NEWS: Why the Fuck is Gas This Expensive?

Q. Are prices going to keep climbing? If so, how high?

A. The collective wisdom of the financial markets is that the worst is over. Wholesale gas prices fell nearly 13 cents a gallon in New York commodity trading yesterday, reflecting traders' conclusion that promised shipments of gas from Europe and progress restoring Gulf Coast pipelines and refineries will ease the supply crunch and lower prices in coming weeks, oil analysts say.

But the market remains skittish. A disruption anywhere from Texas to Venezuela to Norway to Iraq could send prices soaring again.

Q. What about pump prices in Massachusetts?

A. The Oil Price Information Service, a market-analysis firm, estimated retail gas sold in the state dropped 2.5 cents yesterday compared to Monday, to $3.16 per gallon, based on a computerized sample of credit-card transactions.

Q. Will prices fall back to where they were before Katrina anytime soon?

A. It's hard to say when that could happen because of the current volatility in the market, analysts say.

Q. Why have some stations been able to lower prices, and why do stations charge such wildly different prices?

A. Probably the best way of summing it comes from Sarah Emerson, managing director of Energy Security Analysis Inc., a Wakefield consulting firm: ''Every gas station has a slightly different story in terms of their supply line, and that means they have different prices."

Some of the factors include whether stations:

Get supply under long-term contracts from a big oil company like Exxon Mobil Corp. or Royal Dutch Shell Group, or whether they shop on the volatile spot market through independent suppliers called ''jobbers."

Are geographically isolated or have several competitors nearby whose prices they need to match, either to keep competitive or avoid getting bought dry if they're much cheaper than the station across the street.

Have big storage tanks that accommodate seven to 10 days' worth of inventory, which can keep price changes a little smoother, or rely -- as many do -- on nightly or every-other-day tanker runs, which makes pump prices as volatile as the market.

Q. Usually name-brand stations charge a lot more than the little guys, but that's changed in recent days. What gives?

A. More than half the gasoline sold in Massachusetts is supplied by jobbers who rely on the spot market for their supplies, according to John Quinn, executive director of the Massachusetts Petroleum Council, which represents big oil.

That has contributed to what Quinn called a strange ''inversion" in the market in recent days. Name-brand Mobil, Shell, Citgo, and Hess stations that are supplied under huge long-term contracts are often charging notably less than ''no-name" outlets like Jack's Gas in North Cambridge or Friendly Barry's in Dracut.

Usually the no-name filling stations can undercut the so-called majors because they have much lower marketing and overhead, but they're far more dependent on the spot markets and have been stung by recent wholesale spikes.

Q. But aren't the big oil companies just dictating prices?

A. Under federal law, oil companies like Mobil and Texaco can't tell franchisees and independent dealers what to charge. They only control the small minority of company-owned gas stations. That can explain why gas stations bearing the same brand name vary by many cents per gallon in price.

Q. Pump prices went up sharply overnight after Katrina. How can gas station owners justify raising the price 50 cents a gallon for fuel they've already bought that's sitting in their tanks?

A. To make sure they can afford the next load of gas coming tomorrow or next week, station owners say. In a notoriously low-margin business where lottery tickets and cigarettes are far more profitable than gas, few station owners have much working capital on hand, so they need to raise prices on today's gallon of gas to pay for next week's price increase, said Tom Pickett, owner of Arthur's Sunoco in Dorchester.

''Your next delivery is going to cost $10,000 more, and then what happens if the price goes down?" said Paul O'Connell, executive director of the New England Service Station and Automotive Repair Association. ''You can't stay 30 or 40 cents ahead of the competition. It's a tough game right now."

Q. Do the high gas prices reflect illegal gouging?

A. Massachusetts Attorney General Thomas F. Reilly's office fielded just 32 complaints from consumers about high prices this week and has no clear evidence of price-gouging to prosecute, aides said.

Soaring wholesale prices, some federal officials say, just reflect a functioning free market sending the right price signals that will encourage producers, refiners, and shippers to rush supply back in to make up for what's been sidelined by Katrina. The armada of tankers carrying gasoline from overseas is evidence of that.

The chief economist for the Commodity Futures Trading Commission, James Overdahl, says: ''Energy prices are being set fairly in an open and competitive environment."

katermueller said:
In Germany the gallon costs about 6,50 US Dollars.

chainlink said:

but you can drive all the way across the country on a couple of (u.s.) gallons.

I'm just thankful my car doesn't run on redbull !

Monastrell said:
Because the petroleom/gasoline prices are a ruse.

People are much more willing to accept the line that "the cost of everything is rising because everything depends on oil", when the reality is that the purchasing power of your dollar is being reduced by the Federal Reserve and Dept. of Treasury inflating your money beyond recognition.

