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Politics : Rat's Nest - Chronicles of Collapse
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To: Wharf Rat who wrote (8111)7/10/2008 5:44:25 AM
From: Wharf Rat  Read Replies (1) of 24226
 
Why isn't the price of gasoline even higher?
Posted by Gail the Actuary on July 9, 2008 - 9:00am


In the last year, the price of gasoline has risen by 38%. The prices of other fuels have risen much more--diesel has risen by 64% and jet fuel has risen by 91%, and the price of West Texas Intermediate (WTI) crude oil has risen by 100%. Why aren't gasoline prices rising more than they are? Some will recognize this as the "crack spread" issue.

I see several possible explanations, including a long term shift in prices valuing diesel (or "distillate") more highly than gasoline; political pressure to keep gasoline prices low; and integrated oil companies not really needing a high gasoline pricing margin to keep overall profits at an acceptable level. I do not see ethanol as playing a significant role at this time. Regardless of the explanation, refineries and gasoline stations that are not part of oil conglomerates may find this a difficult storm to weather.

Figure 1 shows that the differential between the retail price of gasoline and the per-gallon cost of crude oil has recently dropped dramatically, leaving a much smaller margin to cover expenses and profit. It is this shift that I am discussing in this article.
theoildrum.com
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