Gas Prices

[sgrizzle]

quote:Originally posted by sauerkraut

quote:Originally posted by chas22

It's real obvious that we were being price gouged for gasoline, which cost no more to produce now than it did before or after it reached $3.80 per gallon. If the oil companies say they are not making the money then can something be done to stop it from happing again?

Gas was high because a barrel of oil was almost $150.00 so that makes the pump prices go to $4.00 a gallon. Today a barrel is $70.00 and pump prices reflect that. Diesel is still sky high. The oil companies  have to pass on that cost.

A barrel of oil has cost about $30 the entire time. The prices you're quoting is for the highly fictionalized "oil price futures" with which they say "it'll cost us $140 to replace the oil you just bought" and no-one keeps estimates vs reality in check.

[inteller]

quote:Originally posted by EricP

quote:Originally posted by inteller

quote:Originally posted by sgrizzle

quote:Originally posted by inteller

oh and BTW, 100% gas at 71st/mingo is selling for the same as the quiktrip pee water, so go get your money's worth there.

it still confounds me that people don't understand simple supply and demand.  collectively americans reduced their fuel consumption by 5% BEFORE these prices shot down.  This sent shockwaves through OPEC and they couldn't react soon enough so a huge supply of oil got refined into gas before they could cut back.  Just think what we could do if we answered back with a 10% reduction in consumption.  we can inflict some major pain on chavez and those middle east turds by just conserving.

Just a rumor but I heard the reason they are still selling traditional gas blends is because they have an issue with water in the tanks.

i could care less, as long as it is 100% gas at the same price as quiktrip pee water.

OK, tell us that when your engine craps itself. Of course, you could always just look up the actual records online at whatever that obscure website is..

you are obviously an idiot who doesn't know what they are talking about.  In tanks where ethanol is present you can't have any water because ethanol will bond to the water and carry it into your tank.  regular gas doesn't have this problem as it naturally separates from water and it is siphoned off as normal.  This is no different than the occassional water that is in your car's tank which is why people tell you to never run your tank completely empty because it will pick up water and whatever else is at the bottom.  next time just ****.

[inteller]

quote:Originally posted by sauerkraut

but the "Big 3" only built what the people wanted and that was trucks & SUV's.

not completely true.  They built big SUVs that people wanted, but nobody said "build SUVs that get really crappy gas mileage"  People just accepted the low MPGs because gas was cheap.  Now it isn't.  People still want big SUVs, but they want higher MPG and the big 3 don't have a clue on how to get there.

[Breadburner]

quote:Originally posted by inteller

quote:Originally posted by sauerkraut

but the "Big 3" only built what the people wanted and that was trucks & SUV's.

not completely true.  They built big SUVs that people wanted, but nobody said "build SUVs that get really crappy gas mileage"  People just accepted the low MPGs because gas was cheap.  Now it isn't.  People still want big SUVs, but they want higher MPG and the big 3 don't have a clue on how to get there.

Sure they do GM is going to do it with a 4.9L diesel....

[sgrizzle]

GM and Chrysler are looking at small diesels and ford is looking at a turbo 4cylinder. All 3 are taking their time, although when Chrysler was under Mercedes, the did put diesel in some mid-sized SUV's.

[cannon_fodder]

quote:Originally posted by sgrizzle


A barrel of oil has cost about $30 the entire time. The prices you're quoting is for the highly fictionalized "oil price futures" with which they say "it'll cost us $140 to replace the oil you just bought" and no-one keeps estimates vs reality in check.

APRIL of 2003. That is the last time you could get a barrel of oil from the wellhead for $30.

Sorry SQ, but you are very wrong on this and it demonstrates a basic lack of knowledge on commodities markets.  Oil has not been at a spot price of $30 per barrel since 2003.  Here is your reality check that you wanted.

The futures market you are talking about can either be real, or derivative (simplified).  Real when you agree to purchase X barrels at Y price fr delivery on Z date.  The deal is done then and there and you will pay Y*Z when the oil is delivered without regard to what the market is doing.

The derivative futures market is buying futures contracts.  I pay you for the right to buy X barrels at Y price on Z date, not selling real oil.  When the date comes I will only execute that contract if the price is below Y and force the seller to buy oil and sell it to me for a loss.  I will either save my consumers money or let the contract expire and calculate the reduced risk was worth the price of the contract (this is how Southwest Airlines made money the past few years - executing the contracts, and how SemGroup went under - on the executed upon side of the deal).

So, if you have a futures contract you will pay whatever the contract price is.  Which surely has been above $30 for a very long time (SemGroups contracts were at ~$110, and they LOST on it).  If you either fail to have a contract or you choose not to execute on it - you will buy oil on the spot market.

