Wonder Why you Gas Prices are so HIGH?

[Essex502]

Small Dip in Pump Prices Doesn't Reflect Big Drop in Wholesale Costs, Experts Say
By Elizabeth Douglass, Times Staff Writer
Gasoline prices eased in California for the second week in a row, the federal government reported Monday. But pump prices in the state remain stubbornly — and some experts say suspiciously — high.
The statewide average price for a gallon of self-serve regular fell 1.4 cents in the last week to $2.083, according to the Energy Information Administration, the statistical arm of the Energy Department. Retail gasoline prices have fallen 2.9 cents over the last two weeks.
Despite the dip, some market watchers say prices should be even lower.
"We were expecting to see more than just a penny decline," said Claudia Chandler, assistant executive director of the California Energy Commission. Refiners and service station operators are "trying to hold on as long as they can to the higher prices to capture any profits that are still left."
Gasoline prices in the Golden State skyrocketed in February, jumping more than 16 cents in a week to well above $2 a gallon after reported refinery troubles curtailed production. Retail prices peaked at a statewide average of $2.112 a gallon March 8.
Now, the refinery troubles are in the past and production is up. Wholesale gasoline prices in Los Angeles, a key indicator of the state's fuel supply situation, have dropped to $1.27 a gallon, down 30 cents since peaking at $1.575 on Feb. 19, according to Tom Kloza, chief oil analyst at Oil Price Information Service, a company that tracks fuel prices.
"That's what the FTC chairman called an anomaly," said David Sandretti, spokesman for Sen. Barbara Boxer (D-Calif.), who asked the Federal Trade Commission to investigate California's latest gasoline run-up. Boxer said March 11 that the FTC was reviewing unspecified "anomalies" in the state's gasoline market.
Based on Monday's wholesale spot price for gasoline in Los Angeles — which has rising crude prices and tight supply worries factored in — retail prices in the city should be around $1.87 a gallon, Kloza said.
The average pump price in Los Angeles is $2.139, according to the EIA.
"There's a big refinery margin in there," Kloza said. "This is going to be the most profitable quarter ever for refiners in California and the West. They're going to have to gingerly release their earnings next month."
Only a handful of independent service stations pay the published wholesale price for their gas, but it still serves as an indicator of the overall trend in retail prices. In California, most stations sell branded gasoline and must pay the price set by the oil companies, which in many cases is higher than the wholesale price.
Companies that make most of California's gasoline are ChevronTexaco Corp., Shell Oil Products, BP, ConocoPhillips, Valero Energy Corp., Tesoro Petroleum Corp. and Exxon Mobil Corp.
Joe Sparano, president of the Western States Petroleum Assn., said retail prices are individually set by the thousands of service stations throughout the state. Sparano said he couldn't explain "why retail prices have not moved down apparently as quickly as wholesale prices have."
He said station owners may be trying to recoup earlier losses, saying that "it's the market and competitive factors in the marketplace that are going to drive prices."
Nationwide, crude oil prices have made a difference at the pump; about 2.5 cents is added to a gallon for every $1 increase in the cost of a barrel of crude oil, according to Chandler of the state energy commission.
The benchmark grade of crude started the year at $32.52 a barrel and hit a 13-year high of $38.18 a barrel last week on the New York Mercantile Exchange, propelled in part by unusually low inventories in the United States, international unrest and expectations that the Organization of the Petroleum Exporting Countries would further tighten supplies by curtailing production April 1.
Still, the sharp rise in crude prices accounts for only about a third of the increase in California gasoline prices this year.
On Monday, the price of crude dipped slightly on hints that OPEC may postpone its planned production cutback, falling 97 cents to $37.11 a barrel in New York trading.
Meanwhile, the pressure is mounting on the Bush administration to stop taking oil off the market to fill the Strategic Petroleum Reserve, which is 93% full, with 649.5 million barrels at the ready.
On Monday, a group of 53 House members released a letter to Bush that urged him to stop filling the reserve until prices subside.
While gasoline prices dipped in California, according to the EIA, they continued to go up across the country, rising 1.9 cents to an average of $1.743 a gallon.

[Essex502]

Since few independent stations actually can purchase gas at the wholesale prices it is obvious the Oil Companies selling "branded" gasoline are keeping the price of gasoline sold to their captive, branded dealers artificially high.
Ever wonder how Exxon/Mobil go to be #2 on the Fortune 500 list leapfrogging General Motors, Ford and General Electric? Look at the record profits they are recording.

