Just a brief look at the chart, and daily experience, tells you they don’t always drop with every price drop (just past 3/7 to just past 4/28 of '11 is a prime example) and when they do drop it’s not in proportion (3/7 of '11)
Why would margins be higher now with idle capacity than they were in 2008 with no capacity to spare? Why is gas at a higher price per gallon this year relative to crude than it was in 2008?
Your idea that the disappearance of a gas tax will immediately translate to a drop in pump prices doesn’t match with reality.
What we’re talking about here is the ‘crack spread’, the difference between the gas price and the crude price (don’t ask me where they came up with the name!). As you’ll see on this plot, it goes up and down over time, particularly in the recent volitile period. But it always comes down after it peaks. If oil companies controlled things like some posters here claim, why would it ever come down? Why wouldn’t they keep it at $20/bbl (that’s about $0.50/gallon) instead of it dropping back to $10/bbl or so ($0.25/gallon)?
Simple: competition, the same thing that’ll happen if the gas tax is dropped.
bscar 1:20PM Report
If the gas tax is going towards maintaining the roads, what happens when more and more people start using less and less gas(the 54.5mpg CAFE number)?
Well - one of two things, or a combination of both:
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Gas taxes go up to recover the “lost” revenue
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Need for gas taxes declines as the vehicles become lighter in order to meet requirements and therefore do less damage to the road.
A minor contribution I’d make to this discussion is to point out that NYMEX WTI crude is widely considered to be a broken benchmark, due to structural issues related to capacity at the delivery point, Cushing, OK. ICE Brent crude is a much better benchmark of world oil prices, and, although it was down today parallel to WTI, it settled above $100. Brent has been above $100 since early in the year and is consistently higher than WTI.
“If the gas tax is going towards maintaining the roads, what happens when more and more people start using less and less gas(the 54.5mpg CAFE number)?”
Fewer taxes collected means that they need for find other ways to pay for the road work. Tolls are one way. There is a new road opening around me and the toll will be $6 to drive about 20 miles. And there will be no cash accepted. You must prepay with E-ZPass or pay as you go with a credit card. The state is also thinking about adding lanes to I-95 north of Baltimore for HOV lanes. Unaccompanied drivers may be given the option of buying spots in the HOV lane. Tolls on existing roads are going up in MD. The Chesapeake Bay Bridge will rise from $2.50 to $8.00. The two tunnels and the FSK Bridge in Baltimore will rise from $2.00 to $4.00 each way. The JFK Highway (I-95 north of Baltimore) toll will rise from $5 to $8.
that bridge is kinda aptly named, since they will FSK you on tolls. 
no cash huh? Lets hope there isn’t any power or service outages in those booths.
The horse is out of the barn and there is no supply / demand on oil prices. There is no competition and oil companies through consolidation and cooperation control supply themselves, a neat ENRON trick from the Calif. electric crisis where public good is secondary to corporate profit.
When Bush took office, gas prices were 1.47 a gallon. Since that time given the freedom to control political outcomes here with unlimited contributions and with major oil companies having more than two thirds of their holdings in other countries there is no incentive to do anything but max profit and to heck with the effect on the American economy. When ever a tax is decreased, you can bet that shortly after, a spike in oil prices will fill the void.
Our economy is tenuous because of high energy costs making it suseptble to any other factors that under different times could be absorbed by economic growth. The is no buffer because of the high costs of doing business and transporting goods. Any tax reduction is another step backwards that has to be made up by the middle class.
Again, there is no competition for oil.
Have you noticed, while driving across the country, that fuel prices are lower where fuel taxes are lower?
If what some of you said were true, that lowering the tax will not affect prices, we would see the same fuel price everywhere, regardless of state, county, and city gasoline taxes. We don’t. When you cross from Florida into Georgia, you will notice fuel prices go down as a result of the fact that Georgia charges lower fuel taxes. When you cross from Palm Beach County, Florida into Martin County, Florida, you will notice a difference in fuel prices because of a difference in county gasoline taxes. If fuel prices were really controlled by the oil companies, as you say, and not by supply and demand, as I say, everyone would be paying the same amount for fuel, regardless of the local taxes.
Have you ever been on US-78 in Alabama between Birmingham and the Mississippi state line? If you go there, you will find an unfinished interstate highway as the result of Alabama choosing to spend its highway funds on other things. If you 86 the federal gasoline tax, you will find more and more highways like this across the country.
Have you noticed, while driving across the country, that fuel prices are lower where fuel taxes are lower?
