Patrick How are you?
Gas prices are subject to crude oil prices in that gas is made from crude. As crude prices rises, gas price rise. There is a margin that always exits between the two. The exact spread between the two may flucuate, but there is always a spread. Crude prices have had about a $20 - $30 "fear" premium built into them for a while due to geopolitical fears of disruptions of supply mostly from the middle east (and the Lebanon War with Isreal and Iran Saber rattling, etc) some disruptions from Nigeria. Opec has also been pumping full out, because at $70 per barrel, they are making a $fortune$. There was also a huge amount of "sepculation" on crude in the futures market by hedge funds which further exacerbated the price. Now there is a glut of crude on the world markets and hedge funds are liquidateing their long posistions in crude, hence $61.59 crude price close Friday. Opec is also now trying to get producing countries to cut back supply to keep the prices from falling too far and too fast.....they ususually do not abide by these quotas, so most likely in the short term OPEC production will remain constant which will help further drive oil prices down. Crude prices will most likely end up somewhere between $40 - $50 per barrel within the next 12 months. (Unless of course there are major supply disruptions by a middle east war etc.) So our gas prices will moderate due to crude prices moderating. Gasoline prices are also subject to a seasonal price flucuations, spring and summer gas prices are higher due to higher demand for gas for the summer driving season. Katrina also knocked out some refineries last year and that had a negative impact on the price of gas too as supplies were disrupted. There has also been a shortage of refineries in the US partially due to the cost of building them and the envirnmental rules and laws that govern them...in other words oil companies and refineries have been not been building them over the past 10 - 20 years to keep up with the pace of growing gas demand. Finally every state has different requirements for pollution standards for gasoline which creates a problem for refineries. It is true as stated by others on the post that the actual wholesale price for gas and crude oil is determined on the futures markets, (and in the cash spot market too). Supply, demand, fear, expectations and speculation get built into the price of oil or any commodity for that matter. I have not addressed all the issues surrounding your question, but these are some of the major points, Regards, David --- In FairfieldLife@yahoogroups.com, "Patrick Gillam" <[EMAIL PROTECTED]> wrote: > > Hey, has anybody here read a good explanation > for falling gasoline prices in the United States? > I don't see how supply is any higher or demand > any lower, which would be the purest explanations. > > Other explanations include superradiance and a > conspiracy to re-elect Republicans, but I'd prefer > to know what mainstream economists are positing. > > Thanks for any light you can shed. > To subscribe, send a message to: [EMAIL PROTECTED] Or go to: http://groups.yahoo.com/group/FairfieldLife/ and click 'Join This Group!' Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/FairfieldLife/ <*> Your email settings: Individual Email | Traditional <*> To change settings online go to: http://groups.yahoo.com/group/FairfieldLife/join (Yahoo! ID required) <*> To change settings via email: mailto:[EMAIL PROTECTED] mailto:[EMAIL PROTECTED] <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
