Gas to hit a $1 per litre!

[squawk 7600]

The toronto sun printed a story about gas prices reaching a $1.00 per litre by years end. If this does happen, will the industry pick back up on its up turn or will it be too late? Will it mean that the economy has already hit an all time low and people won't be traveling anyway?

[Stinky]

That chief economist, "Rubin" or whatever his name is comes out with a new prediction every week that makes headlines. I'd like to see his score for accuracy.
I'm not so sure that what we pay at the pumps to fill up our civic is all that reflective of what the airlines pay or how they're able to fill the seats.
The price of oil has come down somewhat predictably due to reduced demand now that we're out of the summer travel season but with the reduced demand for both pleasure travel and business travel due to the slowing economy we still could be in trouble.
What aggravates me is that when oil was $147 a barrel I paid on average $1.47 a liter (Quebec) Before that when oil was in the $120's I was paying about $1.20 something. How come oil is about $115 a barrel now yet the price at the pumps yesterday was $1.35?
We're getting screwed for sure.

[THEICEMAN]

What aggravates me is that when oil was $147 a barrel I paid on average $1.47 a liter (Quebec) Before that when oil was in the $120's I was paying about $1.20 something. How come oil is about $115 a barrel now yet the price at the pumps yesterday was $1.35?
We're getting screwed for sure.

Because the market for Crude oil & refined product are two seperate markets in the short run. The refined product market tends to lag, although petrol companies do adjust prices in advance. This hapens when they anticipate a change in the price of crude oil.

[Stinky]

Because the market for Crude oil & refined product are two seperate markets in the short run. The refined product market tends to lag, although petrol companies do adjust prices in advance. This hapens when they anticipate a change in the price of crude oil.

In other words, we're getting screwed. Price of oil goes up, jack up the prices. Price of oil goes down, feed us a bunch of B.S. about a lag. Where was the lag before.

[V1RotateV2]

We ARE getting screwed.

Even if you factor in that the Loonie lost about 5% recently, the price of gas should be hovering around $1.15, not $1.25.

I thought we had some kind of "regulators" and "market oversighters". Must have been reading news from abroad.

[Swizzle]

Because the market for Crude oil & refined product are two seperate markets in the short run. The refined product market tends to lag, although petrol companies do adjust prices in advance. This hapens when they anticipate a change in the price of crude oil.

In other words, we're getting screwed. Price of oil goes up, jack up the prices. Price of oil goes down, feed us a bunch of B.S. about a lag. Where was the lag before.

I was thinking the EXACT same thing...

[E-Flyer]

is it possible to make hybrid airplanes?

[pilotbzh]

it's comming...
http://www.boeing.com/news/releases/200 ... 1127a.html

[THEICEMAN]

In other words, we're getting screwed. Price of oil goes up, jack up the prices. Price of oil goes down, feed us a bunch of B.S. about a lag. Where was the lag before.

Of course there was a lag... at one point, oil was at 140$ & the price at the pump was 1.24$.
It's true that petrol companies are reluctant to bring their prices down. But you must understand that there is a difference between the crude oil market & the refined product market.
For ex: if the some refineries were to shut down, the price of petrol goes up.... despite the constant supply of crude oil.

Another important concept is to understand what they mean by the price oil. The listings for the NYMX cruse or Dated Brent energy, do not refer to oil when it's at the local refineries where it gets delivered. It is a price listing for 30 day delivery only. So given that oil meets 106$ today?? Then that means, it's the price that Petro Canada is going to pay on october 3rd, 2008 (more or less). When they pump crude oil from the ground, it doesn't magical appear at the refinery...it takes time!

That's why prices at the pump tend to lag when the price of oil goes (more or less).

