Correlation between elections and gas prices?

[bright eyed]

Hey,

In CA, i noticed the gas prices dropped pretty quickly to the lower part of $2 a gallon before the election. There was an initiative on the ballot to tax oil companies...

I thought - isn't that interesting the prices dropped steadily until the election.

Now, we are well above $3 again - w/ the lowest grad (87 octane) at about $3 and up from there.

Can someone 'splain this to me? I've never been satisfied w/ the arguments about price per barrel etc and i even finally heard an economist say around election time he thought the elections were influencing the low prices - isn't this malarky? doesn't it show they are raising prices based on nothing but raising revenue?

There was an interview w/an oil exec (like exxn or one the big co's) when the prices were sky high and he basically said, well we have to raise $ to please our shareholders. I'm so fed up with these people and feel so helpless...

 

[HFWR]

Erections affect gas prices?

Per CNBC, the wintry weather of late caused delays in ethanol delivery; additionally, we're nearing the summer driving season. Notice that crude prices are down, but motor fuel prices are UP...

 

[MasterBlaster]

The conspiracy theory thread !

If you google this topic you get 3,480,000 hits.

So it must be true !

 

[bright eyed]

well, you can call it a conspiracy or smart business decisions...

it still sucks for us!

 

[ERD50]

I've never been satisfied w/ the arguments about price per barrel etc

Ummm, what do you think gasoline is made from?

As the global price for oil goes up/down, gasoline prices in the US will go up/down also. There are also distribution issues and supply/demand with reformulating the gas in the spring and fall.

I had a link (cannot find it at the moment) to a graph of oil $ vs gasoline $ - very, very strong correlation.

-ERD50

edit - here we go:

from http://en.wikipedia.org/wiki/Oil_price_increases_of_2004-2006

 

[MasterBlaster]

Gasoline versus crude oil price.

Here's a chart showing pretty strong correlation in prices:

 

[bright eyed]

Well,

Isn't there supposed to be a gap between price per barrel and price at the pump - ie the price per barrel does not affect today's price at the pump, but a few months from now after it is processed.

Even your graph shows a lower dip at election time than the crude price at the time.

And there was a bunch of broo ha ha about how katrina was supposed to affect gas prices etc. etc. or failing/old lines etc...and prices went up in CA, even though we aren't supplied by katrina processors?

And do these prices reflect the enormous profits the oil co's are making? - or is that not on the chart...oh yeah, that's off the charts!

 

[ERD50]

Isn't there supposed to be a gap between price per barrel and price at the pump - ie the price per barrel does not affect today's price at the pump, but a few months from now after it is processed.

I don't think it works that way. Supply can impact prices in real time. You can't really say '*this* gallon of gas comes from oil you bought 6 months ago'. If you own a painting, and the painter dies, do you say 'No, I won't accept a higher price for this, because I bought it when he was alive'?

Even your graph shows a lower dip at election time than the crude price at the time.

I said there are other factors, oil prices are the main one it appears. Explain exactly how this would have been done - I don't recall Bush releasing oil from the Strategic Oil Reserves. That would have done it, and been easy and within his power (I think).

And do these prices reflect the enormous profits the oil co's are making? - or is that not on the chart...oh yeah, that's off the charts!

Oil company profit margins are *not* off the chart at around 9-10 cents on the dollar. In fact, they are *below* the profits of the S&P500 average. So go beat up about 250 other companies/industries first.

http://www.usatoday.com/money/industries/energy/2006-04-27-xom_x.htm

In fact, Exxon is below the 11-cent average of Standard & Poor's 500 companies, says analyst Howard Silverblatt.

Three laughing emoticons? What's so funny about spreading mis-information?

-ERD50

 

[laurence]

Conspiracies aside, the U.S. automakers must be sending hate mail to the oil companies at this point. They are struggling to stop the bleeding, and SUV/Truck sales are their only profitable venture. Getting north of $3.00 again in such short order says to me that these prices (and higher) are here to stay. Americans have gotten used to having such a small portion of their income go to fuel, this will take a while for people to get accustomed to. In the mean time, SUV/Truck sales will only tank further. I expect Ford to be a shadow of it's former self in a few years.

 

[justin]

bright eyed,

You are definitely correct in noticing this trend. Next time we get near the election, go buy a whole bunch of those artificially cheap gasoline futures contracts, and then rake in the dough as the government/Big Oil jack the prices up post-election. You'll make thousands!

I've personally decided to never buy gas when it is too expensive. Those bastard Big Oils are just out to maximize profits for shareholders.

 

[MasterBlaster]

ERD50:

Facts aside people believe what they want.

You are thinking rationally about markets and their influence, bright_eyed is thinking conspiracy and how horrible those oil companies are to charge him more to fill up his SUV.

