When the daffodils start blooming, it’s time for oil refineries to shut down production to perform annual maintenance while they switch from winter to summer fuel blends. This creates a drop in the gasoline supply that causes prices to rise. The warmer weather in spring also makes people want to drive more, creating a higher demand for gasoline that causes prices to rise. The higher price of transporting the gasoline to the retailers and the higher cost of doing business cause prices to rise.
All that makes sense. But according to energy analyst Jacques Rousseau, those refiners who’ve kept their production online have more than doubled their profit margins since January.
Posted by Patrice Hein
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48 Comments
Would somebody want to explain the winter fuel and summer fuel?I didn’t know that there is difference.
Not being a chemist, I can’t answer that question, Wise. But I can answer the original question posted of why gas goes up. One word answer: greed.
Exon/Mobile makes billions in profits, and keeps gouging the public. Why? Because they can.
Since ethanol has replaced MTBE is there really any reason for a summer and winter blend?
Gas prices are just another way the government’s big money people are padding their wallets. The oil compnanies are making the highest profits in history all the while feeding the american public crap for excuses.
Exactly how would you define Big Government J R Crossman? Would that be Bush? He’s been in D.C. about six years now.
How about Senator Kennedy? He used to not have gray hair when he came to D.C.
How about a tenured FBI employee?
Maybe that government employee who serves as a guard or policeman.
Exactly what is Big Government?
I think that gas prices will always be fodder for politicians to work the ill-informed.
People talk about obscene profits, but have no understanding of profit margin.
I personnaly am constantly amazed that the oil companies always have gasolene at the pumps when I need it.
Gasolene prices adjusted for inflation are cheaper now than when Carter was president. And then there was rationing and the possibility that after waiting in line on an odd day to buy 5 gallons the pump was dry.
Nope, when you’re at the pump, filling your tank, thank the oil companies for being able to supply your needs despite the politicians, despite the wacko environmentalists and despite the greedy Arabs!
Hank
Gasoline prices will always be on the upward trend. That is because our economy and our way of life is built on it. Without gasoline/oil our economy would grind to a halt. It is a necessary expense and one that I would love to do without, but then again, it is nice being able to have the things that it provides.
I agree with Hank about have gas when I need it at the pumps. The problem is that salaries don’t increase enough to keep up with gas and grocery increases. And the fluctuation is in such large increments. These large increment fluctuations often ocuur the week before a major traveling holiday. This last one occurred just before most schools let out on spring break. The last major fluctuation was around Christmas. I would feel better if the fluctuation was not so great at one time but in smaller increments. Also, any politician who has interests in oil wells should not be elected because of conflict of interest.
Also thank Zionist Israel for driving-up the price of gasoline by making threats of nuclear war against Iran, thus endangering the world’s crude oil supply.
The barbaric Zionists in Israel can only be safe if there is no one to punish them for all the war crimes they commit daily.
So instead of moving off Palestinian Land and settling the feuding, the Zionist would rather murder millions of people, break the US economy and destroy the American way of life. All because they think their shit doesn’t stink.
If you think prices are high now you are in for a surprise. Regardless of what you and I do, prices will rise, and will keep rising.The primary driver on gas prices is supply and demand. There are several billion people in east Asia (compared to 300M here in US) that are just now beginning to get a taste for oil (gas). Poor Chinese and Indians cannot afford to drive. However, the middle class in both these countries is growing exponentially and these people now have disposable income and want what we all want: cars.
A talk by a VP from a Koch subsidiary last year was very enlightening on the potential for supply/demand shifts in oil. He said that the world demand for oil would outstrip the available production capacity in several years. As the demand gets closer to and eventually exceeds the available supply, the price will rise.The demand for oil and gas in Asia IS growing and will continue to do so. Everyone in the US could stop driving cars for a year and the price would still go up. There is just too much demand outside the US for it not to.
Israel is a lost cause. Why we even bother over there is beyond me.
“He said that the world demand for oil would outstrip the available production capacity in several years.”
I believe he said in that (or a simular) speach that demand would outstrip before the end of the decade (2010).
