculators thought the American people would continue paying thinking the price elasticity was infinite. Not this time.

Every day, with every dollar that the price of barrel rose, I followed the local gas stations and how they slowly, but surely, increased their prices. However, in the past few days the price of oil has gone down (relatively a lot). From $147, it went to $143, to $140, and today it is trading at $128. Where is the mainstream media? I really don't see that much focus on this. Furthermore, it is estimated that the barrel of oil should be hitting $75-80 and that's where it should stay. I say, more in the $93 range. And the price per gallon should be in the mid-high $2s.

To everyone's surprise, even with this decrease, the price at the pump has not gone down. I know it takes time before the price actually makes it to the market. But isn't it clever of the gas stations to raise the price, even before they get their new shipments based on the most current price?

To me, these are the most positive news in a long time. Oil is what keeps the economy going, as everything revolves around oil prices. I'd be curious to know of your comments on this. Thank you for reading.


[edit on 18-7-2008 by manticore]

Wonderful article, superb....I wish everyone could clap hands together.

with regards, why prices are not reduced at the pumps, here is your answer.

Just when you think big oil companies like ExxonMobil might be content with tens of billions of yearly profits, they surprise you by grasping for pennies. This time it's not just the driver at the pump being squeezed, but corner gas station owners and gasoline wholesalers. Exxon is running the stations out of business, and refineries are cutting out wholesalers from blending ethanol into gasoline, now that ethanol is cheaper.

Exxon is selling off its 820 company-owned stations and 1,400 stations run by independent dealers on company-owned land. It's the end of the independent corner gas station, because Exxon will sell the stations to only to its big distributors. Translation: no more independent corner gas stations, owned by people who might complain publicly about their rapacious landlords squeezing them out of business. From the Washington Post story:

"Consumers aren't likely to notice any outward difference in the stations, and about 9,200 other ExxonMobil stations will not be affected. Those stations are owned and operated by distributors, who deliver fuel and often own several stations.

"But it will mean the end of small independent gasoline station operators such as Sohaila Rezazadeh, who owns an Exxon franchise in Oakton but pays rent to Exxon, which owns the land. Rezazadeh, who has complained about rising rent and tight profit margins, has not been able to afford new gasoline supplies for the past week. After 12 years as an Exxon dealer, she is closing her doors today."

www.oilwatchdog.org...

Originally posted by manticore
reply to post by yellowcard

 

Yellowcard, why is it that immediately after the price of oil goes up a dollar or two you see the gas stations changing prices accordingly? I'm only saying the same doesn't happen when it goes in the opposite direction.

Mainly because the classic economic model of Supply and demand doesn't relate to the current oil market. Many other forces are at work.
Economics 101, won't take you very far in todays world.

www.marketoracle.co.uk...

It was 4.09 yesterday and today 3.99.




Roper

Originally posted by Mason mike
reply to post by manticore

 

the answer is so simple it might scare you.

are you ready?........

because they can.

And we can't do anything about it. the gas station owners can't do anyting about it. The price is set but the people who do that and they are in control. we can complain, we can even threaten to not buy gas. but when the tank is empty, we go back. We have more control over President Bush than we have over the price of gas.

You have hit the nail on the head IMO. They will continue to charge us these high rates because Exxon-Mobil can. (My other half swears up and down that the Exxon-Mobil merger was possibly the dumbest decision made during the Clinton administration)

The gas price does not rise or fall IMMEDIATELY in response oil prices thats why you havent seen it at the pump. There is ALWAYS a delayed effect.

I've noticed that too. But I also know that gas prices at the pump are a month behind. Because the gas we are using today was from probably may/june. So we are paying what prices per barrel were sold for in May/Jun. If oil is dropping now then in Aug/Sept. we will notice it going down.

Originally posted by manticore
Yellowcard, why is it that immediately after the price of oil goes up a dollar or two you see the gas stations changing prices accordingly? I'm only saying the same doesn't happen when it goes in the opposite direction.

Why is it that when oil went up around $20 in a week and gas prices followed the gas in my area stayed at the same price?? Guess my area must be an anomaly because it didn't happen here.

Originally posted by isa75
I've noticed that too. But I also know that gas prices at the pump are a month behind. Because the gas we are using today was from probably may/june. So we are paying what prices per barrel were sold for in May/Jun. If oil is dropping now then in Aug/Sept. we will notice it going down.

I do agree that gas prices will drop, but I doubt we will ever see it for under $3.50 a gallon again.

Ahmadinejad can blow a fart in his palace, and the price of gas goes up ten cent almost instantaneously. The delay only comes in when the price of oil drops.

Forget all the economic models you may have learned in school, they mean absolutely nothing in the real World.

I think some of that also has to do with gas station owners trying to make profit off it.

Breaking news!!!!

My son called me just now and said that gas was down to 3.87 at Loves.

4.09 yesterday and 3.87 tonight!

Roper