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72 comments on Why has the price of gas gone up?

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TRE on April 22, 2006 - 12:06pm Permalink | Subthread | Comments top
I propose one modification to the above description:  gas prices are ultimately set by (a) the price of crude oil; (b) the cost of the refining processs; and (c) the throughput of refiners in processing crude oil to meet gasoline demand.

Item (c) is important.  There can be a decoupling between gas prices and oil if refineries cannot meet gasoline demand even if oil is available.

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Robert Rapier on April 22, 2006 - 12:20pm Permalink | Subthread | Parent | Comments top
Item (c) is important.  There can be a decoupling between gas prices and oil if refineries cannot meet gasoline demand even if oil is available.

That is exactly correct. It would not surprise me to see oil and gasoline prices diverge, or at least change in the same direction, but by starkly different percentages. I know some people who are playing a spread between the two in the futures markets with this expectation (and have been making good money so far).

RR

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Super G on April 22, 2006 - 12:24pm Permalink | Subthread | Parent | Comments top
The full breakdown from the article is:
  • 47%: Cost of crude
  • 23%: Federal, state, and local taxes
  • 18%: Refining costs and profits
  • 12%: Distribution and marketing, retail dealer profits
Indeed, the increase in crude prices may be obscuring more subtle things that are going on in the background.
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turbosaab on April 22, 2006 - 4:02pm Permalink | Subthread | Parent | Comments top
One note, these figures are based on 2004 prices.
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