[Lemmy]

dino_bobba_renno dino_bobba_renno:

I thought you just finished telling me this wasn't a moral issue.

That must have been someone else. I never said such a thing.

dino_bobba_renno dino_bobba_renno:

What ever happened to supply and demand? Sorry this is a business not a commune. If you think the oil companies are getting rich then maybe get in on the action and buy some stocks.

Supply and demand? Isn't that what I said? When the price goes up because of market factors, I have no problem. When it goes up because of collusion and price fixing, then the system isn't working.

[Lemmy]

raydan raydan:

Lemmy Lemmy:

Apples and oranges. A litre of woodstain costs $15. The price at the pumps should be in a straight line with the price of crude. Oil at $50/br = $0.50/l, oil at $100/br = $1.00/l, oil at $150/br = $1.50/l. Anything else is collusion.

Just a small flaw in that logic:

Clearly, I was simplifying the math for those less versed in economics.

raydan raydan:

So it's not exactly a straight line.

No, you're absolutely correct. But there is some relationship between crude prices and pump prices. If the price of crude is $80/br on Monday and and $80.03 on Tuesday and the price at the pumps goes from $0.81 to $0.94, then there's something going on besides market econmics.

[Lemmy]

commanderkai commanderkai:

Now, not denying that refineries need to be built, and the existing ones need to be upgraded...but isn't that kind of a jump to say it needs to be a straight line? There are so many factors to consider, like delivery costs, taxes, and other variables that are added to the price?

I shouldn't have used the phrase "straight line".

[raydan]

Lemmy Lemmy:

commanderkai commanderkai:

Now, not denying that refineries need to be built, and the existing ones need to be upgraded...but isn't that kind of a jump to say it needs to be a straight line? There are so many factors to consider, like delivery costs, taxes, and other variables that are added to the price?

I shouldn't have used the phrase "straight line".

That's why I wrote "small flaw" in your logic.
But I think we all understood where you were going.

[Lemmy]

raydan raydan:

That's why I wrote "small flaw" in your logic.
But I think we all understood where you were going.

Been a while since I taught first year micro.

[dino_bobba_renno]

dino_bobba_renno dino_bobba_renno:

stemmer stemmer:

I hope not. I heard on economist on the tv claim it really was the high price of oil that destroyed the global economy....

Well yes and no, ya oil at $150 wasn't the best thing for the economy but it wasn't just oil that was hyper inflated, it was everything. Steel, potash, coal, ... I would say gold but I wasn't keeping an eye on that so I'm not 100% sure about that but basically everything went through the roof. It was more to do with the investment end though than the actually companies involved in commodities. Futures and derivatives mainly.

One thing about though, you can bet you ass you haven't seen the last of the all mighty $100 barrel. When things recover you may even see it spike into the $200's if the regulators don't don't get their acts together.

Don't you just love it when you find a link that supports your posts the day after you post something. Makes me feel all most smart or something

Anyways, on the oil rising above $100 there was a good article in the paper today:

http://www.calgaryherald.com/business/energy-resources/could+rise+beyond+three+years+Saudi+Arabia+warns/1628761/story.html

I work in the industry and personally from what I can see were setting the stage for some extremely high oil and gas pries in the very near future. If your not drilling then your are losing production. We've all ready had multiple oil sand projects shut down and most of the rigs have been laid down since last fall. That means we've got a good two years before drilling can recommence and some serious work can be done on tie-ing this stuff in so hold on to your wallets.

[dino_bobba_renno]

Lemmy Lemmy:

raydan raydan:

Lemmy Lemmy:

Apples and oranges. A litre of woodstain costs $15. The price at the pumps should be in a straight line with the price of crude. Oil at $50/br = $0.50/l, oil at $100/br = $1.00/l, oil at $150/br = $1.50/l. Anything else is collusion.

Just a small flaw in that logic:

Clearly, I was simplifying the math for those less versed in economics.

raydan raydan:

So it's not exactly a straight line.

No, you're absolutely correct. But there is some relationship between crude prices and pump prices. If the price of crude is $80/br on Monday and $80.03 on Tuesday and the price at the pumps goes from $0.81 to $0.94, then there's something going on besides market economics.

Your correct in saying that there is a relationship between crude and gas prices but the price per barrel alone isn't a very good indicator of what pump prices should be. There are a ton of other factors in there such as capacity, labour, material costs, shipping, and so on. Also it's not as easy as crude up = fuel prices up and vice versa. There are times when the price of a barrel can go down and actually increase the price of fuel.

For example, if the price of extraction becomes higher than what a barrel is selling for then you can probably predict that fuel prices will increase to cover those costs. That's why you end up paying $0.85 / litter or more when the price of oil is at $32 per barrel.

I think the magic number being floated lately for a break even point is around $45 to $60 per barrel depending on if it's light, heavy or coming from the oil sands.

[Lemmy]

dino_bobba_renno dino_bobba_renno:

Your correct in saying that there is a relationship between crude and gas prices but the price per barrel alone isn't a very good indicator of what pump prices should be. There are a ton of other factors in there such as capacity, labour, material costs, shipping, and so on. Also it's not as easy as crude up = fuel prices up and vice versa. There are times when the price of a barrel can go down and actually increase the price of fuel.

But those other factors are largely fixed costs. They don't fluctuate nearly to the degree as crude prices do, as an input to production. I looked at a few econometric models of gasoline pricing this morning. If I can locate a good one, I'll post a link. Most of the research seems to be California data, from what I can locate.

[dino_bobba_renno]

Lemmy Lemmy:

dino_bobba_renno dino_bobba_renno:

Your correct in saying that there is a relationship between crude and gas prices but the price per barrel alone isn't a very good indicator of what pump prices should be. There are a ton of other factors in there such as capacity, labour, material costs, shipping, and so on. Also it's not as easy as crude up = fuel prices up and vice versa. There are times when the price of a barrel can go down and actually increase the price of fuel.

But those other factors are largely fixed costs. They don't fluctuate nearly to the degree as crude prices do, as an input to production. I looked at a few econometric models of gasoline pricing this morning. If I can locate a good one, I'll post a link. Most of the research seems to be California data, from what I can locate.

Sounds good, it would be kind of neat to see (economic model)

On the fixed cost thing, you do realize that the cost of labour has risen by as much as 30%, steel was up to record highs and just started to come down a few months ago and the savings of which will take time to translate into the fittings & fabrication industry, many refining chemicals were up to al time highs, land is more expensive, there are a ton of additional regulations etc etc. So many of those "fixed costs" were not so fixed for a few years.

Not to mention the oil we are getting now even compared to a few years ago is a lot harder to get at and costs more to extract. An eample of that would be SAGD.