The Price of Gas

NoNukes writes:Gas station operators try to make sure that they always bring in enough revenue to buy the next shipment of gas, but also have to be wary of charging even a tiny bit more than their competitor across the street. They have to speculate on a daily basis as to how much they are going to be charged for the next shipment. I'm not sure where they all get their info on what is happening to the price of gas, but they have to be very reactive to that information.

Jon writes:Perhaps this is all hooey, but there was a news story on TV a long while ago which claimed that only a few cents of each gallon actually goes to the gas station.I have no idea how this number was calculated, and it sounds pretty suspect to me. But perhaps it has some merit... and some meaning!

Coyote writes:And if you look at the tax statement on the pump, many times that figure goes to the various governments.

Omni writes:Well.Contending with nearby competitors is definitely a factor, but the larger driving force, I think, is the speculative nature of the global oil futures market which shifts with the slightest change in political and economic winds. Speculation in oil markets has increased dramatically in recent years as investors turned away from unstable bond and equity markets to energy markets driven by an apparently insatiable demand.My understanding is that most gas stations are franchise operations, and the operator does not technically "own" the gas until the actual moment of retail sale--the cost to the operator for gas currently in his station tanks changes after delivery, a truly frightening way to have to operate a business.So we don't have the dynamics of a perfect market, where the retailer sells at a margin above a cost fixed at the time of wholesale purchase.Incidentally, oil markets are perhaps the most manipulated of all commodities: oil producing nations seek to keep prices high by reducing supply at the source; refiners do the same thing by shuttering refineries when demand drops and their returns are "suboptimal". I'm sure you've noticed how high prices in recent years have at times lowered demand, leading to lower prices--until the producers and/or the refiners restrict supply, and prices rise again despite the continuing low demand.At present there is a near glut of oil, globally. But because the market is a speculative commodity market, Iran's threats to block the Straits, however empty, have caused a price per barrel to refiners spike; prior to that, American refiners had shuttered many refineries for "scheduled maintenance", so now prices already manipulated upward by refiners have moved higher on fairly thin fears of reduced supply.It's a mug's game, like most energy markets. You may recall that part of the Enron scandal included strong evidence that "routine maintenance" of electrical plants was being scheduled in a conspiratorial manner to boost profits by orchestrating supply shortages, especially in California markets.The only countries with cheap gas these days are places like Bahrain, Venezuela, etc., who have production in excess of domestic need and keep prices low to buy political stability at home.Compared to most industrialized nations, our gas is cheap, even at nearly $5/gallon. Most of Europe pays close to $10/gallon, largely due to taxes, though in part due to our greater access to domestic production. A good argument can be made that European prices better reflect the actual cost to society of burning carbon fuels (pollution and consequent health costs, the economic impact of huge import payments, etc.). Many American economists have urged higher gas taxes for decades--to discourage profligate American consumption, to encourage conservation, to improve our import-export balance, etc.If I had to give a "short answer to quick questions" I'd say that gas prices change daily, mostly upward, because energy corporations own the entire GOP and a fair slice of the Democratic Party.

Huntard writes:The price of gasoline in my country is currently at about 1,80 Euros, which would be about 2,40 Dollars.... PER LITER.So don't whine to me about "unpayable gas prices!". Not that I have a car... but still...

Hooah writes:True and I totally agree about Euro gas prices (I spent a few years in Deutschland). However, isn't it also true that Europe has higher standards for fuel efficiency? Plus, there are far, FAR more public transport options.

jar writes:Hopefully the US will establish a policy through a mixture of replacement cost accounting and vastly increased taxes to gradually but relatively rapidly increase US gasoline and diesel consumer prices as one tool to reshape the US and move us away from individual car ownership and widely spread communities towards public transportation and a return to neighborhoods.