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Old 09-07-2011, 09:36 AM   #21
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It is odd to me how people focus on gas price down to the penny, when that penny means about 14 cents to a fill up. I guess because the signs are all in our face, and so many of us buy it regularly? How many people could quote the price of their KWhr or Natural gas heat?
People don't see huge signs reminding of them of the rapid changes in electric or natural gas prices when they drive around town. Out of sight, out of mind.
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Old 09-07-2011, 09:43 AM   #22
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While this is my understanding as well, concluding that capacity has not increased since the 70s (since refineries have been built) would be incorrect. Refinery capacity of existing refineries has grown quite a bit in that same time.

Have a look at slides 21 and 22: http://phx.corporate-ir.net/External...R5cGU9MQ==&t=1
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Old 09-07-2011, 09:52 AM   #23
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People don't see huge signs reminding of them of the rapid changes in electric or natural gas prices when they drive around town. Out of sight, out of mind.
And some of us who drive very little and refuel infrequently (for me, once during the past month) a few - or more than a few cents mean little.

DW uses a bit more than gas than me and always comments on the current price (refuels every other week). My answer to her when she notes a few pennies of increase is simply "how many gallons did you refill?".

Usually, it's less than 10 gallons. Multiply 10 times whatever increase (normally in pennies) and see what the difference actually is. It means very little, in our simple life.

As for those that refill every few days? I can understand your concern (another plus for ER )...
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Old 09-07-2011, 05:56 PM   #24
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The relevant statistic is called the Crack spread (really). It is a measure of how profitable the refineries are.


Here is the chart over the past year
Bloomberg Nymex WTI Cushing Crude Oil First Month 321 Crack Spread (CRK321M1:IND) Index Performance - Bloomberg

As you can see, the crack spread has been widening, so decreases in crude prices don't show up equally in gasoline prices.

Here is another interesting chart that illustrates the point. If you look at the chart on Page 2 and compare the distance between the red crude oil curve and the blue gasoline curve, you can see that, while the prices generally tracked up and down, the distance between them expanded over the course of the past three years. This is what the crack spread measures.

http://www.api.org/aboutoilgas/gasol...riceUpdate.pdf
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Old 09-07-2011, 06:03 PM   #25
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If you look at the chart on Page 2 and compare the distance between the red crude oil curve and the blue gasoline curve, you can see that, while the prices generally tracked up and down, the distance between them expanded over the course of the past three years. This is what the crack spread measures.
The chart is missing a key element: the relationship of the crack spread to the price of K-Y Jelly...
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Old 09-27-2011, 06:00 PM   #26
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I just saw this new report from the Federal Trade Commission and remembered this thread

http://ftc.gov/os/2011/09/110901gasolinepricereport.pdf

It addresses the fact that retail gasoline prices rocket up in response to crude increases but settle back down "like a feather" when crude prices decrease. (known as "asymmetric passthrough") They speculate on some causes but come to no definitive answer. The report also discusses refinery capacity issues, including consolidation and capacity expansion at existing refineries. They don't address the widening crack spread (with or without K-Y), which makes me question some of their conclusions.

For those interested in this issue, it is worth the time to read.
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Old 09-27-2011, 06:05 PM   #27
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This may or may not be relevant, but I just had to mention that gas prices are dropping fast in my area right now. I paid $3.47 for premium Exxon a few days ago thinking that was a steal, and now it is $3.39. I saw regular at an Exxon station for $2.99 today too. This is low for my area. Other gas brands are dropping as fast or faster.
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Old 09-27-2011, 08:25 PM   #28
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I just filled up at $3.74 today.
TG for my 4% cashback credit card deal on gasoline purchases to offset some of that cost.
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Old 09-27-2011, 08:53 PM   #29
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$3.04 here.
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Old 09-27-2011, 09:49 PM   #30
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I just saw this new report from the Federal Trade Commission and remembered this thread

http://ftc.gov/os/2011/09/110901gasolinepricereport.pdf

It addresses the fact that retail gasoline prices rocket up in response to crude increases but settle back down "like a feather" when crude prices decrease. (known as "asymmetric passthrough") They speculate on some causes but come to no definitive answer. The report also discusses refinery capacity issues, including consolidation and capacity expansion at existing refineries. They don't address the widening crack spread (with or without K-Y), which makes me question some of their conclusions.