[Hadji Ramjet]

Iceman, the theory is sound but in practise it doesn't seem to work that way. For example, in anticipation of Gustav shutting down both crude and refined supply, the wholesale refined gas price jumped 4.5 cents in one day. No supply had yet been interrupted (aside from PetroCan not being able to supply a lot of their western stations due to a cracker fire), but the price jumped as buyers grabbed supply so as not to be cut short. Stations raised their pump price the same day, yet some had not even taken delivery of fuel at the new price. The price they had paid for their supply was the old one, and that was nothing more than a 4.5c/l gouge.
Since Gustav was a non-event and no capacity was damaged, the price of crude has dropped $10/bbl below what it was pre-storm, yet the wholesale price of gasoline has only dropped 2c/l. The claim is that it takes time to get back on line the refineries that were shut down for Gustav. Fair enough, but if the price went UP on anticipation of shortage, should it not then come right back DOWN on anticipation of NO shortage? Especially since the cost or raw material has declined another 8%?

[Four1oh]

In other words, we're getting screwed. Price of oil goes up, jack up the prices. Price of oil goes down, feed us a bunch of B.S. about a lag. Where was the lag before.

Of course there was a lag... at one point, oil was at 140$ & the price at the pump was 1.24$.
It's true that petrol companies are reluctant to bring their prices down. But you must understand that there is a difference between the crude oil market & the refined product market.
For ex: if the some refineries were to shut down, the price of petrol goes up.... despite the constant supply of crude oil.

Another important concept is to understand what they mean by the price oil. The listings for the NYMX cruse or Dated Brent energy, do not refer to oil when it's at the local refineries where it gets delivered. It is a price listing for 30 day delivery only. So given that oil meets 106$ today?? Then that means, it's the price that Petro Canada is going to pay on october 3rd, 2008 (more or less). When they pump crude oil from the ground, it doesn't magical appear at the refinery...it takes time!

That's why prices at the pump tend to lag when the price of oil goes (more or less).

Ice, I could count the fingers on my uncle's hand(he's a butcher, btw) how many times in the last year that the price of gas actually lagged on the way up. Funny how it only lags 100% on the way down. Fucking crooks.

[complexintentions]

There is also plain old market psychology at work. Risk is always quick to be factored into a price, and slow to be removed. In any market, trading just about anything. If you think you are about to take a hit, do you hesitate to raise your defenses? Of course not. When you think the threat has subsided, do you immediately lower your guard? Not as quickly I'd reckon.

Speculators are human too. The hardest place to live is at the right side of the graph, as they say. The sheer volatility of the market is far more damaging and dangerous than the actual price, IMO.

[Four1oh]

complex explain to me how they all seem to arrive at the same price, or within a 1/10th of a cent of the other? I'm sure it's not collusion is it?

[THEICEMAN]

Ice, I could count the fingers on my uncle's hand(he's a butcher, btw) how many times in the last year that the price of gas actually lagged on the way up. Funny how it only lags 100% on the way down. Fucking crooks.

Well, I can't dispute it. Although I have noticed delays before they jacked the prices, most petrol companies are reluctant to bring the price down.

But this issue is extremely complicated anyways...

[squawk 7600]

Looks like it it happened earlier than expected...at least a $100 per barrel anyway. Not sure if it will reach a $1.00 at the pumps or not, but this is good news...at least in my non-economic, educated mind.

[THEICEMAN]

1$ a litre??? Maybe if they get those refineries back to 100% in the gulf coast.....even at that? energy companies are extremely reluctant to bring the price down.


There is also another explantion as to why gas prices (espcially diesel) are soo high these days. I don't want to open a pandoras box, but the environmentalist play a big role in the puzzle.
In N.America, there's a lack of refineries? Why??? Because every time the U.S federal government tries to build a new one, local state laws & pro environmentalist prevent it.
Just recently Chevron, with the help of the federal government, was granted the right to build a refinery in Illinois.

[Topspin]

1$ a litre??? Maybe if they get those refineries back to 100% in the gulf coast.....even at that? energy companies are extremely reluctant to bring the price down.


There is also another explantion as to why gas prices (espcially diesel) are soo high these days. I don't want to open a pandoras box, but the environmentalist play a big role in the puzzle.
In N.America, there's a lack of refineries? Why??? Because every time the U.S federal government tries to build a new one, local state laws & pro environmentalist prevent it.
Just recently Chevron, with the help of the federal government, was granted the right to build a refinery in Illinois.

