Why are Gas Prices so high.

[TPSprayduster]

Why Are Gasoline Prices So High in February?

US gasoline prices are setting records for this time of the year, with the current price apparently the highest ever for February, at least in nominal dollars. In fact, the monthly average US retail price for unleaded regular has set new records every month since last October. That isn't quite as dramatic as it might seem, because based on the Department of Energy's data, the previous records for those months were set just a year earlier. Yet it's still a significant drag on the economy--an anti-stimulus, as I've noted previously. Unfortunately, some of the explanations I've seen for these price levels, including the ones offered in last night's CBS Evening News, focus too much on minor factors such as refinery maintenance and commodity speculation, while ignoring the most basic influence: the price of oil. That's understandable if they're watching the wrong oil price.

If you've been reading this blog for a while, you know why the most-watched oil price in America, the one for West Texas Intermediate crude (WTI), is no longer representative of the broader US oil market, at least for now. The best domestic grade to follow at the moment is probably Louisiana Light Sweet (LLS), which is of similar quality to WTI but not subject to the persistent transportation bottleneck at Cushing, OK. It tracks closely to UK Brent crude, which has largely taken over the role of global oil price indicator. The "spot" price of LLS was $119 per barrel today, accounting for 94% of the price of prompt gasoline futures on the New York Mercantile Exchange (NYMEX) today. And the $16/bbl increase in LLS since February 9, 2011 explains nearly 80% of the increase in the wholesale gasoline price over that interval. So while refinery outages might be having some impact, particularly in the local and regional markets served by the affected facilities, they are not the main show, nor is speculation in gasoline futures, the effect of which beyond the New York area covered by the NYMEX contract should be rather attenuated.

So with gas prices this high, this early in the year, how high might they be when the summer driving season arrives? That also comes down to crude oil, prompting questions about why oil prices are so high today, despite relatively weak demand. Many analysts attribute oil's strength to worries about Iran's threat to close the Strait of Hormuz as the sanctions noose tightens, along with rumors that Israel may be preparing to strike Iran's nuclear sites on its own this spring. But as with any such risks, they will either manifest or they won't, and the more time that goes by without these feared events occurring, the less influence they are likely to have in propping up oil markets, absent a surge in underlying demand due to a strengthening global economy. If none of that takes place, then oil prices could ease, resulting in summer gas prices not much worse than what we see today. However, I'd be wary of reversing that logic: Keeping gas prices low is not a sufficient reason to back away from addressing the risks posed by what the International Atomic Energy Agency refers to as the "military dimensions" of Iran's nuclear program.

[imgesing]

unfortunately when the economy is stable or doing well the gas prices rise.

Many people forget that when people get mad enough it will drop. We are all sheep though. We are driving the profits until we cant.

It is disgusting. I remember about a year and a half ago when we were all worried about an economic recession the prices were in the dollar plus range. It showed me something important about how things work. We have no say in it directly. Those who are in control are bleeding us because it is a monoply of huge proportions. The price of OIL should be lower due to technology, the fact that there is so much of it still in reserve through out the world etc. In the USA we are way behind countries like Brasil. Why? How can it be that a country like the USA is so far behind countries around the world? Trust me when I say that I feel strongly that this currency and those controlled around the world are watering holes for a select few. We are all caught up in a system which fluctuates based on economic conditions and societial pressures. They put the pressure cooker on heat and wait until the heat boils and when it is about to burst they lower the pressure enough for it to cool down. We all suffer and they make MAX on all of us.

WHy do so many companies move out of the USA? Because they have to in order to survive in a global market. The USA has been sold out by a select few. It is again disgusting. Only those of us old enough to remember the slogan MADE IN AMERICA as a product of quality. Now everything we buy is sent away to CHINA or JAPAN or so many other countries. Who pays the price for this? WE DO!!!! We all do. Even our agriculture is different. Chemicals in our foods and large productions of farming! The little guys have been kicked to the curb. HOME DEPOT has ruined so much of what we all would have preferred... A place to go for answers where some one actually knew what they are doing! Now we are forced to go to omany of these larger companys and there is little SERVICE! We are moving away from quality and service. I remember when there was full service gas stations. They checked the water and oil in your car and tire pressure for FREEEEE!!!!!!