I understand about profit margins. I also understand about cartels and political influence and the resulting highway robbery. Exxon’s profits are anything but marginal!
Anyone with half a brain knows that Bush is behind the gas prices.
But, anyone that has a full brain and actually uses it knows better.
They are also in the midst of changing to summer grades of gas with different vapor pressures and lest we forget…they have to make some 17 different kinds and if there is a shortage somewhere else, you are not allowed to move it up there to help due to it being different.
And the profit thingy is a bit odd, what do people see as abnormal nowadays? The big evil Exxon had sales of 360 billion and had a profit of 37 billion. That is a tad over 10%. If this is “obscene” then something is amiss. Intel the chip maker makes 20%, your local newspapers make upwards of 20%.
The oil industry has made about 9% for the last 30-40 years. There are spikes due to supply interruptions, wars, storms etc. but the total return is not out of line and actually low as far a Wall Street is concerned.
I think people see the headline that screams “Profits UP 75%” and think they MADE 75% overall. When it says they INCREASED 75%, NOT made it.
If your business made 4% last year and this year it makes 7%. That is a 75% INCREASE. But did you MAKE 75%…NO.
Refiners WANT a lack of excess capacity, to maximize profits, and to get price spikes.
For example, see letter, ‘Letter To California Attorney General Bill Lockyer’ near bottom of page at,http://www.consumerwatchdog.org/energy/fs/
Also, lots of progress on hydrogen. Mazda and others have cars that run on either H2 or gasoline, Honda will be leasing fuel-cell H2 cars next year, mass production expected by 2018, etc.
News at,http://www.greencarcongress.com/h2/index.html
Yea, and your profits can rise by 50% but your profit margin actually fall.
Hank
Wow. People really don’t understand how refineries work.
These things aren’t operated by robots. People have to work a massive amount of overtime to both do the switchover and keep up with demand. That overtime pay is passed on to the consumers. (that would be you)
Until a way is found to generate Hydrogen cheaply it is utter nonsense to use it. For starters it is NOT a PRIMARY fuel source, it is merely a storage medium. You can not drill a hydrogen well or mine it in its primary state. You have to MAKE it. Either from Methane or electrolysis of water…all costly and use a primary fuel first.
The cost of hydrogen is about 7-9 dollars per gallon due to this conversion.
It provides you absolutely nothing.
If you cn get solar efficient enough I suppose it might be useful, or if Nukes come on big…you could break down water that way. But how are you going to pump it around the country, you would have to completely rebuild the piping system as you can not use the steel pipe in the ground today.
Hydrogen is so small it passes through and into the metal crystalline structure and cracks it…(hydrogen embrittlement)
Hydrogen has almost alwys been a science fiction thingy. Its only used in space due to absolute necessity. Long term missions use small Nukes on board.
When you start throwing the pencil to most of these energy sources they wont pass the smell test.
Recently saw the numbers on just supplying WIND power for only the lights in Paris, not heat or cooling, only light.
Requires over 32,000 windmills…where would they put that…and the cost…
That is why France gets 80% of its power from Nukes. Wind does NOT have the energy DENSITY needed for such endeavors.
Great posts Mr. Bill. I was ’schooled’ on much of your content. :)
Oil is a global commodity. The dollar has devalued against most of the worlds currentcies. As an example the dollar has devalued 40 percent against the Euro in the last 3 years. If you adjust the cost of gasoline to the current value of the dollar it is about the same price as it was three years ago.
This is something I know a bit about. The reason for the price spikes in the spring and summer are not only because the refineries shut down to switch to the summer gas blends but because of the blends themselves. There are something like 47 different “blends” of summer gas and each part of the country- even different metro areas- have their own “blend” of summer gas. Winter gas is the same everywhere so distribution shortages in one area can quickly be made up by moving product from another. Here in Georgia for example, Savannah which is at sea level has one summer blend that is quite different than the blend for metro Atlanta which is highly elevated with mountains to the north. Therefore if Savannah runs into summer shortages, gas cannot be sent from Atlanta to make up for it unlike in the winter months. Couple that with the fact that millions of us take to the roads and skies during the summer causing high demand peaks, you are going to see price spikes. It would be nice if most of us could safely store about 400 gallons of gas bought in November when prices typically are at the lowest then use it in the summer.
