The thing is there is a bit of truth to every conspiracy theory and every stereotype. Its the Walmart effect (or China effect?)-come in, drive local businesses out, then command the local market at your own price. I do believe the Saudis are keeping production up to drive some of their enemies out of business and the shale producers that they are competing with but that suggests they think they have more control than they really have in the market. Their time came and went and remains to be seen how long they can go without running out of money. I think Russia, Mexico and Venezuela would be happy with a price increase. But as soon as the price goes up, the North Dakota producers will be back in business again.
Of course I know very little about world wide oil pricing and just enjoying it while I can. It was interesting reading about the deal Nixon made with the Saudis to buy our bonds and keep it secret. Then at the same time giving us the 55 mph limit to insure national concern over supplies (climate anyone?) Can’t trust any of those beltway boys.
Well, for me, as soon as I hear a car requires, or even recommends, ‘premium’ gasoline. . . instant deal breaker. I know its not so bad now, but when regular is $4.00 and premium close to $5.00 a gallon. . . OUCH! If people wouldn’t buy these cars, they’d stop making them.
Trouble is (for the gas station owners) its far too easy for us to compare prices. That’s why you see more and more gas stations offering “discounts” connected to credit card and grocery store “loyalty card” programs. To manipulate your behavior. Pay too much for certain groceries, or buy something you hadn’t intended to buy, get “rewarded” with 500 extra “gas points”. AND they hope you won’t notice that they priced the gasoline a little higher to make room for the “discount”.
Its what’s referred to as a “confusopoly”. Manipulate prices and attach conditions and stipulations such that you can’t really know if you’re getting a good deal or not.
It’s not wacky. Some of the best and brightest economists in the world have studied it and written papers on it. You’re too tied to the oil business to see or believe it. Bury your head and hope for the best.
Oh yeah, to the “OP”, did you check to see, maybe the Bradley / Sinclair is cut with 10 or 15% ethanol. Around here, all the fuel pumps say, “contains up to 10% ethanol”. If I knew of any station selling pure gas I’d be willing to pay a few cents more, after calculating to see if it improved my fuel economy by a comparable amount.
Growing up, I never understood why the big oil companies advertised, at all. After all, gasoline is gasoline, you buy it at the station that is cheapest, that’s what my parents always did. As a young man, I never bought stock in Exxon because I couldn’t understand how they stayed in business, their gasoline was always 4 - 6 cents higher than everybody else. Just goes to show what a poor grasp I have on human nature.
No, it’s because they aren’t making any money on GAS. They want you to buy their gas so you’ll come in and buy convenience items that they do make money on or buy their grocery items so you’ll get the discount on gas. Let’s not go there again, we’ve already whipped that horse to death. People are proud to get their discounts and free stuff.
" Some of the best and brightest economists in the world have studied it and written papers on it. "
Show me a legitimate paper that claims today’s low prices are caused by oil companies trying to drive others out of business.
It’s a fact that Saudi Arabia has refused to reduce their production because they want to reduce US production. Is that what you’re talking about? Has nothing to do with oil companies.
I agree @Bing I don’t want to go there again either. Its just fun to post here and sometimes I get carried away with it. How does the old saying go, opinions are like ‘butts’, everybody has one and they all stink!
That’s kinda the way I’ve heard it too, the Saudis want to drive the higher cost US producers out, plus they don’t want their arch-rival Iranians to get a good price for their oil that’s coming back into the market with the end of sanctions. Not to mention that Iranian oil coming onto an already saturated market.
My grandfather in the catering business used to say if you need eggs, it does not matter what they cost, now how many cars require premium, and what is the price tag?
Well, for me, as soon as I hear a car requires, or even recommends, ‘premium’ gasoline. . . instant deal breaker. I know its not so bad now, but when regular is $4.00 and premium close to $5.00 a gallon. . . OUCH! If people wouldn’t buy these cars, they’d stop making them.
I drive many different cars in the course of my work as an auto mechanic, and I can say that the best cars to drive are the ones that require premium fuel. Yesterday I had the pleasure of taking a Lexus LS460 for a test drive after doing a brake job. What a fantastic car to drive. Smooth as glass, whisper quiet, and V-8 power and torque in a rear wheel drive configuration. It seriously has me thinking of looking for one on the used car market.
Oh yeah, to the "OP", did you check to see, maybe the Bradley / Sinclair is cut with 10 or 15% ethanol. Around here, all the fuel pumps say, "contains up to 10% ethanol".