Now we fuel our cars and do everything our selves and pay a lot. They brain washed us into thinking we would get cheaper gas. We are all sheep in a very incredible movement. RICH people control the people in office of our government. I do not care which side of the political party you believe in. I see cameras on every corner slowly we are all being monitored. Call me paranoid if you want but the future is looking a bit unnerving to me. I like being protected but where is the line drawn with all that we are seeing. I think there needs to be full disclosure from all offices of the government except very few decissions. There needs to be a SPRING CLEANING in WASHINGTON D.C. I just dont think enough people will voice this for it to happen.

Sorry for my rant. It is late and I cant sleep. Grandmother is in the hospital, bills to pay, early work and my mind is going.

PEACE ALL and HAVE AN AMAZING WEEK. When this happens let's all make a better world. That is my wish for the future of my child.

Edited February 21, 2012 by imgesing

[jeepguy]

for some reason the oil and gas speculators ,,,, young guys in suits,,, are looking at the conflicks and the oil production as a hole ,,, let see soo far we have iran not pumping crude too the franch and u.k. that will squeeze the market on production of gas ,,, shipping mainly got too ship oil somewhere ,,get turned into gas then trasported too stations everywhere,,,, ,,,, now we have an oil barge that is leaking oil in the lower mississippi ,,, a collision with another carrier i think grain barge,,,, WOW that will cause great conflict at the oil and gas stations ,,, still haven`t made that connection but ,,, back too the oil speculators well these suit kids ,,get paid by the oil and gas markets too keep ahead of the pricing index ,,,last week the gas you bought was at like 3.33 a gallon ,,,the station operator buys new gas at the new price that the speculators are now saying it cost more too make gas because of the above senario`s ,,, now next weeks gas will be at 3.75 a gallon until the next buy of gas from the makers of oil and gas products,,,, Tomorrow we will look into the process called,,, birthing babies ,,,,

[Luigi1]

Several reasons. Iran is always blamed as the #1 reason. Iran is but a small small part of it.

We are closing down refineries rather than building more. We must purchase more diesel fuel from Shell Netherlands causing shortages in the EU. We are exporting our own domestic fuel to China & other emerging nations. Although Obama claims domestic drilling is up 40%, that's on private lands. Now for the rest of the story. Drilling is down 45% on federal lands. That a minus 5% decrease.

Cars are 15% more fuel efficient than 4 years ago. Americans are using less gas. That's less tax revenues coming in for the feds & lost sales to big oil. The taxpayer & consumer will be sqeezed on both ends, 1st for not conserving, 2nd for not using enough fuel. No matter if you use too much or not enough, you will be penalized.

Right now, there is no shortage of oil. There is a glut of too much oil on the world markets. Most all storage facilities are full. Oil tankers must often wait weeks to unload because of storage problems. The rules of supply & demand don't apply with big oil. Hedgers are betting the price will continue to raise once again after the feds promised to halt this practice in 2009. Obama blames big oil while taking kickbacks from them. Don't expect any help from anyone over high energy costs any time soon. It's a rigged game just like Wall Street.

[TAV]

Gas prices are perfectly inelastic:

When a price change has no effect on the supply and demand of a good or service, it is considered perfectly inelastic. An example of perfectly inelastic demand would be a life saving drug that people will pay any price to obtain. Even if the price of the drug were to increase dramatically, the quantity demanded would remain the same.

http://www.investopedia.com/terms/e/inelastic.asp

As the price of a good or service increases, consumer demand for the good or service will decrease and vice versa.

http://www.investopedia.com/terms/l/lawofdemand.asp

OPEC knows that the Quantity Demand (Qd) don't have to increase or decrease by much but and the Purchasing Equilibrium (Pe) or price can flux up or down regardless. The law of Demand states when price goes up demand goes down and vise-verse, not in the case of gas. Prices can go up to 10 bucks a gallon and the demand will stay the same, maybe even go up.