The fact is that, unlike other bills in our lives, most of us have LOTS of control over what we pay for gasoline. It comes to lifestyle choices we make. If you choose to drive a big truck or SUV, you are going to pay more than somebody that chooses a Toyota. If you choose to live in Wellington and drive everyday to work in Wichita you are going to pay more than your co-worker that lives in town. Of all the bills I get, gasoline is not something I sweat over too much. I worry more about my heating and cooling bills which are largely dictated by nature.
mrbill,
“The cost of hydrogen is about 7-9 dollars per gallon due to this conversion.”
But fuel cells are more EFFICIENT than ICE’s. And costs are dropping as research improves the technology.
http://www.bmwworld.com/hydrogen/faq.htm“What does hydrogen cost?…The cost of hydrogen produced at a large SMR is approximately equal on an energy equivalent basis to gasoline at a refinery.”
mrbill: “Hydrogen has almost alwys been a science fiction thingy. Its only used in space due to absolute necessity.”
“only used in space” REALLY???
Better tell that to Honda, Toyota, Mazda, Nissan, Suzuki, Volvo, DaimlerChrysler, Ford, GM, Volkswagen, BMW, Boeing, and everybody else already using, or planning on H2.
Buses, airplanes, motorcycles, fork-lifts, buildings, etc… Or is all the news reported here made up? http://www.greencarcongress.com/h2/index.html
More about the advantages, use, etc of H2 here,’Fuel Cells and Hydrogen’http://www.rmi.org/sitepages/pid304.php
mrbill: “That is why France gets 80% of its power from Nukes.”
France decided to go nuclear because of the 1973 oil embargo, and because they don’t have oil or coal reserves.
Last time I checked, their govt-owned utility had a huge debt due to the high capital costs of the plants, and profits were too low to pay off the debt.
And BTW…
What you pay at the pump is NOT the total price of gasoline.
There are MANY “HIDDEN COSTS” — military, subsidies to oil companies, loss of jobs, ecconomic penalties, pollution, etc.
2003 NDCF report, “hidden costs” add $5.28 per gallon.http://www.iags.org/n1030034.htm
2006 update, add $8.35 per gallon.http://ndcf.homeip.net/ndcf/energy/NDCF_Hidden_Cost_2006_summary_paper.pdf
Outdated 2002 estimate,http://www.sierraclub.org/sierra/200203/lol4.asp“Environmental, health, and social costs: $12.00 [added per gallon]”
MTBE pollution and cleanup?What the Valdez did to the fishing industry in Prince William Sound?
And the huge costs of global warming.
Hey, don’t you Greens WANT gasoline prices to go up?
Doesnt Al Gores “Carbon Tax” cause an increase in carbon cost, to the end user, so as to force conservation?
Aren’t we also told by the Greens that an increase in carbon costs, to the end user, would force creation of alternative energy?
Well, it seems that, when Greens bitch about the price of gasoline, they have some real explaining to do:
AFTER ALL, IT IS THE EPA THAT MANDATES ALL THESE SUMMER GASOLINE BLENDS, ISNT IT?
As pointed out very well, above, Exxon’s profits are low compared to many other companies and industries. Besides, most of that profit is forwarded to retirement plans and charitable trusts which own most of Exxon’s stock!
I believe that the Al Gore “Carbon Tax” and the Kyoto Treaty are designed to hurt the United States. Neither proposal will do a thing to help the environment, especially since the 3rd World will soon be using more energy than the USA anyway!
You can’t “legislate inventions” — so the idea that Kyoto, or any other Treaty or act of Congress will give us guaranteed alternative energy is far-fetched.
However, necessity is the mother of invention. Higher prices, which are happening naturally, will give us some solutions around the edges over the next few decades.
Yes, Greenies do want higher prices…but you are not understanding their shtick, they just dont want the money going to a corporation. They want it going to the government..the usual socialist drill. After Communism went tits up most all of the usual followers of lost causes joined up with the Sierra, Greenpeace and many of the NGO’s that meddle around the world so they are even more suspect than they used to be.