What follows is not futures trading, not a derivative, this is what people actually paid on the spot for a barrel of oil.  This is not futures trading, but if you walked up to the window (so to speak) and wanted a barrel of crude. Below is the spot market chart for Oklahoma Sweet Crude FOB Cushing:




If you want to pretend spot prices are somehow manipulated, lets look at what Oklahoma Lease Holders were getting paid PER BARREL of oil at the well head. Not what they wanted to sell for, not some crazy future sales contract... what Oklahoman's got when they put a barrel of oil from their storage tanks onto a truck:
Year, Month 1 to 12 price per barrel

2003    30.98     34.14     32.01     27.36     27.03     28.98     29.71     30.25     26.92     29.03     29.46     30.88

2004    32.67     33.30     35.63     35.51     38.90     36.81     39.30     43.49     44.58     51.50     47.35     41.85     40.07

2005    45.22     46.57     52.75     51.21     47.53     54.06     56.91     62.76     63.19     59.92     56.32     56.76     54.43

2006    62.70     59.33     59.60     66.83     67.58     67.98     71.42     69.94     61.06     56.10     55.59     58.09     63.02

2007    51.34     56.28     57.67     60.63     60.02     63.68     70.97     69.47     76.26     83.13     92.24     88.75     69.20

2008    90.22     92.30     102.18     109.76     122.95     131.37     131.04     113.32                 111.64 (data through August)

Source: Pennwell Oil & Gas Journal,    
Crude Oil Price at the Wellhead - Oklahoma (monthly) - <i>data 1/1984 thru 8/2008. Available at:
http://lib.store.yahoo.net/lib/ogjresearch/samp1.xls
- - -

SO... futures contracts, derivative contracts, spot market prices, and the price paid at the well head were all WELL above the $30 a barrel number you gave and have been for 5 years.  Please explain who was paying $30 for a barrel and where they were paying this.  I'm sure plenty of oil companies want in on the bargain so they can stop overpaying lease holders.

[inteller]

quote:Originally posted by cannon_fodder

quote:Originally posted by sgrizzle


A barrel of oil has cost about $30 the entire time. The prices you're quoting is for the highly fictionalized "oil price futures" with which they say "it'll cost us $140 to replace the oil you just bought" and no-one keeps estimates vs reality in check.

APRIL of 2003. That is the last time you could get a barrel of oil from the wellhead for $30.

Sorry SQ, but you are very wrong on this and it demonstrates a basic lack of knowledge on commodities markets.  Oil has not been at a spot price of $30 per barrel since 2003.  Here is your reality check that you wanted.

The futures market you are talking about can either be real, or derivative (simplified).  Real when you agree to purchase X barrels at Y price fr delivery on Z date.  The deal is done then and there and you will pay Y*Z when the oil is delivered without regard to what the market is doing.

The derivative futures market is buying futures contracts.  I pay you for the right to buy X barrels at Y price on Z date, not selling real oil.  When the date comes I will only execute that contract if the price is below Y and force the seller to buy oil and sell it to me for a loss.  I will either save my consumers money or let the contract expire and calculate the reduced risk was worth the price of the contract (this is how Southwest Airlines made money the past few years - executing the contracts, and how SemGroup went under - on the executed upon side of the deal).

So, if you have a futures contract you will pay whatever the contract price is.  Which surely has been above $30 for a very long time (SemGroups contracts were at ~$110, and they LOST on it).  If you either fail to have a contract or you choose not to execute on it - you will buy oil on the spot market.

What follows is not futures trading, not a derivative, this is what people actually paid on the spot for a barrel of oil.  This is not futures trading, but if you walked up to the window (so to speak) and wanted a barrel of crude. Below is the spot market chart for Oklahoma Sweet Crude FOB Cushing:




If you want to pretend spot prices are somehow manipulated, lets look at what Oklahoma Lease Holders were getting paid PER BARREL of oil at the well head. Not what they wanted to sell for, not some crazy future sales contract... what Oklahoman's got when they put a barrel of oil from their storage tanks onto a truck:
Year, Month 1 to 12 price per barrel

2003    30.98     34.14     32.01     27.36     27.03     28.98     29.71     30.25     26.92     29.03     29.46     30.88

2004    32.67     33.30     35.63     35.51     38.90     36.81     39.30     43.49     44.58     51.50     47.35     41.85     40.07

2005    45.22     46.57     52.75     51.21     47.53     54.06     56.91     62.76     63.19     59.92     56.32     56.76     54.43

2006    62.70     59.33     59.60     66.83     67.58     67.98     71.42     69.94     61.06     56.10     55.59     58.09     63.02

2007    51.34     56.28     57.67     60.63     60.02     63.68     70.97     69.47     76.26     83.13     92.24     88.75     69.20

2008    90.22     92.30     102.18     109.76     122.95     131.37     131.04     113.32                 111.64 (data through August)

Source: Pennwell Oil & Gas Journal,    
Crude Oil Price at the Wellhead - Oklahoma (monthly) - <i>data 1/1984 thru 8/2008. Available at:
http://lib.store.yahoo.net/lib/ogjresearch/samp1.xls
- - -

SO... futures contracts, derivative contracts, spot market prices, and the price paid at the well head were all WELL above the $30 a barrel number you gave and have been for 5 years.  Please explain who was paying $30 for a barrel and where they were paying this.  I'm sure plenty of oil companies want in on the bargain so they can stop overpaying lease holders.

thanks for pointing this out.  I was going to raise the BS flag on this but got too busy.

