Why is the Price of U.S. Gas 50% Less than it was 4 mos. Ago?

I am not being coy here, and do not personally have a consiracy to add, but believe there must be one afoot if we could see past what is in front of us -- which is the endless reports of the 'cratering' of oil prices, followed by reports of OPEC threatening to cut productivity to drive the price back up.

Does anyone actually know why the price has moved from an average of $4.11 on July 11, 2008 and average of $2.07 today, just four months later?

That is an almost 50% drop.

I am pretty sure the world has not cut its demand for gas by half in the last four months, and also sure the world did not double its needs in the 24 mos. prior to that.

So what gives? And why don't we care to demand the details of these fluctuations?

I'm actively trying to understand why this is and I can't find a reasonable explanation, so any help would be greatly appreciated.


Cheers!
TWISI

PS - Please don't just say 'speculators' unless you can explain exactly how this benefits who, and why Big Oil and OPEC would not be the obvious culprits (speculators) if that was the case.

Because the evil commodities speculators have been called out and don't want to get caught with their pants down around their ankles, at a time when the entire world is watching.
Either that or the US finally tapped their reserve and did not tell anyone.
or
Some of that missing bailout money went to the oil companies.
Cheap gas = good for the economy.




[edit on 17/11/2008 by reticledc]

A couple of reasons.

First and foremost, the demand has plummeted with the growing worldwide recession. there has been a tremendous cut back in consumption and his results in classic supply vs demand pricing.


Second, in the USA, refineries have converted over to winter gasoline. It doesn't have all the additives used in warm weather gasoline. Yes, the government mandates different gasoline for different seasons for pollution control. Winter gasoline is less costly.

i'm wondering if anyone is stocking up? its bound to soar come summer.

reply to post by governmentsecrets


Did you know that in a lot of states, stockpiling more than a certain amount is illegal? For obvious reasons.
Never the less, someone out there is filling up their swimming pool right now.




[edit on 17/11/2008 by reticledc]

So that we discuss the drop in gasoline cost rather than the real issues at hand.


For example...

I'm pretty sure it has something to do with the economy. I'm not sure what exactly though.

So glad you posted this. I think the better question is "How EXACTLY are gasoline prices set?" I've been wondering about this for a while now.

After Hurricane Ike, many cities in the SE US were experiencing gas shortages. According to the law of "Supply and Demand" gas prices should have spiked. BUT they continued to fall. I know that there were stories about speculators in the oil market driving prices up, but can anyone out there show the law or whatever that was passed to make this illegal or at least not viable anymore?

Good topic. S and F to you!

Originally posted by hinky
A couple of reasons.

First and foremost, the demand has plummeted with the growing worldwide recession. there has been a tremendous cut back in consumption and his results in classic supply vs demand pricing.

Really? Has there really been a 50% decrease in the demand for oil in the last four months? If you actually believe this is the case, please supply us with some data to back that assertion up.

Second, in the USA, refineries have converted over to winter gasoline. It doesn't have all the additives used in warm weather gasoline. Yes, the government mandates different gasoline for different seasons for pollution control. Winter gasoline is less costly.

By this logic we should see something akin 70% (of the 50%) decrease in October every year, I have not noticed this trend. Again, if you have data to back it up, post it.

edit: typos to clarify intent


[edit on 17-11-2008 by TheWayISeeIt]

Look up " The non oil crisis" by Lindsey Williams and watch a video on you tube dated ~ Oct 2007. he predicted less than $50 oil in less than a year.

Its here..

Why?

To bankrupt the Arabs....but we too will feel the pain.

Intertesting ideas he has...

Well, with over a half a million Americians out of a job and God knows how many who are and will become homeless soon, what else could they do! You can't get "blood from a turnip!" If the price had stayed high how could people afford to put fuel in their autos to go to work? The whole state of the nation is sad! I mean, what can you really do? Even with the price lower now, you still pay high prices for everything you buy! You know, once they raise the price on groceries, it dosen't matter if oil prices come down, those prices don't!

Originally posted by edsinger
Look up " The non oil crisis" by Lindsey Williams and watch a video on you tube dated ~ Oct 2007. he predicted less than $50 oil in less than a year.

Its here..

Why?

To bankrupt the Arabs....but we too will feel the pain.

Intertesting ideas he has...

I think I have seen that before, was he the one who was a Big Oil CEO's pastor in Alaska in the 70's and saw the kept secret massive oil-field? If that is the same person, wasn't he stating that it all has something to do with funding to Thrid World countries?