And the reason that Honda, Toyota, GM etc are fiddling with hydrogen is due to either government subsidies or pure research, You can burn hydrogen in the engine we have now.And using hydrogen derived from a hydrocarbon source (steam reformation of hydrocarbons) gain you absolutely what..? nada thats what. Why change energy source you can transport to one you can not and do not have an infrastructure for.
But as long as you can get a governmnent subsidy they will follow it down a rat hole. Look a the Ethanol scam going on here. 53 cents per gallon tariff to keep others from shipping it in here to the US. It that was gone, every plant here in Kansas would fart and blow out the window in a few months.
Corn is simply to expensive and to inefficient to use as a source. Brazil and other use Sugar Cane which is many times more efficient and produces more per unit land area.
Sorry gotta call this one out.
“After Communism went tits up most all of the usual followers of lost causes joined up with the Sierra, Greenpeace and many of the NGO’s that meddle around the world so they are even more suspect than they used to be.”
You need to credit your source for this. That would be Rush Limbaugh.
Why am I NOT surprised?
Carbon tax is a good idea. Use the revenues to fund alternatives. Another idea worth exploring would be an incentive to conserve. Think rationing or gas credits here. There are PLENTY of people in this country who… gasp! DON’T drive a car! Or, they don’t need to drive much. Let them sell their credit to those who need or want to drive more.
Again:One purpose of a “carbon tax” is that it might force conservation and force alternative fuels.
If that is what you want, why bitch about the cause of the increase?
Rejoice, greens, whenever the price of energy goes up, since that is what you want, right??
Carbon Credits?
LOL, Carbon Credits are the new “Indulgence.”
The Church of Liberalism will allow you do do whatever you want tonight, as long as you buy their “carbon tax” indulgences before you party down!
(Just look at Al Gore and his electric bill!)
PAUL F. ROSELL,
“Doesnt Al Gores “Carbon Tax” cause an increase in carbon cost, to the end user, so as to force conservation?…However, necessity is the mother of invention. Higher prices, which are happening naturally, will give us some solutions around the edges over the next few decades.”
Paul F. Rosell seems to believe that carbon taxes, which could fund R&D, energy audits, etc., ONLY “force conservation”.
And Paul F. Rosell seems to believe that “naturally” occurring higher prices are required to find solutions, decades away.
Typical Paul F. Rosell fossil-fuel shill BS.
PAUL F. ROSELL: “Just look at Al Gore and his electric bill!”
His bill is about 50% higher because he pays extra for green sources.And look at other, smaller homes near Gore’s, who use more electricity than he does.
mrbill,
“And the reason that Honda, Toyota, GM etc are fiddling with hydrogen is due to either government subsidies or pure research”
“fiddling with hydrogen”???
Japan has been doing huge R&D in H2 since the Kyoto talks.They know the future is non-fossil, because of the climate crisis.They know about the peak-oil problem, and much higher future oil prices.They know that H2, efficiency, and other solutions are the key to future PROFITS.
WAKE-UP, mrbill, and Paul F. Rosell.
The ‘Stone Age’ did NOT end because humans ran out of stones. The fossil-fuel age WILL end soon.
You libs dont “love” people or the Earth, in my opinion.You libs just hate the profit motive and free enterprise.
Look, you cant dodge my main point: Every Green plan to cut down on carbon increases the cost of carbon to the end user!
Why, therefore, do you bitch about natural price increases but come up with goofy, artificial ways to increase prices?
Cosmos, I know that you are smart enough to realize that supply and demand models always include something called “substitution” — the price of butter gets too high, we buy margarine. This always happens, with food or fuel or any other commodity.
However, you cant “legislate invention” and that is what you greens are trying to do.
Have we cured AIDS, MD, MS, the common cold, cancer or a million other diseases? Why not? If money is all it takes, we should have cured every disease there is by now!
Some conspiracy kook is bound to say that “Big Oil” or “Detroit” have killed energy saving ideas, or alternative energy sources. That is nuts. Our system rewards cost savings, we reward new ideas. New ideas will come, in due time, but they cant be forced!