$60 is the common wellhead price these days.

[sgrizzle]

Let me clarify, the cost of oil coming out of the wellhead to the person selling it (not what they charge everyone else) did not go from $30 in '03 to 5x that five years later and then suddenly drop 57% in the last 3 months. In almost every case we're talking about the same well, same pump, and same guy pumping it.

[cannon_fodder]

quote:Originally posted by sgrizzle

Let me clarify, the cost of oil coming out of the wellhead to the person selling it (not what they charge everyone else) did not go from $30 in '03 to 5x that five years later and then suddenly drop 57% in the last 3 months. In almost every case we're talking about the same well, same pump, and same guy pumping it.

Ummm, true.  What's your point?  

It doesn't matter if the price of production dropped to 2 cents, the producer isn't going to sell it for that unless market forces dictate it.  The cost of production sets the minimum price for a commodity, in a normal market that cost is not influential on the price of the commodity.  The market drives the price - what people are willing to pay for that barrel of oil and what the producer is willing to sell it for.  Coal, copper, steel... the price to produce these items dropped but the commodity price rose - the market dictates.

With the price dropping fast, you will see the remaining contracts fulfilled and production slow down somewhat.  Lucky for us, OPEC has not retained most of their oil wealth and countries like Venezuela, Nigeria, and (non Opec member) Russia have spent it as fast (or faster) than they produced it.  They will have to increase production to offset the losses in revenue, keeping the price in check.

Anyway, on a fairly inelastic commodity (oil, copper, coal) the market drives the price exclusively.  It is hard to garner more demand but dropping the price (I will sell more F-150's if they are 24K instead of 30K), so there is little if any incentive to do so.  The market is subject to manipulation on the supply side (OPEC, off shore drilling ban, hurricanes) but the demand side is mostly static (oil went up 500% and consumption dropped 5%).

Hence, production prices are only really relevant to producer profits, not the commodity price (but for setting a floor).

[inteller]

quote:Originally posted by sgrizzle

Let me clarify, the cost of oil coming out of the wellhead to the person selling it (not what they charge everyone else) did not go from $30 in '03 to 5x that five years later and then suddenly drop 57% in the last 3 months. In almost every case we're talking about the same well, same pump, and same guy pumping it.

i'm not sure what you are clarifying.  If you are speaking of the price basis a company uses to bring in a well, that cost is between $60-70 a barrel.  That is the price a producer demands to cover all of its costs (pay royalties, pay the driller, etc etc) and still make money on it.  Otherwise they shut in the well because it will cost them more to bring the oil out than what they spent on it.

[AMP]

It will be much better when gasoline drops back below 99 cents per gallon.  Believe the damaged value of the American Dollar is what caused the giant spike up in pricing at one time.  

Now that the entire world seems to of fallen victim to the greed factor of all the oil barons and their war monger associates, the consumers seem to of gotten a wake up call and are starting to refuse to pay artificially inflated prices.  

[sauerkraut]

quote:Originally posted by sgrizzle

GM and Chrysler are looking at small diesels and ford is looking at a turbo 4cylinder. All 3 are taking their time, although when Chrysler was under Mercedes, the did put diesel in some mid-sized SUV's.

Yes- I'm a big diesel fan they are better engines and last longer than gasoline engines and get better fuel mileage. However today with diesel fuel selling more than a dollar a gallon higher than gasoline, few people will want to buy a diesel. Diesel in Columbus, Ohio is around $3.00 a gallon today and gasoline is way down to $1.72 a gallon.[B)]

[sauerkraut]

This cheap gasoline we have now is great, but it shows that the market is very unstable. Three months ago fuel was $4.00 a gallon, and now it's under $1.80 a gallon. Gas could just as fast go up to $6.00 a gallon

[inteller]

keep a look out in the news.  producers are cutting back rig counts because the oil field services guys aren't ratcheting back on costs.  wells are starting to shut in.

i think we are in for a really cold winter so this brief over supply should play itself out.  But the rig operators out there better get in line with market conditions or they will find themselves hurting fast.

this may save chesapeake's donkey though as they own their own rigs and they need to keep drilling in their heavily leveraged land positions.  too bad they'll probably have to sell the gas at $3.50 a spot.

[sauerkraut]

I'm listening to Sean Hannity streaming on the web on KKAR the big 1290 flame thrower of the great plains. Anyhoo, he just anounced that oil fell to $55.00 a barrel today. If that is correct that's another huge drop. This un-stable oil market is dangerous for the economy. It goes up and down in wild swings. Oil was $60.00 something a barrel yesterday.