A good's demand is considered perfectly inelastic when that good's demand does not change, no matter the price set. No matter how big or small the price change is.

http://wiki.answers.com/Q/What_is_Perfectly_inelastic

The chart shows that the narrow demand curve for fuel can move by as much as 3 gallons, this doesn't mean that it will move, just showing the demand curve for fuel can moved along the red line on the charting by as much as 3 gallons but the cost per gallon can move by as much as .40 cents to 2.60 per gallon.

Edited February 21, 2012 by TAV

[TAV]

Notice, in the above chart:

P1 1st Price = Q1, first Quantity. As the Price starts to drop down to P2, the 2nd Price the Demand D2 increases up ward. and as price drops down to P3 the Demand moves farther out ward to Q3. Again as prices decrease the Quantity demand increases. As the price of iphones decrease, everyone and their mother will want an iphone and the demand put on apple to produce more iphones will increase or flood the market.

Now check out this fuel chart. Look at the two dollars and ten cent on the left, they can increase gas prices up to two dollars and fifty cents and not even produce a full gallon on the demand curve, a .40 cent markup with maybe an additional 3/4 gallon added to this market. They don't have to work as hard as apple because the demand for gas will stay just about the same regardless of how much they charge.

Edited February 21, 2012 by TAV

[Heavyduty053]

Why are gas prices so high:::::::simple, Wall St, years ago started trading """FUTURES""" because the regular day trading wasn't enough profit. Now they trade on what they think the price will be , 1 month from now, or six months for now and trade it for todays prices so money is made. Also they trade on information the media feeds them about current oil events happening. 911 was the biggest starting point for gas price increase over a 1.00 a gallon the next day. Excuses is what keeps us broke and they bug oil wealthy. And the biggest reason is they know you and i can't do without it so that gives them the power to rule. Just take a look at their quarterly earnings report. The big question is , is why is there 1,000's of wells all over this country that is capped off. New wells is not being drilled so as to keep the prices high, this is what drives the stock market.It is a myth that we are dependent on foreign oil----we are not dependent, we are being told that because if they keep buying oil it keeps prices high , it saves our oil for whatever reason and it gives the US leverage to do or say whatever to the other countries.......Get the picture now so when you sit down to your evening news and the newsman start telling you oil stories and why gas prices jumped just ask yourself why is our own oil not being used.

[tampa1000]

Why are gas prices so high:::::::simple, Wall St, years ago started trading """FUTURES""" because the regular day trading wasn't enough profit. Now they trade on what they think the price will be , 1 month from now, or six months for now and trade it for todays prices so money is made. Also they trade on information the media feeds them about current oil events happening. 911 was the biggest starting point for gas price increase over a 1.00 a gallon the next day. Excuses is what keeps us broke and they bug oil wealthy. And the biggest reason is they know you and i can't do without it so that gives them the power to rule. Just take a look at their quarterly earnings report. The big question is , is why is there 1,000's of wells all over this country that is capped off. New wells is not being drilled so as to keep the prices high, this is what drives the stock market.It is a myth that we are dependent on foreign oil----we are not dependent, we are being told that because if they keep buying oil it keeps prices high , it saves our oil for whatever reason and it gives the US leverage to do or say whatever to the other countries.......Get the picture now so when you sit down to your evening news and the newsman start telling you oil stories and why gas prices jumped just ask yourself why is our own oil not being used.

I agree....Its too bad we can't stop the future trading crap. If the president wanted to he could do it but when we need a presidential order we can't get one! after all it would help everyone and everything even our food prices.

[The Machine]

Ha Ha Ha .... your gas prices are not high .... If you were in europe you'd be paying on average around $9 per gallon .... try complaining when you get to where we are .... and it is comming!!

[tampa1000]

Ha Ha Ha .... your gas prices are not high .... If you were in europe you'd be paying on average around $9 per gallon .... try complaining when you get to where we are .... and it is comming!!

You better pray ours don't get to $9 because then you'll be paying over $14.00 ......I guess we should all go back to riding bikes and horses and let the oil people choke on their gas...