For those interested in this issue, it is worth the time to read.
The gubmint ain't never (officially) figured out the economics of this business, and I would bet they never will.
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Old 09-27-2011, 10:33 PM   #31
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I heard a news report stating most US refineries use Brent crude as it is a lighter crude which is easier to refine. Add to that, 10% of our fuel is ethonal. Corn prices have doubled in the last year, so that is another contributing factor.
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Old 09-27-2011, 10:49 PM   #32
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I heard a news report stating most US refineries use Brent crude as it is a lighter crude which is easier to refine. Add to that, 10% of our fuel is ethonal. Corn prices have doubled in the last year, so that is another contributing factor.
Crude input is refinery-specific. Most refineries are optimized to use specific crudes, rangining from light, sweet stuff from Texas or Brent, to heavy, sour stuf (heard tell that when the crap they ship from Venezuela is spilled on land they use pitchforks to clean it up). Since gasoline and distillates are a global market, this stuff is all priced on the margin. Who happens to be the marginal producer shifts from time to time.

Man, I should quit the plodding day job and sign on with J. Aron....
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Old 09-27-2011, 10:54 PM   #33
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I heard a news report stating most US refineries use Brent crude as it is a lighter crude which is easier to refine.
This is opposite to the reality. Brent is a heavier crude, WTi is light and relatively low sulfur. The price inversion of Brent over WTI is very unusual, and likely due to Far Eastern demand for middle distillate product.

While the price of corn effects the price of gasoline at the pump ( and thus demand), it has nothing to do with the gasoline contract traded on the NY Merc, which specifically states that it is blendstock prior to blending with 10% ethanol.

RBOB Gasoline

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Old 09-27-2011, 11:05 PM   #34
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While the price of corn effects the price of gasoline at the pump ( and thus demand), it has nothing to do with the gasoline contract traded on the NY Merc, which specifically states that it is blendstock prior to blending with 10% ethanol.

RBOB Gasoline

Ha
And the ethanol market is about to get weird. Have been reading that Brazil appears to be shifting fromn a massive exporter of suger-based ethanol to self sufficient to possibly even being an importer. With high corn prices and maybe an end to the EtOh subsidy in the US, things could get funky, fast.

I find it is best to have an appropriate hedge in the portfolio. Since refiner profitabilitu is tough to cuff, I have settled on MEOH and CHK.
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Old 09-28-2011, 06:19 AM   #35
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This is opposite to the reality. Brent is a heavier crude, WTi is light and relatively low sulfur. The price inversion of Brent over WTI is very unusual, and likely due to Far Eastern demand for middle distillate product.

While the price of corn effects the price of gasoline at the pump ( and thus demand), it has nothing to do with the gasoline contract traded on the NY Merc, which specifically states that it is blendstock prior to blending with 10% ethanol.

Ha
thanks for the correction. I wonder how many refineries use the Brent, and how many the WTI.

The Brent/WTI spread is highly unusual. I mentioned the corn prices not as a factor in the spread, but in the pump prices now vs a year ago.
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Old 09-28-2011, 06:32 AM   #36
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I calculate if it's worth a drive for $.05 cents cheaper per gallon before heading out for fill up. I normally fill up in Jersey if I had to go there. By shopping in Jersey and filling up the tank more than offsets the toll paid to go there. I stopped trying to figure everything out. There isn't enough time in a day to know why gas price isn't dropping in line with price of crude oil. Or why a stock drop or go up without any new data. More I know, less it makes sense.

I use this website to see where cheap gas prices are in the area since it covers all 50 states. New York City Gas Prices - Find Cheap Gas Prices in New York
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