Question about the High rates for Crude oil?

Question

Notice how crude oil goes up in price everyday. It is sold by the barrel and controls the price you and I pay for gasoline at the pump. Why don't quarts of motor oil go up every other day as well? Why doesn't tupperware and ziplock bags go up? They are plastics which are made from oil as well.
Any thoughts?

Answer 1

Hi, I'd to take a crack at answering your question to the best of my knowledge.

Before answering the core of your question, I'd to just quickly point out that motor oil prices have gone up in price, only not as obvious. The main difference between the cost of motor oil and gasoline would be the refineries that process the crude oils which I will attempt to explain.

First, I think it is important to distinguish the cost of gasoline and the cost of plastics, which in this case will include products such as Tupperware and zip lock bags and even toys are made of plastic. Gasoline prices are high because crude oil must be processed via refineries; a significant factor in determining gas prices. While public outcry against refineries may be warranted in a sense that they are profiting on average about 40% of the total cost you are paying at the gas pumps, it is also crucial to note that the cost of running a refinery is not cheap. The last major refinery in the U.S. was built in 1976 and if you live in California, the three largest refineries (Chevron, Shell, and Conoco-Phillips) are responsible for producing approximately 50% of the states gasoline demand. A solution to this dilemma would to be build more refineries, but the cost of building a new refinery is anywhere between 2-8 billion dollars, not an easy sunk cost to swallow. So what does this have anything to do with rising crude oil prices? Very simplistically, it goes back to supply and demand. Because the demand of gasoline has risen then so has the production of gasoline from the limited amount of refineries here in the United States. A higher demand for gasoline without ample capacity to produce a good supply to feed the demand means sharp rises at the gas station.

Now why doesn't a rise in crude oil prices affect plastics? The answer is that it is affected, but not nearly as much as it has affected the gasoline industry. This could be attributed to the fact that there are synthetic materials and post-consumer material available for firms to use. However, the use of these materials are very limited and petroleum based plastic materials are still in very high demand. The cost of plastic hasn't affected consumers yet because the industries that have utilized it were using petroleum based plastics because it was very cheap and their profit margins very large. As their profit margins continue to decrease due to the ever rising cost of crude oil, then so will the plastic they use and eventually, consumers will bare that cost as well.

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Answer 2

Good point, it could be that they haven't thought about it yet, now they know. It is something to think about though. What about all the car manufacturers? There are five quarts in the engine and we put about 16-25 gallons of fuel in the trucks we built. We built a lot in a day, so it has to add up.

The only thing I can think of is they buy on a contract. They agree to pay a set price for a set period of time. That would stabilize the prices.

Answer 3

Merchants tend to sell their products based on what they paid for them and sometimes they do have "blanket orders" or contracts so they lag. Your zip lock bags and motor oil will go up, it just takes a little longer. I used to buy tons of plastic sheeting that is made from ethylene which is made from oil and the price of gasoline almost always went up or down prior the price of sheeting.

Answer 4

Don't believe the supply and demand or any other b.s. reason oil refineries tell you. Their reasons are ludicris. I know you (and probably everybody else) will think I'm crazy, but who cares......Here is my take.

The people in "secret societies" (those who run our government) sat at a big table one day and decided that Saudi Arabia would charge more for oil and a percentage of profits would be set up in a separate and "secret" bank account. If you think about it, the oil prices went out seemingly out of nowhere. That's because there was a meeting the weekend before the prices skyrocketed. These "societies" of politicians and corporate elite control everything many governments in this world do. And Muslim countries are not excluded from these "societies" -- they are very much a part of it. Hell, I wouldn't doubt if Osama bin Laden attended them!!!

Read up on it. Do a yahoo search on secret societies if you don't believe me. It's not all conspiracy. George W. Bush wrote a small passage (I believe in his autobiography), "about joining a group while in Yale called the Skull & Bones society....and admits that it is so secret that he can't even say any more. Check it out.

Anyway, I like your question....very interesting observation!

Answer 5

supply and demand