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Strategies & Market Trends : Point and Figure Charting -- Ignore unavailable to you. Want to Upgrade?

To: Giordano Bruno who wrote (18162)	4/16/1999 2:29:00 AM
From: Dennis J.	Respond to of 34824

Off topic! Are CA/AZ gas price increases inflationary? Not really. We have, I think, twelve refineries in the state. One is down for about two months, maybe longer. Another had a major cat-cracker fire, causing them to operate at reduced output. The market was in reasonable balance, but now is short by the lost production, hence scarce product being allocated among competing buyers at higher prices, until the market is in balance again, (Higher prices may induce imports from out of the region, and the other 10-refineries to operate at or just above normal capacity.) Classical economics. Then as the refineries all come back up to capacity operations, prices move back down to a level, where imports into the region cease, and where some/all refineries move back to a slightly lower operating rate. And prices re-stabilize at a new lower level. Probably all gasoline prices are now a bit higher due to spot crude prices being higher by about $5 per barrel ($16 per bbl vs 11, say). If 80% of each bbl, or about 33 gallons absorb the price increase, and no added refinery margins, then $5/33 gal = 15.2 cents/gal. So, a price increase of $5 per bl would likely increase long-term gasoline prices about 15 cents per gallon plus sales tax or say 16-17 cents per gallon. This is about a 10% increase, which would be a component of consumer price level calculations. So, yes to some inflation caused by crude prices rising and staying about $5 per bbl higher (if prices can really stabilize there, without being driven lower). Hope this helps. Dennis