IT GIVES ME GAS
January 19th 2007 13:35
It seems everyone is ticked off about it. The price of a barrel of oil is dropping and we're still paying through the nose at the pumps. Yesterday, for the first time since May 2005, crude futures slipped below the $50 US a barrel barrier, to trade as low as $49.90 US a barrel. And yet prices at the pump remain as high as they were when a barrel sold for $80 US. Why are we paying so much?
A local news program the other day tried to delve into this problem, but as usual, they had no answers. They did interview an ‘expert' who started off by saying you hear all sorts of conspiracy theories, which in his view is nonsense. I say he is full of nonsense. His argument was that oil companies buy their futures at whatever price the market sets and this is reflected at the pumps. When they pay a ton of money for crude, the pump price will go up. Fair enough. He says that the oil companies buy just that, futures, and so if you bought some crude futures 3 months ago and the price has gone up between buying and delivery, you're going to get nailed at the pumps. Seems to make sense so far, they are just trying to recoup their losses..
Some years ago, I heard on the news that there is a 90 day supply of oil in the pipeline at any given time. Stay with me, because from here it gets a bit complicated. So, let's say I bought crude futures at 50 cents per litre and by the time it hits the pipeline, the price is up to 55 cents per litre. What I thought I could sell to you at 60 cents will now go up to 65 cents. Still with me? This should happen for the next 90 days according to what the ‘experts' would want you to believe.
If we take the above example as gospel, then if I buy futures at 70 cents and by the time it hits the pipeline the price has dropped to 50 cents, I now have a 90 day supply which I should sell at a lower price. The oil companies say they must sell it you at 80 cents to recoup their losses. Okay, still seems to make some sort of sense. I always thought that buying any future was a gamble, and just like the guy who frequents the local casino, you win some, you lose some. But big oil makes it a point never to lose. This is proven by the record profits they announce each quarter.
My question is, if there is a 90 day supply in the pipeline, bought and paid for at a certain price, why do pump prices fluctuate on average 10 cents per litre, sometimes 3 or 4 times a day? My brother lives in Alberta and he pays the same transportation costs for gasoline as I do or someone living in Newfoundland does. Does it cost as much to haul it from the refinery to Calgary as it does to haul it to Goose Bay? I don't think so.
Despite what analysts predicted, oil has dropped about 18.3% since the start of the year. This plunge is the biggest price slide over 10 trading days since April 2003, after the U.S.-led invasion of Iraq. And yet we're still paying the price of $80 US per barrel at the pump. It's time a politician had the guts to demand a real explanation on how prices are set.
A local news program the other day tried to delve into this problem, but as usual, they had no answers. They did interview an ‘expert' who started off by saying you hear all sorts of conspiracy theories, which in his view is nonsense. I say he is full of nonsense. His argument was that oil companies buy their futures at whatever price the market sets and this is reflected at the pumps. When they pay a ton of money for crude, the pump price will go up. Fair enough. He says that the oil companies buy just that, futures, and so if you bought some crude futures 3 months ago and the price has gone up between buying and delivery, you're going to get nailed at the pumps. Seems to make sense so far, they are just trying to recoup their losses..
If we take the above example as gospel, then if I buy futures at 70 cents and by the time it hits the pipeline the price has dropped to 50 cents, I now have a 90 day supply which I should sell at a lower price. The oil companies say they must sell it you at 80 cents to recoup their losses. Okay, still seems to make some sort of sense. I always thought that buying any future was a gamble, and just like the guy who frequents the local casino, you win some, you lose some. But big oil makes it a point never to lose. This is proven by the record profits they announce each quarter.
Despite what analysts predicted, oil has dropped about 18.3% since the start of the year. This plunge is the biggest price slide over 10 trading days since April 2003, after the U.S.-led invasion of Iraq. And yet we're still paying the price of $80 US per barrel at the pump. It's time a politician had the guts to demand a real explanation on how prices are set.
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Comment by Don Lee
Comment by S.L. Bradish
Comment by youranter
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I heard the same thing on the news today SL. You can bet your booty that all the oil companies will do is keep raising their prices to make up for the taxes.
Comment by Brenton
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Comment by youranter
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Comment by Brenton
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You're very aggressive. I'd suggest some meditation, or some form of therapy. Chill dude.
I'm not saying don't travel. Or don't drive. But, this has been on the cards for a very long time. It's a change, and I think it's more constructive to try to adapt, than to complain.
But yes you are correct - it would be good if a politician had the guts to demand answers from a powerful corporation.
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Comment by Brenton
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I just said that the situation could cause people to reconsider how much they drive. Wheter or not Global Warming is some kind of conspiracy, cars pollute. It's a fact. And less pollution is probably a good thing.
Not saying drive less. Just saying some folk need to think less about their driving habits. Maybe not you. Maybe you.