[The Machine]

You better pray ours don't get to $9 because then you'll be paying over $14.00 ......I guess we should all go back to riding bikes and horses and let the oil people choke on their gas...

already got one of each lol ..... horse back really is the way to travel

[djgabrielie]

Add to that a mild winter thus far and a surplus of heating oil and still not price drop?

It really is a bunch of BS.

[WallyWeaver]

I'm no expert on this but here's what I do know about gas prices:

Certainly 2 things that affect gas prices are taxes and inflation (a weakening dollar).

In regard to taxes gas is taxed 3 to 4 times per gallon at the pump. It's taxed by the Federal Government, the state you live in, and either the county or city that you live in but it is usually both.

Here's how it breaks down:

The Federal Government taxes gas at $.184/ gal. for non-diesel and $.244/ gal. for diesel.

My state (California) taxes gas at $.353/ gal. for non-diesel and $.18/ gal. for diesel.

County/ City taxes for me come out to $.152/ gal. for diesel and non-diesel.

That means in my state gas is taxed at $.689/ gal. for non-diesel and $.576/ gal. for diesel!

Crazy! Every gallon of gas I buy in my state, in my city, I pay $.70 per gallon in taxes! (And, shockingly, the word on the street is politicians in Sacramento would like to see the state raise taxes per gallon of gasoline.)

Okay, what about inflation? How has a weakening dollar contributed to high gas prices?

Well, let's take a look:

In March of 1980, a time of rampant inflation of the USD, gas was at $1.252/ gal. for non-diesel. As another indicator of a stronger USD back then the price of gold was at $640/ oz.

In February of 2012 gas here in California is around $4.10/ gal. for regular gasoline. The price of gold? As of the time of this post gold is at $1757.70/ oz.... almost triple of what it was in 1980!

Want to see gas prices come down? Two areas that could be looked at would be reducing taxes and strengthening the USD.

Of course opening up the entire continental US (including offshore) to drilling and building a few more oil refineries would be the biggest help. But that is not in-line with the current enviro-wacko philosophy that is prevalent in Washington today.

[trooper]

By Joe Miller Obama's giveaway: Oil-rich islands to Russia

The Obama administration, despite the nation’s economic woes, effectively killed the job-producing Keystone Pipeline last month. The Arab Spring is turning the oil production of Libya and other Arab nations over to the Muslim Brotherhood. Iraq is distancing itself from the U.S. And everyone recognizes that Iran, whose crude supplies are critical to the European economy, will do anything it can to frustrate America’s strategic interests. In the face of all of this, Obama insists on cutting back U.S. oil potential with outrageous restrictions.

Part of Obama’s apparent war against U.S. energy independence includes a foreign-aid program that directly threatens my state’s sovereign territory. Obama’s State Department is giving away seven strategic, resource-laden Alaskan islands to the Russians. Yes, to the Putin regime in the Kremlin.

The seven endangered islands in the Arctic Ocean and Bering Sea include one the size of Rhode Island and Delaware combined. The Russians are also to get the tens of thousands of square miles of oil-rich seabeds surrounding the islands. The Department of Interior estimates billions of barrels of oil are at stake.

The State Department has undertaken the giveaway in the guise of a maritime boundary agreement between Alaska and Siberia. Astoundingly, our federal government itself drew the line to put these seven Alaskan islands on the Russian side. But as an executive agreement, it could be reversed with the stroke of a pen by President Obama or Secretary Clinton.

The agreement was negotiated in total secrecy. The state of Alaska was not allowed to participate in the negotiations, nor was the public given any opportunity for comment. This is despite the fact the Alaska Legislature has passed resolutions of opposition – but the State Department doesn’t seem to care.

The imperiled Arctic Ocean islands include Wrangel, Bennett, Jeannette and Henrietta. Wrangel became American in 1881 with the landing of the U.S. Revenue Marine ship Thomas Corwin. The landing party included the famed naturalist John Muir. It is 3,000 square miles in size.

Northwest of Wrangel are the DeLong Islands, named for George Washington DeLong, the captain of USS Jeannette. Also in 1881, he discovered and claimed these three islands for the United States. He named them for the voyage co-sponsor, New York City newspaper publisher James Gordon Bennett. The ship’s crew received a hero’s welcome back in Washington, and Congress awarded them gold medals.

