We are constantly barraged by the talking heads telling us that the price of gasoline is driven by the market. In a simplistic look at what the "market" includes in this case is: oil prices, refining capacities and demand.
Oil prices lower.
From ABS CBN News:
Oil prices dipped in Asian trade Tuesday, extending overnight falls as investors took profits following last week's rally, analysts said.
The market was also waiting for the weekly US energy inventory report for signs of strengthening demand in the world's biggest economy, which is reeling from a deep recession, they said.
New York's main futures contract, light sweet crude for June delivery, fell 30 cents to $58.20 a barrel.
Brent North Sea crude for delivery in June was down 23 cents to $57.25.
"This market seems to have found a bit of a comfort zone (at current price levels)," said Dave Ernsberger, a senior editorial director at energy information provider Platts.
More below
So, the market has found a comfort zone for the price of oil. That prices isn't going up either. It's kind of settling down somewhat. YET, gasoline prices are going up. Weird! The market must have something else going on in order to see this anomoly. Let's check!
Prices at the pump are up 18 cents over the last 13 days
There's plenty of economic pain to go around these days because of the recession. Now there's this: Gas prices have surged nearly 9% over the past two weeks.
That's a gain of 18 cents during the past 13 days, and the national average hit $2.226 a gallon on Monday, according to a survey by motorist group AAA.
snip
And the current runup is not surprising because prices typically increase ahead of the Memorial Day holiday -- the unofficial beginning of the peak summer driving season.
"A bump-up is to be expected this time of year but we're not on the way to another spike," said AAA spokesman Troy Green. He said would be "surprised" to see prices reach $3.50 a gallon, barring unforeseen supply disruptions such as a hurricane, and he would be "shocked" to see $3.75 a gallon this summer.
Um. Memorial Day IS a factor in the market! Memorial Day, that day that unofficially kicks off the beginning of Summer has something to do with the price of gasoline! Yes, of course we all knew that the added demand of summer driving for vacations, trips to the beach or just a spin around the countryside on a beautiful day ups the price of gasoline, yet the oil companies have always denied this. Their hue and cry is oil prices and refining capacity. Yet, doesn't that include the ever present idea of demand?
From One Year ago, via NPR:
Prices are likely to remain relatively high this summer, though. Most of the extra money consumers are paying at the gas pump is going to refiners, who perform the crucial but often overlooked task of turning crude oil into useful products.
Just outside the gates of an oil refinery south of Los Angeles, workers recently feasted on a catered meal of barbecued pork, baked beans and corn on the cob. The host of the party was Bruce Smith, chief executive of the Texas-based Tesoro Corp., which just bought the oil refinery from Shell.
"We do this a lot at the refineries. And it's something that people really enjoy and appreciate. It's a nice celebration," Smith says.
For refiners, there is a lot to celebrate. In the first three months of 2007, refiners on the West Coast were able to charge about 70 cents per gallon more for finished gasoline than they paid for the crude oil used to make it; refinery margins in the specialized California market were even higher.
Yep. Lots of profit there. Now, when we come back to the same CNN story from today, there is a bit of a different spin than what we learned considering the story from ABS CBN news that is also dated with today's date.
The oil factor. Many analysts expect gas prices to continue climbing over the next few weeks, largely because of rising crude oil prices, the main ingredient in gasoline.
"Gas prices have trended higher in lockstep with crude prices," said Chris Lafakis, economist at Moody's Economy.com. "Crude is the biggest input in the price of gasoline."
Well, paint my backside blue and call me Arvin! There seems to be some disconnect in the information being dissiminated to the laypeople out here! Oil prices are going down, but we are being told they are going up. Crude prices are the biggest input in the cost of gasoline, but refining capacity is available and crude prices are going down.
You know what?
Fuck it. Gas prices are going up. It must be Memorial Day. Just like every year.