Alternative fuel is not ready for prime time.
The USA will be using more oil in 10 years than we do now. Ditto for the world at large.
The carbon tax/carbon credit idea is a joke. It probably wont ever come to pass. If it does, it will be a hallmark of corruption and stupidity.
How on Earth do government hand outs to people who dont drive (carbon credits) help the planet? Do you really think that paying people not to use carbon will work?Welfare cheats.Tax cheats.Insider trading cheats.Carbon cheats.Only with carbon taxes and carbon credits, the libs turn redistributionist socialism into a fake cause to “save the planet”:
The drunk driver who lost his license gets a check, a “carbon credit” for not driving.The rich guy pays an indulgence, his sins are absolved, and he can drive his SUV.NO NET CHANGE IN CARBON!
By the way, will carbon credits be taxable?Will they count towards the AMT?Will they count towards the taxation of social security benefits?Will carbon taxes be deductable as a business expense?Will the credits expire at a specific date or are they legal tender forever?How do we prevent forgery of the credits?This system is not workable.
“Posted by: Econ101 | March 20, 2007 at 01:04 AM ”
Wow, Econ …. great post and logic. I haven’t heard anyone discuss alot of what you posted.”Carbon credits taxable” Why not? Why shouldn’t they be, it IS a ’source’ of income.
PAUL F. ROSELL,
“However, you cant “legislate invention” and that is what you greens are trying to do.”
Are you again claiming that only “natural” price increases stimulate “invention”?
Suppose Congress passes ‘feebate’ “legislation”.
A fee on gas-guzzlers discourages their sales, and funds a rebate on high-mpg choices that boosts their sales.
Do you claim that would NOT encourage “invention”?
Car-makers would NOT try to increase the mpg of guzzlers, to reduce the fee, and increase sales? NOT boost the mpg of high-mpg choices, to earn an even bigger rebate?
Same for refrigerators, A/C’s, etc…?
PAUL F. ROSELL: “NO NET CHANGE IN CARBON!”
Congratulations! You finally figured out that it’s ZERO impact. Buy additional carbon credits, and it’s negative impact.
I’ll tell ya what annoys me, liters instead of cubic inches! I have a motor home that has a 454 Chevy engine. My Chevy pickup has a 5.7 liter engine which I believe is a 350ci, but who the hell knows anymore?
Now momma’s El Dorado has a 5.7 liter engine and it’s a lot faster than my pickup. It amuses me when I eat some Ford Mustangs lunch with it!
We also have a little Saturn SC2 that we tow behind the motor home. It’s pretty quick, but it’s not much in the CI department. All RPM’s and gears.
Anyway, I want my engines listed in cubic inches and horse power. Sounds better! Now I wonder, how many carbon credits should I buy when I’m towing my horses behind the motorhome on the way to Missouri to go trail riding?
Hank
http://epw.senate.gov/public/index.cfm?FuseAction=PressRoom.Blogs&ContentRecord_id=71e7e4c1-802a-23ad-4c16-02e25ed1bfd3
“I’ll tell ya what annoys me, liters instead of cubic inches!”
We fought two wars to stay away from the liters and meters!
Viva la USA!
“”Big Oil” or “Detroit” have killed energy saving ideas, or alternative energy sources. That is nuts. Our system rewards cost savings, we reward new ideas. New ideas will come, in due time, but they cant be forced!”
Paul F Rosell what about the electric cars that Ford (I think) built, NEVER sold but leased, and subsequently recalled and destroyed AGAINST the wishes of the people leasing the cars?
If jr understood how the free market worked, he might understand how silly he sounds.
Oops wrong bad guys.
It was GM.
LOL Given how THEY are performing in the automotive market, this marketing strategy is rather puzzling!
From a critique of the film “Who Killed the Electric Car?”
