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Oil prices are falling, but gas prices rise


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The price of oil is dropping, but gas prices are still rising. First the oil companies said the gas prices reflect the rise in oil prices, then it was the crisis in Libya. So now that oil is dropping, are they going to tell us that gas prices need to rise to cover share price losses? The bastards will gouge us every chance they get.

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Guest American Woman

I've been reading that the price of oil has taken the steepest drop since the first Gulf War. I'm guessing there will be a drop in prices by Memorial Day. Seems to take two minutes for prices to go up to reflect an increase in the price of oil while it takes two weeks or more to reflect a decrease. I don't expect them to ever be as low as they were again, but I doubt if they will stay where they are. Of course I'm just going by past experience. I'm sure glad I live in town and really don't need to use much gas, but people I know who live out of town are spending a small fortune just coming and going to work. I can just imagine what it's done to the cost of airline tickets, too. Something's got to give.

Edited to add: as for the "why," I think it's simply because the oil companies can, and do, get away with it.

Edited by American Woman
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Rumor has it - that the CFTC will be raising margins on oil next week.

Forced sell, just like Silver. But it might (I say it probably will) backfire as oil producers will just refuse to sell at spot to the US if it drops too low. Noone says that you "have" to sell or buy at spot price, its just a guide. One that is often poorly manipulated both up and down.

Compared to silver: Hell, Some pieces of silver are selling for $140/ounce on Ebay... And the spot price of silver has "supposedly" taken a nosedive to $35.

The dollar is unravelling and detaching itself from its implied value, watch out. I'd be buying food right about now.

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Guest American Woman

No, no one says the oil companies have to sell at the lower prices, but from what I've read, one of the reasons they've lowered the prices is the fear of less demand for their oil. Americans are driving less, airlines are saying they're going to reduce flights, countries are drilling, or can drill, for more oil themselves. I would love to see the oil companies screw themselves in the end. B)

Edited by American Woman
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I would love to see the oil companies screw themselves in the end. B)

Many of the best performing oil companies are the same companies that are developing new energy technologies, so they are pretty safe whatever happens with oil.

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Guest American Woman

Many of the best performing oil companies are the same companies that are developing new energy technologies, so they are pretty safe whatever happens with oil.

That's the way it usually goes with these big corporations, eh? Still, a girl can dream ..... :P

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The price of oil is dropping, but gas prices are still rising.
Over time, the retail price of gasoline is highly correlated to the world price of crude oil. In fact, over 90% of variations in the retail price can be explained by variations in the world price.

It is hard to imagine a more competitive enviroment than retail gasoline in an urban market. What market posts its prices to a decimal place in two meter high signs that you can see hundreds of meters away?

I think people complain about gasoline prices because in the short term, people have little alternative choice. If you commute to work and drive a truck, what alternative do you have? Maybe in the future, you will buy a vehicle with a smaller engine, or maybe you will move closer to your work or find work closer to home, but for the immediate future, you have to pay the high price of gasoline. And it hurts.

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Over time, the retail price of gasoline is highly correlated to the world price of crude oil. In fact, over 90% of variations in the retail price can be explained by variations in the world price.

It is hard to imagine a more competitive enviroment than retail gasoline in an urban market. What market posts its prices to a decimal place in two meter high signs that you can see hundreds of meters away?

I think people complain about gasoline prices because in the short term, people have little alternative choice. If you commute to work and drive a truck, what alternative do you have? Maybe in the future, you will buy a vehicle with a smaller engine, or maybe you will move closer to your work or find work closer to home, but for the immediate future, you have to pay the high price of gasoline. And it hurts.

Not quite, August! If we had a truly competitive situation I would agree with you but that's clearly not the case!

Those retail gas stations may compete with each other but that is the SMALLEST portion of the price! They all have essentially the same cost, since there are so few refineries to supply them.

With so few refineries, price fixing is easy! You don't need a signed agreement, which would be a silly way for a company to get busted. You just need a gentleman's "understanding".

The term I believe is "oligopoly", where a market is supplied by just a few players.

In general I agree with your "laissez-faire" views on economics, August. I just don't share your assumptions that we exist in a truly free market!

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Gas price is related to oil, but not *that* closely related.

Gasoline is well over $9 a gallon in the UK.

http://www.telegraph.co.uk/motoring/news/8346035/Motorists-facing-6-a-gallon-at-the-pump-due-to-Libya-crisis.html

Then you have the heavily socialist (ok, communist) countries like Venezuela that pay 12 cents per gallon.

http://www.marketwatch.com/story/low-gas-prices-plague-venezuela-2011-03-16

Which market system works better? The US is currently between the two, but have no doubt - if you want the government to step in to lower gas prices (and get into higher levels of debt), its a much more communist system.

Pay to play, raise gas prices around the board I say.

"Iran posted troops at gasoline stations when President Mahmoud Ahmadinejad slashed the gasoline subsidy, quadrupling prices."

Deadly rioting broke out the last time that Venezuela tried to increase the price of gas from 12 cents per gallon. Its a screwed up market we have.

Edited by ZenOps
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