Our government is doing what all countries with a fiat currency do while in fiscal crisis .... they are merely printing more money out of thin air to cover the cost of their wars, Congressional fiscal irresponsibility, and massive debt spending.

Their official policy is "We need more money - so, uhhhhh, let's make there be more." Inflating the currency is a technique to delay the inevitable : by buying time, permitting continued spending, making the economy appear superficially active, consumer confidence high, and disguising the serious problems of our economy since 9/11 .... which will only now be exacerbated by Hurricane Katrina.

Monastrell said:
Because the petroleom/gasoline prices are a ruse.

People are much more willing to accept the line that "the cost of everything is rising because everything depends on oil", when the reality is that the purchasing power of your dollar is being reduced by the Federal Reserve and Dept. of Treasury inflating your money beyond recognition.

Our government is doing what all countries with a fiat currency do while in fiscal crisis .... they are merely printing more money out of thin air to cover the cost of their wars, Congressional fiscal irresponsibility, and massive debt spending.

Their official policy is "We need more money - so, uhhhhh, let's make there be more." Inflating the currency is a technique to delay the inevitable : by buying time, permitting continued spending, making the economy appear superficially active, consumer confidence high, and disguising the serious problems of our economy since 9/11 .... which will only now be exacerbated by Hurricane Katrina.

misguided said:
What a bunch of B.S. This happened overnight in Canada as well, and here in Alberta, we drill/extract all of our OWN oil and gas; I believe less than 5% of oil and gas used in Canada is imported. So there was no reason for us to see a 30% jump in gas prices the very night of Katrina. Especially since, even if we WERE importing our gas, the ACTAL price COST difference wouldn't filter through the system for weeks. No, I don't buy it. Gas prices are based on speculation and hoarding, and screwing consumers who have no equally convenient alternative, rather than anything to do with supply.

Monastrell said:
Because the petroleom/gasoline prices are a ruse.

People are much more willing to accept the line that "the cost of everything is rising because everything depends on oil", when the reality is that the purchasing power of your dollar is being reduced by the Federal Reserve and Dept. of Treasury inflating your money beyond recognition.

Our government is doing what all countries with a fiat currency do while in fiscal crisis .... they are merely printing more money out of thin air to cover the cost of their wars, Congressional fiscal irresponsibility, and massive debt spending.

Their official policy is "We need more money - so, uhhhhh, let's make there be more." Inflating the currency is a technique to delay the inevitable : by buying time, permitting continued spending, making the economy appear superficially active, consumer confidence high, and disguising the serious problems of our economy since 9/11 .... which will only now be exacerbated by Hurricane Katrina.

misguided said:
What a bunch of B.S. This happened overnight in Canada as well, and here in Alberta, we drill/extract all of our OWN oil and gas; I believe less than 5% of oil and gas used in Canada is imported. So there was no reason for us to see a 30% jump in gas prices the very night of Katrina. Especially since, even if we WERE importing our gas, the ACTAL price COST difference wouldn't filter through the system for weeks. No, I don't buy it. Gas prices are based on speculation and hoarding, and screwing consumers who have no equally convenient alternative, rather than anything to do with supply.

PurpleMongoose said:

ah, how nice to ear some truth. that q&a sounded like some bullshit. did anyone else have the feeling it was trying to soothe the consumer into accepting this crap and preparing us for higher prices?

Monastrell said:

Oil is a perfect disguise for the inflation. There is an entire propaganda campaign being waged to resign the public into acceptance for devalued currency, by cloaking it in "oil prices".

Your dollar buys less, and consequently, it takes more of them to buy a gallon of gas. Your dollar buys less - because the Federal Reserve's printing machines are running at full capacity to temporarily provide the illusion of fiscal solvency in an insolvent government, the illusion of abundance, and the illusion of consumer confidence and activity.

stockula said:

No, Monsastrell. The rise in energy prices recently are largely just a function of supply and demand. If it wasn't we'd see inflation in other consumer goods at the same rate we've seen inflation in energy prices. If what your saying is true, why wouldn't we? I mean, we use the same money we use for gas for food and DVDs and whatever else people buy. But we're not seeing the prices of those other goods rise as much as gas.

Not to say you're not basically right about the constant inflation of the money supply, but that's needed to keep the economy expanding.

bean said:
Yep. Comparing the European and Japanese markets with America is ridiculous, because they're so incredibly different on every level it's staggering. Besides the tax issue, how many households in Japan or Europe drive 20,000 miles a year? Not many, I'd wager. The household average for the US in 2001 was 21,252 (13,783 miles per person). By comparison, in Britain, during the same time period, the average distance travelled by car per person was 5,354 miles. Germany is about the same as Britain, and Japan is far lower.