And even if that is the case that we are talling about the same person (regardless of whether his theory holds water) -- my question stands as to why why don't WE, the American consumers, have a basic understanding of these dramatic price fluctuations?

And why don't we actively care that we don't know?

I mean it is not like they are trying to blatantly confuse us. They simply report price changes and we accept them as inevitable... up or down.

reply to post by TheWayISeeIt


I told my 20 yr. old son in July that the price of gas would be $2.25 by Nov. 4th. The price of gas nearly always comes down for the elections. Why?? To make the incumbent party look good...as if the have have control over the whole OIL thing.
I don't know if the price of oil will continue to drop. But if it does I predict
that we will see $1.25 by the end of winter!!

I'm an evil speculator. Know that first.

The real reason is this: Crude oil production has multiple producers on the local, national and global horizons. In the US, most producing wells are owned by a family business that owns 5 or fewer wells in total.

So crude oil is amenable to a public auction like the one at Nymex. Multiple producers and multiple consumers reduces the change of someone "cornering" the market for more than a few minutes at most.

But Gasoline isn't like that in the US. Gasoline is only produced at large refineries. And the EPA continues to forbid the building of ANY new refineries, and even controls whether or not existing refineries may be modernized (even though it would mean less pollution!).

There are three big factors in gasoline futures:

First, the Demand Side. (two parts)

A. The falling dollar. Part of the problem is not that gasoline is rising---it's that the dollar is falling. Part of the equation really is that simple. You don't notice it with your other purchases because they aren't bought and sold globally the way petroleum is.

B. There is no dependable way to hedge the price of most refined products. Most airlines actually use the price of home heating fuel as a proxy for aviation fuel prices. Every other hedger (including most farmers) use.....crude oil future on Nymex. These people aren't speculators, they are businesspeople who are trying to manage risk. And if you cannot hedge diesel, you just buy crude futures. And all this activity had jacked up crude prices.


Then, the Supply Side
A. Mobil has begun refining gasoline in Africa, beyond the reach of the EPA. This has avoided US control over a large part of their operations, and they have been able to bring in much more product and unleash it on the market.

B. Many speculators felt that Congress' temporary decision to allow drilling in the ANWR and other federal areas means that the days of unfettered profits by speculating on an upward drift in crude markets is over.

While gasoline futures are traded

I didn't notice the drop until I filled up my gas guzzling Jeep Grand Cherokee. It was costing me almost $60 to fill, and today was around $40. Whatever the reason, I love cheap gas and hope this continues! I would rather ride a horse, but I don't have a big enough yard to keep one.

reply to post by hinky

I concur. This is an accurate statement. But there are also th polito/business realities in play.
Many folks dont realize the summer "additive" increase thats posted as a sticker on every pump (that I've seen..) .

reply to post by dr_strangecraft

But you do make a cogent point.
A one line reponse.
Sorry, when something makes sense to me I'll go with it.

Thank you TWISI!!!

my question stands as to why why don't WE, the American consumers, have a basic understanding of these dramatic price fluctuations?
And why don't we actively care that we don't know?

This is the root of it all! While Dr Strangecraft, the evil speculator, gave a good explanation, I still think there's more to it. My example of gas shortages in the SE US at the same time gas prices were falling shows the supply and demand reason to be blatantly false. If Dr Strangecraft would care to shed some light on that, I'd love to hear it.

Originally posted by TheWayISeeIt

Really? Has there really been a 50% decrease in the demand for oil in the last four months? If you actually believe this is the case, please supply us with some data to back that assertion up.

here

here

It doesn't take much of a drop, let alone 50% less, to cause an over supply of any commodity. There are so many bulk storage tanks and just so much storage. There are deadlines for when gasoline with summer additives can be sold. Oil companies need to get rid of inventory just as any store does.

By this logic we should see something akin 70% (of the 50%) decrease in October every year, I have not noticed this trend. Again, if you have data to back it up, post it.

here

There was a shortage of the additives last winter for the summer gasoline we just used. This alone drove the price of gasoline up. Now this additive is no longer needed driving the price back down to pre-additive prices.

Don't know how old you are or if you are an aware person. Traditionally, in the USA, gasoline prices have gone up in May and start falling in September. It happened again this year, but other factors made it more apparent. You can notice it again next spring.

I think its going to absolutely skyrocket in march 2009...more so than before...$200 to $300 a barrel is a possibility.