GM’s efforts to demonstrate to California that there was no demand for their product, and then to take back every EV1 and dispose of them. A few were disabled and given to museums and universities, but almost all were found to have been crushed; GM never responded to the EV drivers’ offer to pay the residual lease value ($1.9 million was offered for the remaining 79 cars in Burbank before they were crushed). Several activists are shown being arrested in the protest that attempted to block the GM car carriers taking the remaining EV1s off to be crushed.The film explores some of the reasons that the auto and oil industries worked to kill off the electric car. Wally Rippel is shown explaining that the oil companies were afraid of losing out on trillions in potential profit from their transportation fuel monopoly over the coming decades, while the auto companies were afraid of losses over the next six months of EV production.
I sure would have liked the chance to buy one of those little EV1s. But I guess it made more sense to destroy them huh?
Do you people believe everything you see in a movie?This movie is typical LibLies.
Take something you believe in, find or create ways to make it true, show it to Libs. They will buy it.
If electric cars were competitive, we would have more electric cars!Besides, electric cars have batteries which are often charged by coal fired generators.Those batteries cost lots of money to make, take lots of energy to make, and the disposal of those batteries is a big environmental problem
Hatred of Detroit is hatred of the United Steel Workers and hatred of the United Auto Workers.
Funny how the Democrats blame Republicans for loss of manufacturing jobs, but support Al Gore who will ship more manufacturing jobs to the 3rd world!
http://epw.senate.gov/public/index.cfm?FuseAction=PressRoom.Blogs&ContentRecord_id=71e7e4c1-802a-23ad-4c16-02e25ed1bfd3
Even if someone, somewhere did not get a fair hearing for some new idea or energy source, so what?Ford and GM would both love to beat the competition to the punch, as would Toyota, Nissan, BMW, Volvo etc.You are a KOOK if you think any company or any industry had the power to stop progress.On the contrary, competition will force all ideas, all inventions to be considered.
Your ideas are not ready for prime time.They flopped because they are flops.
Paul F Rosell
YOU are part of the past. America is moving beyond you. Now you have a choice here. You can adapt or you can perish. Frankly I’m for perish because I’d just as soon not have a soulless drone like you on my side.
Thank God for oil. Without it, we’d never industry and thus never computers and thus never hear JR’s wisdom.
Indeed. Bully for oil!
Cheers also to the horse and tack industries. Without them America could never have been settled. (Too bad for the Indian, but that’s manifest destiny.
High marks also for the whale oil industry. Why they brought light from darkness. Good thing technology came along just in time to keep THAT resource from exploitation to extinction.
Yes oil has been good to us. It’s STILL good to SOME of us. But like the other technologies listed above, it is time for us to move on.
JRYou will be using gasoline and other fossil fuels until the day you die.We still use wood to build houses, havent we been doing that for eons?We still use concrete to build things, and bricks, isnt that old-fashioned?We still like natural fibers like cotton and wool and silk, things we have been using for thousands of years.It is empty headed to think a resource we have only used for roughly 100 years is outdated!
By the way, ENRON was a big supporter of Al Gore and Clinton on the Kyoto issue:http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Facts&ContentRecord_id=14c06b15-802a-23ad-47ff-fdd4a3e444d0&Region_id=&Issue_id=
PAUL F. ROSELL,
Please learn from, and enjoy these,
‘FACTSHEET: Sen. James Inhofe’http://www.exxonsecrets.org/html/personfactsheet.php?id=945
Type “inhofe” into the search box at,http://desmogblog.com/http://scienceblogs.com/deltoid/global_warming/http://www.realclimate.org/
CosmosYou prove nothing but your dislike for Inhofe.
Inhofe is correct.The United Nations has REDUCED the forcasted bad effects of “warming.”The United Nations has REDUCED its estimation of mans contribution to any warming.
Also, the public and the media are beginning to ask questions.
Liberals will be pulling around the Al Gore “ball and chain” for decades to come if Gore has any short term legislative success.
You have lost votes over national security, gun rights, abortion, taxes and many other things. This is why Democrats have “triangulated” and tried to avoid alienation of the middle on these issues.
Clinton even tried to “tiangulate” on Kyoto. Clinton did NOTHING to enact the treaty — that would have angered his union support.Clinton and Gore simply went to meetings, signed empty, non-binding paperwork and met with:ENRON!!Yes ENRON is behind the carbon tax/credit scheme!!