One thing to remember is that this is due to unavoidable supply shortages so the cost is dictated by basic econ- oh hold on, the oil industry is making HOW much profit now?
https://www.cnn.com/2022/06/09/politics/white-house-oil-profits/index.html
Seems similar to the general inflation situation, where the spectre of a price increase leads to profiteering disguised as the feared price increase:
https://www.cnn.com/2022/03/28/business/ceo-pay-inflation-prices/index.html
Floating Doc (Forum Supporter) said:Too bad for the brodozer crowd.
I'm seeing a pretty clear bimodal distribution among the brodozer crowd...some are driving super slow (trying to save fuel???) and some are driving super fast (trying to release rage???)
In reply to GameboyRMH :
Nothing to see here...
Just paid $7.49/gal. for fuel oil, which I thought was less refined than gasoline.
In reply to 914Driver :
Yeah... I'm not looking forward to my heating oil delivery bill. Typically a good $2/gal more than the going price for diesel in my area.
Less refined, although the cracking process produces both. Prices are also heavily affected by diesel fuel costs, since they are essentially the same.
Paid 5.59 for some premium this week. F.
RX Reven' said:Floating Doc (Forum Supporter) said:Too bad for the brodozer crowd.
I'm seeing a pretty clear bimodal distribution among the brodozer crowd...some are driving super slow (trying to save fuel???) and some are driving super fast (trying to release rage???)
I drove to two autocross venues last Saturday and Sunday. 260 and 580 miles round trips, mostly highway. Driving about 75-80+ myself, I was passed by almost every large truck and SUV.
Many of them are still trying to drive 5 to 10 MPH faster than everyone else, no matter the actual speed.
I wish I could tow my Miata, but 25 MPG including the autocross runs made it a lot cheaper.
Yesterday I returned from a month long trip to France. Here is a shot of the prices at the station near our apartment in Tours.
The $/gal equivalents to these are, from top to bottom: $8.697, $9.135, $8.582, $8.263. "Gazole" is diesel. In Europe they only use RON octane scale so their SP95-E10 is like our 87 E10. The cars there are small and fuel efficient. Lots of diesels and mostly manual transmissions. In a month covering both Aix-en-Provence/Marselle and Tours I saw exactly ONE "American" (Ram actually) pickup truck. Trades people use small transit vans almost exclusively, not pickups. When we rented cars and drove their highway system virtually no one exceeded the speed limit (130Km/hr max), most drove slower than the limit, and I never saw anyone hogging the left lane, very disciplined drivers, I have never seen so many people using turn signals in my life. The exception are motorcycles, they are bat-E36-M3 crazy. Tolls are steep but the highways are in great condition. I did see a couple of newer Mustangs and an older Corvette, a C4 in Tours.
We did find this gem on a trip to a little village outside of Aix. It had Quebec tags on it.
In reply to GameboyRMH :
Profit does not mean they're gouging, if you make a little profit off a lot of people, it does mean you're charging too much, it just means you're selling a lot.
Gouging also requires some sort of monopoly (e.g. the only store in the area selling the needed product). There are LOTS of gas stations. (Another option is of course a broad conspiracy)
As noted previously, it's a global market. Think of it as eBay. You may think that Miata should only sell for $3000, but the markets willing to pay $5000, because there are simply a lot more buyers for the limited number for sale, so that is what they go for.
(There also seems to be a fair amount of worry about future "Miata" production built into gas prices also).
Supply and demand does not work well for pricing when demand is essentially fixed. Gasoline would have to go up to the $10+ range before it started to make economic sense to buy a smaller car, move closer to work, etc.
People are not all "omg gas costs $100 a month more, time to sell my house in the exurbs and get an apartment in the city".
I am spending close to $1000 a month on fuel and I still can't justify buying a different car at this time. That would cost more money, and I do not see current fuel prices staying where they are. Heck, I can't even justify parking the 93-octane Volvo for an 87-octane Mazda, which gets slightly less cents per mile. $5.59 for 93 vs. $5.29 for 87 (5.09 for fuel, 20c/gallon of two stroke oil, about 25% more fuel consumption)
If we're going to blame high gas prices on gouging from some combination of drillers, refiners, and sellers, we first need to answer the question of "what changed".
Until someone can point to the change that opened the door for gouging, it's just not a coherent explanation.
What changed?
In reply to RX Reven' :
If you want to place blame... they realized that demand is inelastic and people will shell out what it takes.
Are there production issues? Probably.
Is there a strong economic incentive to rectify those issues? Well... I mean, look at what happened in Texas last year with electricity. Did they take steps to keep it from happening again?
Pete. (l33t FS) said:In reply to RX Reven' :
If you want to place blame... they realized that demand is inelastic and people will shell out what it takes.
That just occurred to them now 
RX Reven' said:Pete. (l33t FS) said:In reply to RX Reven' :
If you want to place blame... they realized that demand is inelastic and people will shell out what it takes.
That just occurred to them now
Well, the realization probably hit a while ago. The viable excuse is more recent.
Steve_Jones said:In reply to GameboyRMH :
Profit does not mean they're gouging, if you make a little profit off a lot of people, it does mean you're charging too much, it just means you're selling a lot.
