Skip to main content

Are Oil Companies Ripping us off with Gas Prices?


Inflation Adjusted Crude Oil Prices Chart:

"Are Oil Companies Ripping us off with Gas Prices?

October 17, 2005

by Tim McMahon

Recently Gas at the pump has jumped almost exponentially while crude oil prices have stabilized and even have fallen a bit giving rise to the question... are they really correlated?

The chart to the right shows the correlation between the average annual price of gasoline and the average annual price of crude oil. By using the average annual price we eliminate brief spikes and get a better picture of what we really pay over the long term. If we see a brief spike many of us will put off buying gas as long as possible hoping to miss the spike so over the long term we will pay closer to the average price.

But as we can see from the chart gas and oil prices are fairly closely related. They tend to rise and fall in tandem but at some extremes oil will rise faster while at others gas seems to rise faster.

There is a simple explanation for this. Typically the oil price remained below the gas price with the major exception being during the price spike in 1979 -80. If you will notice it also appears that Oil prices are more volatile and erratic while gas prices don't fluctuate quite as much.

Over the last 10 years even though oil prices fell lower and lower gas prices remained the same. Why? Is it some collusion by the oil companies? No actually it is much less sinister than that. It is actually just supply and demand. Over the last almost 30 years (since 1976) there have been no new refineries built in the US due to tight regulations, environmental restrictions combined with low prices making the oil business less profitable. So supply has gotten tighter and tighter with it culminating recently with only one or two percent excess capacity at the refineries.

When supply gets that tight several things happen, first of all, it goes from being a buyer's market to a seller's market and secondly any slight disruption causes all kinds of havoc. And that is exactly what has happened every time a minor storm shut down a refinery for a day we would see a new spike in gas prices at the pump. But then along came hurricane Katrina and it has shut down a dozen refineries for as much as six weeks. Reducing supply by as much as one fifth. In some cases not because of problems at the refineries but also because of transportation issues.

So the recent spikes are due primarily to a lack of processing capacity. And unfortunately, it won't be fixed soon yes the shut down refineries will come back on line but what we really need are more refineries and that takes time. You can build a new refinery over night. Plus there is all the 'red tape' to get regulatory approval and no one wants a refinery in their back yard.

These issues need to be addressed but my guess is that with higher prices at the pump the oil companies will be more motivated to build new refineries and somehow it will get done. But in the mean time we need to learn to conserve gas."

Comments

Post a Comment

Popular posts from this blog

Insulin Resistance- cause of ADD, diabetes, narcolepsy, etc etc

Insulin Resistance Insulin Resistance Have you been diagnosed with clinical depression? Heart disease? Type II, or adult, diabetes? Narcolepsy? Are you, or do you think you might be, an alcoholic? Do you gain weight around your middle in spite of faithfully dieting? Are you unable to lose weight? Does your child have ADHD? If you have any one of these symptoms, I wrote this article for you. Believe it or not, the same thing can cause all of the above symptoms. I am not a medical professional. I am not a nutritionist. The conclusions I have drawn from my own experience and observations are not rocket science. A diagnosis of clinical depression is as ordinary as the common cold today. Prescriptions for Prozac, Zoloft, Wellbutrin, etc., are written every day. Genuine clinical depression is a very serious condition caused by serotonin levels in the brain. I am not certain, however, that every diagnosis of depression is the real thing. My guess is that about 10 percent of the people taking ...
5 comments
Read more

Could Narcolepsy be caused by gluten? :: Kitchen Table Hypothesis

Kitchen Table Hypothesis from www.zombieinstitute.net - Heidi's new site It's commonly known that a severe allergy to peanuts can cause death within minutes. What if there were an allergy that were delayed for hours and caused people to fall asleep instead? That is what I believe is happening in people with Narcolepsy. Celiac disease is an allergy to gliadin, a specific gluten protein found in grains such as wheat, barley and rye. In celiac disease the IgA antigliadin antibody is produced after ingestion of gluten. It attacks the gluten, but also mistakenly binds to and creates an immune reaction in the cells of the small intestine causing severe damage. There is another form of gluten intolerance, Dermatitis Herpetiformis, in which the IgA antigliadin bind to proteins in the skin, causing blisters, itching and pain. This can occur without any signs of intestinal damage. Non-celiac gluten sensitivity is a similar autoimmune reaction to gliadin, however it usually involves the...
19 comments
Read more

Blue-blocking Glasses To Improve Sleep And ADHD Symptoms Developed

Blue-blocking Glasses To Improve Sleep And ADHD Symptoms Developed Scientists at John Carroll University, working in its Lighting Innovations Institute, have developed an affordable accessory that appears to reduce the symptoms of ADHD. Their discovery also has also been shown to improve sleep patterns among people who have difficulty falling asleep. The John Carroll researchers have created glasses designed to block blue light, therefore altering a person's circadian rhythm, which leads to improvement in ADHD symptoms and sleep disorders. […] How the Glasses Work The individual puts on the glasses a couple of hours ahead of bedtime, advancing the circadian rhythm. The special glasses block the blue rays that cause a delay in the start of the flow of melatonin, the sleep hormone. Normally, melatonin flow doesn't begin until after the individual goes into darkness. Studies indicate that promoting the earlier release of melatonin results in a marked decline of ADHD symptoms. Bett...
Post a Comment
Read more