Regarding prices, I think maybe bright_eyed should sell his house for what he paid for it, not for what the market is going for. That would be the only "just" settlement.

 

[bright eyed]

Look,
I never claimed to be an expert - just as a regular jane, I have to say that none of the explanations i have heard seem to jive - I am not a conspiracy theorist and I do believe in research/facts...but splain the below.

http://www.dailyfueleconomytip.com/?p=208

I have also watched interviews w/ an oil exec who basically said their motivation is to increase their profits - flat out - when pressed by the journalist as to why the gas prices were going up sooo high (before the last dip pre election time) -

his explanation went as follows:

1) it's complicated
2) we need to satisfy our shareholders

so stop telling me i am crazy and spreading misinfo - I understand profit motivations - but am frustrated that on certain resources it's easy to get away with raising prices just because they can. Chanel does it w/ sunglasses - but hey, i can go w/out a $300 pair - it's harder to do that with gas when i have to take the kids to school etc.

i think it's great that higher prices have motivated people to get hybrids and smaller cars - i just wish that the $ went to a euro style gas tax for alt fuels/energy than to some oil tycoon.

 

[lets-retire]

And there was a bunch of broo ha ha about how katrina was supposed to affect gas prices etc. etc. or failing/old lines etc...and prices went up in CA, even though we aren't supplied by katrina processors?

But the companies selling oil in the Gulf area lost a couple of their refineries, that supply the area. They had to buy their gas from other distributors, probably ones who also supply Cali.

 

[justin]

I never claimed to be an expert - just as a regular jane, I have to say that none of the explanations i have heard seem to jive - I am not a conspiracy theorist and I do believe in research/facts...but splain the below.

http://www.dailyfueleconomytip.com/?p=208

I'll splain it. Exxon Mobil has products that are in high demand. The market price (set by us consumers) is sufficiently high as to allow Exxon Mobil to sell these products for more than their cost of acquisition and/or production. I would suggest doing as I do. I've personally decided to never buy gas when it is too expensive.

 

[eridanus]

It's not unheard of for energy companies to manipulate markets.

 

[ERD50]

...but splain the below.

http://www.dailyfueleconomytip.com/?p=208

OK, that article states that Exxon had the highest and second highest quarterly profit for a publicly traded American company ever. True, but that is because they are a BIG company, selling a high demand product. But they are not making high profit *margins* (profit per dollar sold). As I stated 9 to 10 cents per dollar is below the average. It is their size that makes the number big. Now, if it were shown that they were using that size in a non-free-market way, I would be all for doing something about it,. I like free markets. But, AFAIK, there is no evidence of anti-competitive behavior, and, when you look at their size compared to the *global* market for gasoline, it hardly seems that they could manipulate the market.

If Exxon were broken up into 20 smaller companies, and if that made them less efficient overall (maybe , maybe not - but go with me here), gasoline prices on average would go up. But you would not have one company to point to to see the 'big' profit number. Would we be better off? I think not.

I have also watched interviews w/ an oil exec who basically said their motivation is to increase their profits - flat out

It is the duty of every corporate executive (and employee for that matter) to maximize profits (legally and ethically).

1) it's complicated
2) we need to satisfy our shareholders

I agree.

so stop telling me i am crazy and spreading misinfo - I understand profit motivations - but am frustrated that on certain resources it's easy to get away with raising prices just because they can. Chanel does it w/ sunglasses - but hey, i can go w/out a $300 pair - it's harder to do that with gas when i have to take the kids to school etc.

OK, but unless there is an unfair monopoly, or other non-free-trade action, the market pays what it will. From what I understand, there is enough competition in the gasoline business that no one can really get away with charging more than fair market value. Chanel gets high $ for their products only because people are *willing* to pay it. No different than any other product. When gas hits $6 a gallon, people will find alternatives. True, alternatives are tough right now, but that is because we pretty much built this country on a 'cheap energy' policy, and now the piper is looking to get paid.

i think it's great that higher prices have motivated people to get hybrids and smaller cars - i just wish that the $ went to a euro style gas tax for alt fuels/energy than to some oil tycoon.

Taxes are probably the best incentive for conservation we have. But, those taxes will still be on *top* of oil company profits. After all, if they can't make 9 cents on the dollar selling gasoline, they will start putting their investments elsewhere ( which in turn will drive up the price of gasoline, as there will be less oil exploration, less oil, etc, etc, etc.).

I hope that explanation helps, and feel free to challenge anything I said that does not appear correct. I certainly am no expert either.

-ERD50

edit/add: adjusted for inflation, $3 gas isn't bad at all.

