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Resulting Oil costs (and not politics)

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calibuck

calibuck

Too soon old, too late smart
Just curious, maybe someone can clear the fog from my eyes. OK, so we're at war with Iran. And gas prices go up. Even though USA is oil self-sufficient, how come does gas at the pump rise? Clearly what's already in the oil to gasoline pipelines was extracted at lower costs, (before this Iran thing), retailers are upping the prices. Anticipation of higher cost crude? Maybe, 'market prices'? Maybe, but seems more like the big oils are making a ton more money but raising gasoline prices (OF GAS IN THEIR HOLDING TANKS) before increased cost of crude hits the refineries. Recognize my econ degree was decades ago, but no one quesions, nor do we consumers balk at filling up at a buck or so more than the day before this war erupted.
 
calibuck said:
Just curious, maybe someone can clear the fog from my eyes. OK, so we're at war with Iran. And gas prices go up. Even though USA is oil self-sufficient, how come does gas at the pump rise? Clearly what's already in the oil to gasoline pipelines was extracted at lower costs, (before this Iran thing), retailers are upping the prices. Anticipation of higher cost crude? Maybe, 'market prices'? Maybe, but seems more like the big oils are making a ton more money but raising gasoline prices (OF GAS IN THEIR HOLDING TANKS) before increased cost of crude hits the refineries. Recognize my econ degree was decades ago, but no one quesions, nor do we consumers balk at filling up at a buck or so more than the day before this war erupted.
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We have the most and the best crude in the world but we're sitting on it.
 
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calibuck said:
Just curious, maybe someone can clear the fog from my eyes. OK, so we're at war with Iran. And gas prices go up. Even though USA is oil self-sufficient, how come does gas at the pump rise? Clearly what's already in the oil to gasoline pipelines was extracted at lower costs, (before this Iran thing), retailers are upping the prices. Anticipation of higher cost crude? Maybe, 'market prices'? Maybe, but seems more like the big oils are making a ton more money but raising gasoline prices (OF GAS IN THEIR HOLDING TANKS) before increased cost of crude hits the refineries. Recognize my econ degree was decades ago, but no one quesions, nor do we consumers balk at filling up at a buck or so more than the day before this war erupted.
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Because oil is a global commodity. US based production will naturally rise to the global price. And that price shift will be somewhat sticky and not immediately come down when (if) the straight opens back up since Gulf states are being forced to shut down wells and refineries, and those don't come back on line at the flip of a switch.
 
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calibuck said:
Just curious, maybe someone can clear the fog from my eyes. OK, so we're at war with Iran. And gas prices go up. Even though USA is oil self-sufficient, how come does gas at the pump rise? Clearly what's already in the oil to gasoline pipelines was extracted at lower costs, (before this Iran thing), retailers are upping the prices. Anticipation of higher cost crude? Maybe, 'market prices'? Maybe, but seems more like the big oils are making a ton more money but raising gasoline prices (OF GAS IN THEIR HOLDING TANKS) before increased cost of crude hits the refineries. Recognize my econ degree was decades ago, but no one quesions, nor do we consumers balk at filling up at a buck or so more than the day before this war erupted.
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It's complicated. While the US is the world's largest oil producer and a net exporter we aren't "self sufficient". The majority of oil produced in the US is "light sweet" crude. The majority of US refineries are designed to handle "heavy sour" crude which we import. The cost of retooling refineries is in the tens of billions and would take years. So we export most of what we produce and import what we need. We also import Canadian oil that we refine and export the finished products. There's much more to it including worldwide production totals and prices etc.....
 
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Trevi said:
I believe that I also heard recently that at least for accounting purposes, gas stations charge at the pump based on the price to refill their tanks. A cash flow situation so they can afford the cost of refilling the tanks. And as noted above, the cost to refill is based on global oil prices.
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I believe that’s correct. As a result, gas stations do well when the price is rising and get killed when the price is falling. Some big chains might buy futures/swaps/options to hedge against price volatility, but I doubt the independent operators could manage that.
 
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CincyInterloper said:
I believe that’s correct. As a result, gas stations do well when the price is rising and get killed when the price is falling. Some big chains might buy futures/swaps/options to hedge against price volatility, but I doubt the independent operators could manage that.
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I think that's why the stations make most of their money inside the store selling beverages, snack, etc.
 
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Trevi said:
I think that's why the stations make most of their money inside the store selling beverages, snack, etc.
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Yep. I know a gentleman who owns a truckstop/restaraunt located at the local exit of the Turnpike. That exit was built specifically to handle the traffic for a steel mill and associated industries that were built just down the road. He sells massive amounts of fuel with all the truck and auto traffic in the area. He usually gets 3-4 diesel deliveries and 2 gasoline deliveries daily. He told me that if he makes 3 cents a gallon on fuel sales he's doing good. All the money is made is made with the sit down restaurant ( which is quite popular locally) and the store and food sales on the truck stop inside. He also had picked the perfect location because none of the turnpike service plazas are close and there isn't really anything in this somewhat rural area that can handle the truck traffic. He's had the location all to himself for 30 years but now one of the large national truckstop chains is building right across the road from him.
 
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