No big Hurricanes so why the high gas?

Question

I don't understand these dam gas prices. Oct 15 was the date they were allowed to switch to the cheaper (winter gas) and we had no significant hurricanes this year yet crude oil prices are surging past their all time high. 5 years ago a barrel of crude oil was about 19.00 now it is 88+! What has to be down to fix this? Why don't we drill in Alaska? It seems we keep raising the prices whenever someone mentions Iran in the news. It is unbelievable!!

Sorry I guess I just needed to vent!

Answer 1

It's simple supply and demand.  As long as people keep driving like crazy, the price will stay high.

Answer 2

I work in the gasoline industry and will tell you that your first mistake is in the winter/summer blend.  Winter gasoline is more expensive, because it needs the additional additives to promote vaporization in cold weather.  It's called 9 pound gasoline, versus the 7 pounsd gasoline of summer.  The pounds refer to the vapor pressure, not the weight of that gasoline.  Higher vapor pressures evaporate more easily.

Second, global demand sets oil prices.  Five years ago, the average price of oil was about $25/barrel.  In 1980, it was $38/barrel in unadjusted dollars, which means it was more expensive in real terms than it is right now.  (See attached link from inflationdata.com )  

China and India weren't demanding anywhere as much petroleum as they are today.  We are drilling in Alaska, that's why we have the Alaska Pipeline.  What you're referring to is exploration in the ANWR, which may or may not prove to be econmically viable to drill.  The Alaskan fields reached peak oil in the late 90's are in decline.

Prices do rise when political tensions rise.  Interupting even a few percent of the world's daily production of oil can cost billions per day globally.  When Mideast oil becomes more expensive on the spot market, where oil prices are determined, the oil we produce becomes more valuable.  The oil from the countries we import most of our oil from (Canada and Mexico, not the middle east!!) becomes more valuable.  OPEC does not set prices, OPEC sets a production goal they believe will result in a preferred price.  You haven't heard about OPEC cutting production lately, because they're making money  hand over fist.

Third, refineries are full bore producing for the upcoming home heating oil season and have been most of the summer.  Refinery time for gasoline cuts into home heating oil, which means the profit they're expecting from heating oil now has to come from gasoline.  Since home heating oil prices are rising, that means the refiners need to get more profit from gasoline.

Prices are really reflective of the national days supply of finished gasoline.  Prior to Katrina, we were running about 25 days finished product for RBOB, which is the regular gasoline base product.  Lately, we've been running around 20 days supply.  This means if for some reason all the refineries shut down, as a nation, we'd run out of gasoline in about 3 weeks.  Risk fuels price increases and our situation is risky right now.  The eia.doe site shows supply data.

That's why prices are so high and will continue to be high.  Don't ever expect gasoline to drop below $2.50/gallon anymore.  The world situation is what it is and you're going to have to get used to paying more for gasoline.

Notice I didn't cite wikipedia, the biggest bag of wind on the net.  I cited respected government and industry data.  The last link is an excellent discussion of gasoline pricing from the department of energy.

Hope this information heleped clear up some issues.

Answer 3

Where do you get your winter gas info? I work derricks on a drilling rig and I don't remember ever setting a seasonal price on our costs. For well over a decade we did this blood and sweat labor for almost min. wage. When a lot of us old-school roughnecks started moving to other jobs they had to do something to draw in unskilled kids because it takes more of them to do the job now. Now to line you out on the prices. If you remember 9-11 by the time the second plane hit that tower your local gas supplier had gouged the price by $2+. I know for a fact that their supply hadn't gone up. Look to your C-store managers and owners for the answers to this. If you want to lower the fuel prices stop buying fuel!!!

Answer 4

I know, and yet they think it's not galging.... I guess they're not galging when we have a holiday  either. I'd say it would go over 3.00 a gallon (in my KY area) by thanksgiving. I've found out too that it almost doesn't help to vote. You may be be voting for the lesser of the two evils, but they're still evil and are going to s***w you over...