 

[MasterBlaster]

I have also watched interviews w/ an oil exec who basically said their motivation is to increase their profits - flat out - when pressed by the journalist as to why the gas prices were going up sooo high (before the last dip pre election time) -

his explanation went as follows:

1) it's complicated
2) we need to satisfy our shareholders

How is that different from any other company out there ? Increase profits, satisfy the shareholders - That seems like par for the course to me.

Bright_eyed seems to think that since prices were low(er) last year that they should stay low from now on. You as an American have a right to gas that costs no more than $1.59 and 9/10ths !

Those rotten oil companies are selling gas for more than it cost them ! and they are making profits along the way ! How dare they ! Where's my congressman, we'll tax all their profits away for the Al Gore energy alternative lottery.

 

[Texas Proud]

This seems to me the normal 'they are make gobs of money' rant...

YES, they are making a lot of money... THEY ARE HUGH COMPANIES... but their margins are not as high as your local bank, or your pharmacy or a number of other businesses... they make less per dollar spent than these others...

And I just filled up my tank yesterday at $2.26 per gallon.... maybe Cali is charging you this high tax and you should be complaining to them...

And I doubt any CEO of any company will not try to make their shareholders happy.. that is what companies do... or they die...

 

[Texas Proud]

Man... slow to repond... missed the last page that had the same thing I said...

Sorry for duplicating what other said....

 

[MasterBlaster]

And I just filled up my tank yesterday at $2.26 per gallon.... maybe Cali is charging you this high tax and you should be complaining to them...

You can thank the envirnmental lobby in California for the high gas prices here. They have dictated that through March 31st that we can only use a special blend of gasoline that is only made here.

So since supplies are tight before the cutover the price goes through the roof before the cutover date. That's what is causing prices in California to spike.

Thanks alot California govenment for yet another poorly thought out govenment solution. !

 

[bright eyed]

i get it i get it...yes, it was a bit of a rant.

i think it's just terrible to raise prices that cause such hardship on regular and low income people.

forgive me... :

 

[Texas Proud]

i get it i get it...yes, it was a bit of a rant.

i think it's just terrible to raise prices that cause such hardship on regular and low income people.

forgive me... :

OK... what kind of vehicle do you have to drive you kids to school?? A lot of the people that I have heard 'rant' are driving a pickup or SUV... which is it for you??

Do you have cable?? They have raised their prices a lot over the years. Why not complain about them??

What about those fruit prices I have seen some of then sky high at times... and then they will sell bananas for 3lbs for $1... why are these sellers able to get away with this??

 

[justin]

i get it i get it...yes, it was a bit of a rant.

i think it's just terrible to raise prices that cause such hardship on regular and low income people.

Prices are causing hardships?

So, let's say a family makes $50k per year, and spends $1000/yr on gas when it is at $1.50 per gallon. In other words, 2% of their annual budget is spent on gas. That equates to 20667 miles per year at 31 MPG.

Now the price doubles to $3/gal. Let's say our family doesn't react at all to this price increase and is now paying $2000 per year for gas. Or 4% of their annual budget. Were they already spending all of their money? Does increasing their budget by 2% cause "hardships"? Here are some suggestions - put your kids on a bus. Put yourself on a bus. Buy a bike. Live closer to work, shopping, schools, and activity centers. Sell the SUV and buy a civic or aveo.

Times are changing. Take notice.

 

[bright eyed]

<<Prices are causing hardships?>>

yes! i make enough so it's not a hardship - just annoying but many families, particularly in CA make well under $50k per year - fed pov level is ridiculously low around $20k? for family of 4...so imagine the choices they have to make.

i have a honda pilot (ok, hold back your stones)...it is an "suv" but gets same/similar mileage to many sedans out there and we will likely get a prius (might hold out for that 90mpg 2009) next. I do have a hard time finding a car that will fit my 2 over 6 foot boys and 2 car seats...and minivans have similar mpg...by contrast my whole family of 5 (my parents and my sis's) all fit comfortably into an accord so we never needed a big car growing up.

are you guys so angry at me because i think it is unfair? we all rant about tiny percentage charges between .5 and .4 for financial fees, i don't get to rant about gas? don't they have to make money too?

 

[lets-retire]

I used to get almost to the point of anger at the gas prices. One day it hit me that even a .50 hike in gas prices only equated to about and extra $300 per year and I drive a full sized truck. When I decided that the price was too high I quit driving so much and stayed home. Fortunately the price rarely goes up more than a few cents at a time, so there is time to adjust our lifestyles.

Bright eyed your correct it's a travesty that....uh...normal people, like me can't afford the extra for gas. It is also very sad that the poor, who own a car instead of using public transportation, can't buy gas. We should have the government take over the oil industry and provide gas cheaply for everyone.


Side note: I am looking forward to selling my truck now that I no longer need one. As soon as I get a real job, it's gone and my new fuel efficient car will be in the driveway.