Shouldn't savings via mass production be a factor? If they're making bigger profits couldn't they also lower prices to be more competitive while keeping profits relatively stable? If oil was a competitive market, which gets to the next point...
aircooled said:Gouging also requires some sort of monopoly (e.g. the only store in the area selling the needed product). There are LOTS of gas stations. (Another option is of course a broad conspiracy)
I'd say that the monopoly is OPEC and the other oil companies benefit from the elevated prices - we've seen similar situations in the electronics industry where just 2 or 3 big manufacturers collude to raise prices on some component and the smaller players cash in with similar prices rather than severely undercut them:
https://www.fbi.gov/news/stories/lcd-price-fixing-conspiracy
https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal
RX Reven' said:If we're going to blame high gas prices on gouging from some combination of drillers, refiners, and sellers, we first need to answer the question of "what changed".
Until someone can point to the change that opened the door for gouging, it's just not a coherent explanation.
What changed?
The Ukraine invasion leading to the decrease in supply from Russia? This changed production capacity, especially for diesel, and also created the expectation of a price increase.
From what I can find the latest global oil market data currently available is from March-April, so it will be a few months before we know what's happening right now. If we see that consumption was steady while prices and profits were increasing, that would be a smoking gun for price gouging.
In reply to Pete. (l33t FS) :
I don't believe this is about excuses but even if it was, there'd have to be an industry wide antitrust violation for gouging to be an explanation.
Every player benefits when they take a slightly smaller profit margin in exchange for a large increase in volume. I think we just don't have sufficient capacity...COVID brought demand down and it can't be increased quick enough to keep up with current demand due to material and labor shortages.
In reply to GameboyRMH :
They don't "set" the prices, the market speculators do. Increasing supply might drop prices... or the speculators might assume that it is going to go higher anyway and thus buy buy buy, which drives up prices.
Pete. (l33t FS) said:In reply to GameboyRMH :
They don't "set" the prices, the market speculators do. Increasing supply might drop prices... or the speculators might assume that it is going to go higher anyway and thus buy buy buy, which drives up prices.
OPEC doesn't set prices directly like the LCD price fixers did, but they can and often do artificially limit supply, so they have a lot of control over prices.
Sorry, I (we) may have mis-implied what you meant. No, you are absolutely spot on about OPEC being a (mostly) monopoly and they do very much manipulate the market. A LOT of why we are where we are is because OPEC (in cooperation with Russia) refused to ramp up production last year. They are STILL not ramping up and that is causing supply issues and higher prices. It's not hard to see why they might do that (Russia has a very obvious reason). They got hammered big time during the pandemic, and they want to make up what they lost.
As far as domestic oil companies though, that doesn't really hold. They are slaves to the global market, which is heavily controlled by OPEC.
Until someone starts dumping more supply on the market (or even commitment to future supply) we will stay where we are, and maybe get worse(?)
(Also, very likely the reason "someone", is going to meet "someone else" very soon to try and convince them to do just that)
In reply to aircooled :
In cooperation with the US. During the pandemic the US made an agreement with them for them to hold back production for two years, which helps the more-expensive-to-extract US oil fields.
I know, I know... whynotboth.jpg
GameboyRMH said:The Ukraine invasion leading to the decrease in supply from Russia? This changed production capacity, especially for diesel, and also created the expectation of a price increase.
It sounds like we basically agree on what's causing the high gas prices...if there's any difference between us, it's in our definition of "gouging".
To me, gouging requires intentionality..."let's chock off the supply to drive prices so high that we'll make more profits even with the reduced volume".
Currently, I don't believe there's any evidence indicating that has occurred in the US. BTW, we keep hearing about how many drilling permits have been issued...that's not an informative metric...an informative metric would be "how many drilling permits have been requested but not issued".
OPEC claims that they're experiencing the same labor and material shortages that the US is having (I have no idea if that's true or not). I believe the US appears to be producing as much fuel as it can but it's not nearly enough to keep up with demand so in my mind, that's not gouging.
In March of 2020, oil was at a negative value per barrel...they literally couldn't give the stuff away resulting in the industry hemorrhaging money. Today, the pendulum has swung the other way and the oil industry is making bank.
What's happening now is terrible for the consumer but what's the alternative, price fixing, that movie never seems to end well...in this case, it would just cause stock outs (i.e., the price isn't crazy but you can't reliably get fuel).
Let's look closely for collusion among the players and if found, let's throw the suits in prison by the 100's but if this is just natural market gyrations, let's just hang on and get this mess in the rear view mirror ASAP.
I don't think we can get to gouging without first answering the question of "what changed"...greed has been with us forever, what changed.
Credible excuse, so, in the absence of collusion (antitrust = prison), everybody knows they'll make more profit if they slightly undercut the other guy.
Given all of this bad news, here's even more. We're headed into hurricane season and if a storm knocks out some of our production capability, we'll be pining for the good old days of the $5.00 national average.
Gas prices here in Ann Arbor are topping $5.49 now.
On a related note I saw a Tesla model 3 today towing a pretty large Airstream trailer. It definitely did not look big enough to tow the huge trailer. It had Ontario plates, and was pretty happily cruising down US-23 at a solid 65 mph. I can't imagine they get very far at that speed and weight.
In reply to Erich :
Maybe it was an eStream. It has motors and batteries that allow it to add range to the combination and can be disconnected from the tow vehicle and then remotely controlled for parking.
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