Gas Gouging?
Wednesday March 15, 2006
At 10.30 this morning, gas at the Citgo in Albany, GA was $2.23 for regular unleaded. At 2.00 pm, it was $2.39 -- a 16 cent jump. What happened?
On Monday, gasoline futures were weak, according to Oil & Gas Journal. On Friday, "the April contract for benchmark US light, sweet crudes dropped 51 cents."
On Wednesday, the Department of Energy reported US crude inventory at "the highest level since May 1999." And according to the American Petroleum Institute, our refineries weren't doing much in February: utilization was only 87.1%, "the lowest level for that month since 2002." But gasoline inventory was 2.4% above the five-year average. Huh?
High inventory of raw material (crude), above average inventory of finished product (gasoline), despite low production levels. This sounds like drivers are cutting back (a normal response to increased prices). But decreased demand doesn't jibe with the 16 cent jump in price I witnessed today.
What it does jibe with is Tuesday's 12.27 cent increase in gasoline for April delivery. [Except I think Georgia's price-gouging laws don't allow stations to increase prices until their raw material (truck pumping gas into their holding tanks) price increases.]
You see, on Tuesday, a Venezualan oil company shut down a gasoline producing unit for "unexpected repair;" the facility will be offline for two weeks.
Over in the Senate, oil executives swore that consolidation wasn't decreasing competition, even though in California, "six major oil companies control more than 80% of the refining capacity."
The Shell prez said, "When supply is limited and demand is not reduced, the consequence is higher prices; in a free market, that's how it works." Very true, when the "free market" is a competitive one -- in the Adam Smith style of competition (lots of buyers, lots of sellers/producers). That characterizes very few markets in America today and certainly not the market for gasoline.
On Monday, gasoline futures were weak, according to Oil & Gas Journal. On Friday, "the April contract for benchmark US light, sweet crudes dropped 51 cents."
On Wednesday, the Department of Energy reported US crude inventory at "the highest level since May 1999." And according to the American Petroleum Institute, our refineries weren't doing much in February: utilization was only 87.1%, "the lowest level for that month since 2002." But gasoline inventory was 2.4% above the five-year average. Huh?
High inventory of raw material (crude), above average inventory of finished product (gasoline), despite low production levels. This sounds like drivers are cutting back (a normal response to increased prices). But decreased demand doesn't jibe with the 16 cent jump in price I witnessed today.
What it does jibe with is Tuesday's 12.27 cent increase in gasoline for April delivery. [Except I think Georgia's price-gouging laws don't allow stations to increase prices until their raw material (truck pumping gas into their holding tanks) price increases.]
You see, on Tuesday, a Venezualan oil company shut down a gasoline producing unit for "unexpected repair;" the facility will be offline for two weeks.
Over in the Senate, oil executives swore that consolidation wasn't decreasing competition, even though in California, "six major oil companies control more than 80% of the refining capacity."
The Shell prez said, "When supply is limited and demand is not reduced, the consequence is higher prices; in a free market, that's how it works." Very true, when the "free market" is a competitive one -- in the Adam Smith style of competition (lots of buyers, lots of sellers/producers). That characterizes very few markets in America today and certainly not the market for gasoline.
Comments
Right on. When will we get the masses to understand aand do something about this? Market maniplation must be a lot of fun for those in the game.
Hi, Terry:
I’m not sure what “the masses” can do. From this (admittedly skimpy) data, it looks like demand might be down. That’s all we can do. I think.