I'm not even going to pretend to understand the economics of it, but you would think that with our crude supply's we would be more than capable of doing what Venezuela did under Chavez.
It's blatantly obvious we are getting taken to the cleaners for no good reason, weather paying $1.00 too much or $0.50 too much.

[bmc]

A number of airlines hedged fuel between $100-120 while it was on its way up. Although it's below $90, trouble still looms.

[THEICEMAN]

A number of airlines hedged fuel between $100-120 while it was on its way up. Although it's below $90, trouble still looms.

as of today 15:35

PRICE* CHANGE % CHANGE TIME
NYMEX CRUDE FUTURE 120.00 15.45 14.78 14:49
DATED BRENT SPOT 104.22 6.32 6.46 15:23
WTI CUSHING SPOT 119.14 14.59 13.96 14:11

HOLY CRAAAAAppp....trouble still looms that's for sure!


Didn't Southwest Hedge at 86$/barrel?

[North Shore]

as of today 15:35

PRICE* CHANGE % CHANGE TIME
NYMEX CRUDE FUTURE 120.00 15.45 14.78 14:49
DATED BRENT SPOT 104.22 6.32 6.46 15:23
WTI CUSHING SPOT 119.14 14.59 13.96 14:11

HOLY CRAAAAAppp....trouble still looms that's for sure!

What, you think that we can keep pumping it out of the ground for free? 88 million barrels a day, every day, year in and out. It simply cannot go on forever. Laws of supply and demand will dictate the price. You want the price to go down, use less on a global scale..

[Go Guns]

Supply and demand doesn't explain a 25% jump in pricing in one day. I do agree that in our current state, long term, supply is only going to go down while demand goes up. However, I think short term there are other variables at play.

[5400AirportRdSouth]

I'm hoping that the crystal-ball-gazers are worried that too much attention is now being paid to efficiency, hybrids and that economic driving practices are going to cause a fundamental change in consumption.

A la the 70s, we went from big-block high compression double pumping quadrajets to fuel injected subcompacts in less than 5 years.

If I was them, gas would stabilize around 1.10-1.20 for a couple years till everyone got cozy again and public opinion of the over-the-top consumption of a single-driver SUV relaxed a little.

Overseas, particularly in the EU where prices avg 2.25 - 3.00CAD / Liter, the moto and compact is king. If our consumption paradigm here abruptly shifted to this kind of means, due to market pressure from fuel prices, there'd be a pretty nasty thump along the way for the oil sellers.

Let em down easy and string us along for a while.... ( please! )

[Four1oh]

When was the last time anyone saw a 'gas war' in the city they live in? I distinctly remember in the late 80's, early 90's that there were gas wars all the time in YQR and YYC. Seems as though the competitors get along so well now that no one drops their price to get customers anymore.

[squawk 7600]

As far as I'm concerned, the "supply and demand" concept does not apply when it comes to oil. It is a resource that everyone needs, so no matter what they charge (within some state of reasonableness) people will always buy. Supply isn't even a factor at this point, it's all about the demand...and the fact people will pay anything because our precious SUV's are just that....precious.

[THEICEMAN]

As far as I'm concerned, the "supply and demand" concept does not apply when it comes to oil. It is a resource that everyone needs, so no matter what they charge (within some state of reasonableness) people will always buy. Supply isn't even a factor at this point, it's all about the demand...and the fact people will pay anything because our precious SUV's are just that....precious.

Oh come on....where did you figure that out.

Supply = 86 million barrels a day
Demand = 89 million barrels a day.

Since a couple of years a go, demand has exceeded supply & it looks like it's going to get worse.
Now I don't believe that it justifies the spike in the price of energy that we see right now. But there is no doubt that global crude oil supplies have peaked. We could barely keep up with 86 million Barrels per day. The new strain that China & India posses on the global supply is also what's driving speculators.

Now I know that the market has been a real roller coaster the past year & it's a really complicated situation, but don't discredit the principles of economics just because you see people in precious SUVs....
To be more accurate, the demand is at a five year low & GM is seriously starting to cut back on truck production.