In the Bering Sea at the far west end of the Aleutian chain are Copper Island, Sea Lion Rock and Sea Otter Rock. They were ceded to the U.S. in Seward’s 1867 treaty with Russia.

Now is the time for the Obama administration to stand up for U.S. and Alaskan rights and invaluable resources. The State Department’s maritime agreement is a loser – it gives us nothing in return for giving up Alaska’s sovereign territory and invaluable resources. We won the Cold War and should start acting like it.

[R2D2]

Ha Ha Ha .... your gas prices are not high .... If you were in europe you'd be paying on average around $9 per gallon .... try complaining when you get to where we are .... and it is comming!!

Mr. Mach, We are not in europe. The reason we pay what we pay. Is because the money exchangers are SO very greedy. Every time they think we have an extra penney they think it should be theirs.

I might also add that if this one would allow the industry to drill for return on investment. We (AMERICANS) would not have to depend on the countrys that hate us. We have oil and gas out the wazoo. This adminstration wants USA to be just like our european friends.

I can also tell you we have a chance to send him down the road kicking rocks. In November you just might see a different picture.

Edited February 23, 2012 by R2D2

[tarsi]

Haven't you heard its Obama's fault!!!!!!!!!!!!!!!!!!!!!!

[Abarvets]

By Joe Miller Obama's giveaway: Oil-rich islands to Russia

The Obama administration, despite the nation’s economic woes, effectively killed the job-producing Keystone Pipeline last month. The Arab Spring is turning the oil production of Libya and other Arab nations over to the Muslim Brotherhood. Iraq is distancing itself from the U.S. And everyone recognizes that Iran, whose crude supplies are critical to the European economy, will do anything it can to frustrate America’s strategic interests. In the face of all of this, Obama insists on cutting back U.S. oil potential with outrageous restrictions.

Part of Obama’s apparent war against U.S. energy independence includes a foreign-aid program that directly threatens my state’s sovereign territory. Obama’s State Department is giving away seven strategic, resource-laden Alaskan islands to the Russians. Yes, to the Putin regime in the Kremlin.

The seven endangered islands in the Arctic Ocean and Bering Sea include one the size of Rhode Island and Delaware combined. The Russians are also to get the tens of thousands of square miles of oil-rich seabeds surrounding the islands. The Department of Interior estimates billions of barrels of oil are at stake.

The State Department has undertaken the giveaway in the guise of a maritime boundary agreement between Alaska and Siberia. Astoundingly, our federal government itself drew the line to put these seven Alaskan islands on the Russian side. But as an executive agreement, it could be reversed with the stroke of a pen by President Obama or Secretary Clinton.

The agreement was negotiated in total secrecy. The state of Alaska was not allowed to participate in the negotiations, nor was the public given any opportunity for comment. This is despite the fact the Alaska Legislature has passed resolutions of opposition – but the State Department doesn’t seem to care.

The imperiled Arctic Ocean islands include Wrangel, Bennett, Jeannette and Henrietta. Wrangel became American in 1881 with the landing of the U.S. Revenue Marine ship Thomas Corwin. The landing party included the famed naturalist John Muir. It is 3,000 square miles in size.

Northwest of Wrangel are the DeLong Islands, named for George Washington DeLong, the captain of USS Jeannette. Also in 1881, he discovered and claimed these three islands for the United States. He named them for the voyage co-sponsor, New York City newspaper publisher James Gordon Bennett. The ship’s crew received a hero’s welcome back in Washington, and Congress awarded them gold medals.

In the Bering Sea at the far west end of the Aleutian chain are Copper Island, Sea Lion Rock and Sea Otter Rock. They were ceded to the U.S. in Seward’s 1867 treaty with Russia.

Now is the time for the Obama administration to stand up for U.S. and Alaskan rights and invaluable resources. The State Department’s maritime agreement is a loser – it gives us nothing in return for giving up Alaska’s sovereign territory and invaluable resources. We won the Cold War and should start acting like it.

