Speakeasy forum: Well, they've gotten around to fixing low gas prices

by: Roger NC February 2, 2013 7:28 AM PST

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Well, they've gotten around to fixing low gas prices

by Roger NC - 2/2/13 7:28 AM

Look at the increase in the last few weeks, supposely due to refineries being shut down for maintenance and for the change over to summer blend.

Question, if there is enough winter blend already stored to begin switching to summer blend the first of Feburary, how is the supply short enough to drive price up?

Gas (not necessarily crude oil) can be driven a bit by demand, but once demand gets to a certain low, it's not going much lower. People probably have been driving a bit more just because relatively the price has been down and there was a perception of greater affordability. And perhaps people are feeling enough better about their economic future to do and spend a bit more.

Cost drive in price wouldn't be changed by demand I admit, but these temporary "shortages" caused by refinery maintenance or blend change over driving price up seems to me to indicate one of limited number of problems.

Not enough refineries, a compliant I've heard expounded a lot the last couple of decades. Granted no one is going to build a new one unless demand is projected to exceed demand a year from now.

The opposite possibility there is not wanting any spare capability at all because the shorter the spare supply the easier it is to drive the profit margin higher.

Not enough storage of refined products. Again a cost that would have to be added in and companies would have to see a profit motive to build. A side problem there is storage of refined products is a safety issue also.

Just like with production, is storage low because demand doesn't justify it, or because with a low storage its easier to spike prices every time there is a temporary lull in production?

Interesting around here that several stations in a 45 mile radius at times have huge differences in prices, even the same brand, distributed by the same distributer may different by 20 cents a gallon occasionally. Normal variance is about 10 cents a gallon. How does the gas delivered by the same tanker to retailers 10 to 15 miles apart regularly vary by 10 cent a gallon?

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