Why does gas skyrocket when oil rises and slowlly inch down when it declines?

Question

Why does gas skyrocket when oil rises and slowlly inch down when it declines?

Answer 1

In a word: GREED.  Sadly, ALL our states allow--to some degree--"flexibility" when it comes down to gas stations setting per gallon gas prices.  It's a logical given that such allows for legalized "controlled" price gouging by station owners---something that should be made illegal ASAP.  

Actually, the existent consumer laws in many states on gasoline purchases are simply NOT ENFORCED---and THAT needs to change.

Greedy people running corporate Big Oil are akin to sharks: Once they get that taste for blood---they never stop hungering for it; they NEVER SETTLE FOR LESS.

They think our economy is "flexible" to take a $5 a gallon for gas hit.  They're wrong.  And when credit card bills simply get ignored because of such gas prices---what do you think the credit card lobbyists are going to do to Big Oil lobbyists????

Big Oil better take a hard look at just how far they can go: because the battle IS comming---and it's set to get UGLY between them and corporate lobbyists.

Answer 2

because gas is naturally produced from oil...

Production wise, so to speak, of oil has a few stages and one of the stages will produce what we call as natural gas, which we use it on taxis and cabs in my country

Answer 3

John De Witt is right.

Let me amplify his point.

Oil refineries don't just run down to the 7-11 for a cup of oil...they contract for shipments months in advance. (You can see the current futures prices in the Wall Street Journal, they are for months, or years, out...it's not a secret cabal or anything.)

http://en.wikipedia.org/wiki/Futures_con...

http://www.investopedia.com/terms/f/futu...

http://www.investopedia.com/university/f...

http://www.investorwords.com/2136/future...

A futures contract gives the holder the obligation to buy or sell  a certain underlying commodoty at a certain date in the future, at a specified price.  The refineries use these to lock in prices and supplies over the long term, so that they can be assured of delivery....(Nobody wants to be the guy who has to shut down the refinery because there isn't any oil to refine.)

When something happens that threatens future supply, like a terror attack, or a storm in the Gulf of Mexico,  people get scared and bid the prices up VERY fast, in order to make sure that they will have an adequate supply.  Markets absorb that sort of information very quickly.

However, it takes a while for the market to absorb that the threat is passed. ( For example, how long did it take for people to have confidence in the safety of the airlines after 9-11.?)  

Also, on the retail level , the guy that is selling you gas at the corner gas satation, is using the money he earns TODAY to buy the gas that will be delivered TOMORROW.  

Example...lets say you run a corner gas station.  These are FRANCHISE operations, you don' t just get inventory dropped off for free, you have to BUY it. So lets say you have 30,000 gallons of gas in your tanks, and you paid $3.50 a gallon for it, and you are selling it for $4 a gallon. (in real life the margins are smaller...but that makes the math eaiser).

Then lets say Iranian terrosits attack the Saudi Arabian oil fields...well that's a pretty good indicator that oil prices are going to spike. It's a pretty good bet that you are going to have to pay more than $3.50 a gallon next Tuesday when the truck comes to fill up your tanks.  So what do you do?  Keep charging $4.00 a gallon, and then pay $5.00 a gallon next Tuesday when you need to refill you tanks?  You'd loose $30,000 that way...you'd be selling something for less that it will cost you to replace it!!!

So you raise prices NOW so that you will have the $$$ you need to purchase new inventory.... and listen to ignorant and uninformed fools complain about things they don't understand.

Answer 4

Economics.

Answer 5

because its greed, greed, and more greed.

Answer 6

I know what you mean.

When oil went up to over $140 a barrel, the gas that is in the tanks in gas stations came from cheaper oil. Yet they raise the prices on that gas instead of waiting until they temselves have to pay more for it.

But when the price of oil comes down, they say - "Oh but the gas we are selling now was bought when it was $143 a barrel so our price has to reflect that."

Quick to raise prices on futures, but not to bring them down on futures.

Answer 7

It would be nice to put it off to "greedy corporations," but that's overly simplistic thinking. When oil prices rise, the companies naturally raise prices quickly, so they can buy oil, refine it, and sell you gas in an uninterrupted supply. When oil prices drop, the gas is being made from expensive oil even though the lower-priced oil is on its way. Also, there's no way to know lower prices will stay low.