Yes. Is that part of the winter oxygenation that they discontinue in the warm months?
Or am I thinking of something else and is it always added to gasolines?
Usually I am cleaning the windshield while looking for themergency fuel shut-off button.
Nope, it isn’t part of the winter blend. It’s promoted by the EPA and DOE as a method to allegedly promote more complete combustion of the fuel. Personally, I believe it’s a covert agricultural subsidy program. I don’t believe the official version. It reduces mileage about 10% (about 3 mpg on a car that’s rated at 30mpg), and causes problems with older cars and small engines. It’s also been shown to have driven up the price of feed corn as farmers switched their fields over to ethanol-producing corn. There’s a lot more politics involved in ethanol fuels than science.
If there is a single “villain” in this piece it is the King of Saudi Arabia. Through his oil minister he has commanding influence in OPEC which directly or indirectly sets prices. American oil companies are not OPEC members.
The growing fracking business started to scare the Saudis (when oil sold for close to $100 a barrel) and at a price of $55-$60 a barrel they could produce enough to severely cut down the Saudi market share, where production cost is between $3 and $5 per barrel or so. Like any business trying to drive other out of business, the Saudis simply kept producing (at very low marginal cost) and the drop in price (supply & demand theory) would force all the fracked oil to dry up, or so they thought.
Oil is an international commodity and users can switch easily from one supply country to another.
We are now in an oversupply situation, with the marginal non-OPEC cost per barrel at about $45 at which an unlimited supply is available in the foreseeable future. Previously, that marginal barrel was oil sands at $80-$90 and very deep offshore wells, also very expensive. The US is now exporting oil and cutting into that Saudi market share.
By now you will realize that the selling (market) price of oil has no relationship to the production cost, which can be as low as $1.5 per barrel to as high as $90!
I consult to the industry and they are basically gearing their operations and accommodate their business models to the $50-$60 price range.
The days of $100 oil are gone for now and very far into the future, unless the whole Middle East goes up in flames or a major war breaks out elsewhere. The supply situation in now very diversified.
So, Western oil companies would LOVE to have the power to set prices or even influence them. They just don’t. End of “conspiracy theories”.
The closest consumer product analogy is the coffee industry. When Brazil had a massive oversupply of coffee bean they burned the excess so as not to disrupt the market. On the other hand, when their is a significant crop failure, coffee prices skyrocket. Brazil is the Saudi Arabia of coffee.
Maybe just dumb luck but it reminds me of what Reagan did to the Soviets. Making them spend money they didn’t have. Falling oil prices hits the Saudis and Russia hard where they are most vulnerable and throw in a few other socialist countries that depended on raping consumers with high oil prices. The next few years will be interesting.
@Bing Right! The poorer members of OPEC are really hurting, like Venezuela which relies for nearly its entire state budget on oil revenues and took $90 oil for granted. Saudi Arabia is also living dangerously, since their treasury (super piggybank) is already 35% depleted. It has a population of about 12 million but 4 million expatriate workers do nearly all the work. That would be like the USA having nearly 100 million foreign guest workers! Most of that money paid leaves the country. They are rapidly trying to diversify their economy with chemicals and buying foreign refining and other companies. The Saudis will actually have to start taxing workers. Right now foreigners pay no income tax; it’s a favorite assignment for Western experts.
I met a prominent Mexican one day and we talked about oil and its role in development. He told me "God gave us sunshine and fertile soil; the devil gave us oil’!!
So, we are in for interesting times. The very rapid growth in alternative energy sources, including “clean energy” will slow down growth in the demand for oil quite a bit as well…
Let’s not forget that Iran was set to resume production as well and subsequently has. There is no love lost in that region of the globe. The Saudis so much as said, we’re not surrendering any market share we currently have so others can join the party.
@TwinTurbo If Iran and Iraq come back full bore we will really have a glut. The forest fires in Canada took 1 million barrels per day off the market for several months. Those barrels will all be back in 2 months time. Nigeria and Libya have had some supply interruptions due to domestic unrest.
US fracking oil at $50-$60 is the real spoiler here. It has allowed the country to severely cut imports and actually start exporting some as well.
The quickest way to get back to sky high oil prices is for well meaning US environmentalists to stop the fracking and shut off further new imports from Canada. That would raise oil prices back to $100 within months.
