Do you know, or if you don't know, how do you think the price of the gasoline you buy is determined?

Question

True, China has become an importer of petroleum, and it is a factor in the price but not in the way you think. The volumes they are import are small compared to what the Big 7 nations import. See my other Q's on the subjects revolving around this one at my webpage. You will begin to see the big picture based on real knowledge and yes, real experience. TWH 08182006

lovely, the gov''t under Chenet/Bush43 and other militaristic neocons is the problem because they want to get control of oil and they are letting OPEC, the oil cartel clean our clock. TWH 08242006

Mickey, thanks for sharing your job function monitoring prices in an area, but that is not how gasoline prices are determined. The bulk of the price/cost of gasoline made from crude oil is the price/cost of crude oil which has become a geopolitical commodity, which no longer follows free market pricing rules since the supplies and prices of crude are fixed by OPEC, an oil cartel formed back in 1974. This international cartel consists of 13 National Oil Companies under the control of governments who politically don't like US government policies for a whole host of reasons. They meet regularly taking advantage of the Middle East situation to determine prices arbitrarily because they control 60-70% of the planet's proven oil reserves. They also set production quotas and at current prices for oil, they are filthy rich and they have no need or desire to increase their production rates to bring prices down.

About the speculators who trade futures on the Nymex, they know this and they are having a field day playing at the fringes of the the market. That is not the way most crude oil are obtained. The real oil market is based on term contracts with the oil producers-OPEC and non-OPEC.

The Non-OPEC producers are the major multinational oil companies (Exxon, Shell, BP,etc) and other National Oil Companies(PEMEX and the National Oil companies of Russia and Great Britain). These players have come online in response to rising demand for petroleum products in part because of the dramatic economic developments in Asian and Eastern European countries. The prices they charge for their crudes are based on the oil cartel's prices and in that sense they are all conveniently going along with the price fixing & getting a piece of the action.

Pricing of crude is in the long run will be determined by Supply & Demand realities, but in the short run it's not the way prices are determined.TWH 08242006

Blah, the reference from the Tax Policy Center, a collaboration of the Brookings Institution and the Urban Institute, that you provide looks at the Q of the importance of gasoline taxes.It is a very parochial study about what effect cutting gas taxes would have on the supply/demand situation for gasoline. Having read the reference I think the authors rambled on alot about issues which I think they have no real knowledge. It reads like a bad MBA term paper. In figure 2 which graphs table 2 they did not in either one breakout oilco profits nor did they show either the constant dollar adjustment factor or the nominal prices for gasoline in the years included in the study. I don't see any mention of effect of lowering of gasoline octanes to todays 87-92 range from the 98-93 range, nor do I see the changeover from leaded (TEL) gasolines to no-lead in 1974/75 reflected. There is no mention of constant profits per constant dollar sales.

I say this to you because I would be very careful interpreting these reports which often are based on info massaged to avoid revealing real ugly facts about the oil industry that is run by people who have a 19th century robber baron mentality.

The volumes of gasoline sold by the oilcos in this country is in the order of 40MMBDX42gal/Barrel= 1.68 Billion gallons per day which at 0.50$/gallon over one year equates to total profits of 306 billion dollars a year. These profit numbers are not being reported because of creative accounting & stepped up spending to find more oil (very little for developing alternative sources of energy) that keeps the money offshore. Keep in mind Exxon has reported Quarterly after-tax profits of 10 Billion dollars which would indicate my back of the envelope figures can't be too far off. Part of the reduction in the gov't deficits comes from the taxes paid by the oilcos--something the corporate controlled mainstream press hasn't highlighted.TWH 08242006

Answer 1

See Figure 2: Composition of Gas Prices, 1968–2005 (2004$)
in
http://www.taxpolicycenter.org/UploadedPDF/900836_gasoline_prices.pdf#search=%22gas%20price%20composition%22
Its made of
crude oil+Distribution, Refining & Marketing+taxes
the proportions varies as time goes by....

Answer 2

Sometimes I do this partime job for a guy who works for gasprice.com. I basically drive around to about 50 stations within 3 hours and have the data ready for the morning to be submitted to the internet for people to find out where the best gas price is for the day. I've also worked at gas stations when I was young, for many years. So I'm something of an authority on the subject. Most often, if the company has a big name like Getty or Hess then the prices are determined at the company headquarters. As the prices change daily the reason same name stations differ by a few cents is because they have a time window in which they are required to change the price. If the handlers of the station are lazy, they may not change the figures as fast as another station. Spies such as myself are used to keep prices to the competition in perspective, but as we all know... some greedy bastards just don't give a **** and will charge whatever they damn well feel like charging. Especially the independent stations, which usually sell petroleum mixed with water (which is bad for your gaspump) and can end up costing you more in service repairs then is worth the risk for spending a few cents more on a more reliable gas company. That's about it.

Answer 3

Supply and demand. Right now, with China becoming a more advanced economy, the demand for gasoline has gone up dramatically. However, the supply has not. This is why the price of gasoline has increased lately, especially with things such as Katrina shutting down some of the refineries and lowering supply even more.

Answer 4

Speculation and Speculators-if we could get rid of them and take gas off the commodities list, we'd be doing just fine.

Answer 5

http://money.howstuffworks.com/gas-price.htm

The biggest chunk is the global market rate for crude oil. Then the refining cost, the distribution & marketing costs, and finally taxes.

Answer 6

The price of gasoline/petrol is governed by politics, unfortunately.

Answer 7

it truly should be about 1 buck a gallon. but the govt hates us