Trooper do you have link? This I need to put in front of a few people. Thanks.

[429]

Trooper do you have link? This I need to put in front of a few people. Thanks.

I'm not trooper but I found this on bing:

http://www.wnd.com/2012/02/obamas-giveaway-oil-rich-islands-to-russia

Cut and paste. Hope it helps.

[Sparta]

Why are Gas Prices so high? My simple answer: It is an excuse for war. High gas prices make people angry, and the public buys into it as a rationalization for going to war. FOLLOW THE MONEY.

[DinarMillionaire]

Haven't you heard its Obama's fault!!!!!!!!!!!!!!!!!!!!!!

Finally, for once, I agree with you Tarsi! Obama said, "under his administration, energy prices would necessarily skyrocket". So proud of you for admitting it. It's about time you wake up.

[Weapon X]

I'm not trooper but I found this on bing:

http://www.wnd.com/2012/02/obamas-giveaway-oil-rich-islands-to-russia

Cut and paste. Hope it helps.

World Nut daily?? I take everything they say with a 100 lb block of bovine licking salt

[TPSprayduster]

As DJ said surplus of heating oil mild winter prices still high, blame those who speculate. You see no matter how much oil you have on the market speculators influence the price. Some say drill everywhere get all of the oil problem solved well you have to get to market refine it and you still not saving jack. Some say Keystone pipleine, news flash Keystone oil won't reach the market until it is built and pumping to capacity timeline? 3-5 years. Same thing they said about the alaskan pipeline, has the the price gone down nope, has the oil from Alaska help the market? Nope, it made money for the citizen of alaska though. Plus you had a sleeping captain and Exxon weasel their way out of punitive damages.

Imagine this happening in the heart land of america.

http://en.wikipedia.org/wiki/Exxon_Valdez_oil_spill

[DinarMillionaire]

As DJ said surplus of heating oil mild winter prices still high, blame those who speculate. You see no matter how much oil you have on the market speculators influence the price. Some say drill everywhere get all of the oil problem solved well you have to get to market refine it and you still not saving jack. Some say Keystone pipleine, news flash Keystone oil won't reach the market until it is built and pumping to capacity timeline? 3-5 years. Same thing they said about the alaskan pipeline, has the the price gone down nope, has the oil from Alaska help the market? Nope, it made money for the citizen of alaska though. Plus you had a sleeping captain and Exxon weasel their way out of punitive damages.

Imagine this happening in the heart land of america.

http://en.wikipedia.org/wiki/Exxon_Valdez_oil_spill

So what is the answer? Never start to produce, because it takes so long to get to market? Then what? With that kind of thinking, we run out of oil production in the U.S.. Then what? We TOTALLY DEPEND on the middle east for our oil. What a brilliant way to think. Never get started, because it takes too long to get to market, so we can depend on others for our energy. Yep. sounds like a brilliant plan. Maybe, you should run for President.

[smee2]

"They" raise the gas prices because "they" can! Every one of use who drives a vehicle that uses gas is part of their captive audience. What can we do? Buy an electric? Takes gas to even get to the showroom to start investigating that.

smee2

[TPSprayduster]

So what is the answer? Never start to produce, because it takes so long to get to market? Then what? With that kind of thinking, we run out of oil production in the U.S.. Then what? We TOTALLY DEPEND on the middle east for our oil. What a brilliant way to think. Never get started, because it takes too long to get to market, so we can depend on others for our energy. Yep. sounds like a brilliant plan. Maybe, you should run for President.

Not me for President, but people want the quick fix can't you see that? building a pipeline at this time is not going to solve the issue. It takes a tanker to transport crude in 2 months depending on the course. Build a Pipeline from Canada 3-5 years cheap oil that is not effected by speculators or oil down the road. Bottom line is this you will continue to pay these prices as long as speculators can speculate. Can't blame the administration for what we allow to happen. What's it called deregulation, free market and who gets kicked in the tail section US. Who makes a killing, the Oil companies, who gets a tax break and make huge quarterly profits. One of these days you might wake up and see the industry for what it is.