EXCELLENT point…And I live within 2 miles of the MA border where the MA state tax is about 3cents higher then NH…but the gas prices are the same. We do a lot of trips to NY and their tax is more then 20cents a gallon higher…yet their gas prices are only about 10 cents higher…
Yup those lower gas taxes mean lower prices…NOT…
“there is no supply / demand on oil prices”
Facts prove you wrong. Why have oil prices dropped $20/bbl in the last month or so, from $100 to $80? If oil companies could fix prices, why would they ‘let’ them drop?
And one other detail: “big oil”, Exxon, Shell, Chevron, etc., no longer produce most of the world’s oil. Instead, it’s the “NOCs”, the national oil companies. So if you’re looking for who ‘controls’ oil prices, they’re the ones to look at. Seems like they’re failing to do what folks claim, though.
Facts prove you wrong. Why have oil prices dropped $20/bbl in the last month or so, from $100 to $80? If oil companies could fix prices, why would they ‘let’ them drop?</b>
When the prices get TOO high - buying slows…If it slows too much then the oil companies start to loose money…so they’ll drop the price to increase buying. It’s a game they play constantly. This is economics 101. A company that big has some serious programs to determine exactly what the selling point to maximize profits. Most companies do these days.
And one other detail: “big oil”, Exxon, Shell, Chevron, etc., no longer produce most of the world’s oil. Instead, it’s the “NOCs”, the national oil companies. So if you’re looking for who ‘controls’ oil prices, they’re the ones to look at. Seems like they’re failing to do what folks claim, though. <.b>
But Exxon, Shell, Chevron…control the refineries…Thus controlling the gas price you see at the pump. When was the last time a refinery was built in the US???
Answer - 1976.
Control the supply and you control the price (thus profit). The energy industry has learned that lesson very well.
OK, now we’re back to refineries. That’s not the case - that ‘crack spread’ plot shows that the difference between crude price and gasoline price, while it spikes, keeps getting back to about $0.25/gallon. And the majors don’t control most US refineries now, they’re getting out of that business because of the low profits. Like I said, Marathon and ConocoPhillips are spinning off the refineries and marketing because they’re a drag on overall company performance and stock price.
And the majors don’t control most US refineries now, they’re getting out of that business because of the low profits.
Not according to my Exxon stock statement…They own 46 refineries in 26 different countries…and profit is up to $1,000,000 PER DAY in just ONE refinery.
http://www.knoxnews.com/news/2011/may/17/oil-refiners-big-profits-help-keep-gasoline-prices/
NOT PROFITABLE…They are making HUGE profits…Biggest profit EVER…
MikeInNH: “We do a lot of trips to NY and their tax is more then 20cents a gallon higher…yet their gas prices are only about 10 cents higher…”
How do you explain the 10 cent difference? This ought to be good.
Those articles are out of date. Folks are good at picking the peaks and claiming that will continue, when it never does. Refining margins are now way down, as shown here:
http://www.eia.gov/todayinenergy/detail.cfm?id=1630
Note that those articles were from earlier this year, when the gap between crude and gas were just about at the max. That gap has greatly decreased (as it always does).
And you can see here that gasoline stock are now at the high side of historical averages. For being such devious planers, these refiners sure don’t seem to know how to control things!
http://www.eia.gov/oog/info/twip/twip_gasoline.html#prices
The flip side of refineries:
http://www.chron.com/disp/story.mpl/business/energy/6787241.html
My articles I posted are from 2011…Yours is from 2009…
These are the latest articles you’re going to find. We’re just into the 3rd quarter…so only 2nd quarter data has been reported…Exxon had a $10Billion profit in Q2. Their refinery profit DOUBLED over last year.
I’m NOT saying the oil companies can’t make as much money as they want…They can…more power to them.
This whole discussion is about taxes and will lowering taxes effect the final cost of gas…And I think it’s been PROVEN that it won’t. Taxes would have to decrease a LOT more then 0.18 to make a difference at the pump. I’m all for it…now just go after the top 1 percenters to make up the margin in lost tax revenue.
All but one of my articles are current. Check them out. Current margins are way down, current inventory way up.
Well I don’t know where you’re getting your information from…
There’s no way margins are down when there’s RECORD profits…Sorry, but not possible.
As of July 2011…
http://notmsnmoney.proboards.com/index.cgi?board=startinvesting&action=print&thread=702
http://247wallst.com/2011/03/07/refiners-getting-squeezed-vlo-hoc-fto-tso-mro-xom-cvx-cop/
MikeInNH: “There’s no way margins are down when there’s RECORD profits…Sorry, but not possible.”
In order to believe that, you have to believe petroleum products are only used for fuel. They aren’t. Petroleum is used to manufacture just about everything, so yes, it is possible that margins on fuel sales are down, but PETROLEUM COMPANY profits are at record levels. You just have to consider all the other revenue streams available to petroleum companies.