[mickeyfinn]

Don't know how the stations out there operate but I have worked in several of them here during my life. The biggest reason for the prices not dropping is because of the way most stations price their fuel. Most of the time any increase in the wholesale price of fuel causes an almost immediate increase in the pump price, even though the station didn't pay anywhere near that for it. When prices begin to drop most stations will not drop the pump price until they have actually recieved a shipment at the reduced rate. Even then they usually back off the price slowly over time. Usually in a fairly busy area the prices drop as the stations in the immediate area get into a price war. The volume sales stores such as Quick trip will always be the first to reduce the pump price to keep their customers coming in. This usually results in a temporary increase in sales as people shift from other retailers to take advantage of the lower price. As they stabilize prices people usually gradually go back to their usual retailers.
Pretty simple concept, Soon as the rumor of higher prices start act on them and make them a reality. When rumors of price drops start, refuse to acknowledge them until you reap the benefits.

[Essex502]

I interpreted the article as pointing the finger at the "branded" oil company distributers NOT selling their brands at the wholesale price but somewhere above it. When few independent stations are in a neighborhood buying the less expensive unbranded gasoline at the wholesale price there is no motivation for stations to dro their price. Ever notice that on 4 corners of an intersection all four dealers are selling their gas at exactly the same price? Coincidence - absolutely not! They usually match each other's lowest pricing. If one of the station's is an independent then all of the stations usually lower their pricing as low as they can go to meet the independent's price. With the independent stations being bought-up by the branded stations, there's no need to lower the pricing.

[PHX ATC]

Doesn't matter how you slice it, you're getting porked.:rolleyes:

[Essex502]

Gasoline prices likely to stay up
Bay Area can expect to pay more than $2 a gallon all summer
Verne Kopytoff, Chronicle Staff Writer
Wednesday, March 24, 2004
Brace yourself for an expensive summer driving season.
Gasoline prices, which hit an all-time national high Tuesday, aren't expected to drop significantly anytime soon, according to oil industry experts.
That means that a gallon of self-serve, regular unleaded will probably cost at least $2 in the Bay Area through September. Analysts lay the blame on high oil prices, limited refinery capacity and the state's unique blend of fuel, formulated to produce less smog.
"None of these issues are going to improve much," said Jenny Mack, a spokeswoman for the California State Automobile Association. "So it looks like a long summer."
On Tuesday, AAA reported that the average price for gas across the nation hit an all-time high of $1.74, beating a record set last summer by less than a penny.
As usual, the average price in California was much higher at $2.14. That represents a decline of a few cents from the $2.18 record for the state set earlier this month, according to AAA.
In San Francisco, gas averaged $2.23 per gallon on Tuesday. In Oakland, the average was $2.13. In Vallejo, Fairfield and Napa, it was $2.11 per gallon.
Drivers filling up their cars at a Shell station in South San Francisco Tuesday reacted to the high prices with a mix of anger and resignation. They complained about paying $2.36 for a gallon of regular at the station, but in the end said they had little choice.
"I don't really like it, but there's not a lot I can do," said T. Puckett, a San Francisco resident who works at a shipping company near San Francisco International Airport and drives a Chevrolet Camaro.
Eric McCarver, who travels about 300 miles a week from his home in Napa to buy cars at auctions, said he feels like he is being taken advantage of. He said he had visited Texas and Arizona recently and was shocked at the lower gas prices there.
"It was appalling to come home and see that we're 50 cents a gallon higher," McCarver said while pumping gas into his Jeep sport utility vehicle.
Oil industry representatives have said the increase in prices has simply been a consequence of supply and demand. They decline to speculate about prices this summer, citing antitrust concerns.
The Energy Information Administration forecasts that national gas prices will rise about 7 cents to peak at $1.83 in April. Prices are expected to slowly decline after that to a low of $1.65 in July before rebounding to $1.70 in September.
Dave Costello, an economist with the Energy Information Administration, said that growing demand for gasoline, compounded by low inventories, is partly behind the rising prices. Getting new supplies tends to be difficult and expensive, he said.
Traditionally, Costello said, prices rise before Memorial Day as refiners gear up to get summer supplies in place. After that, prices tend to moderate until jumping again around Labor Day weekend.
To help bring oil prices down, several U.S. senators, including Democrat Barbara Boxer of California, asked Energy Secretary Spencer Abraham at a Senate hearing on Tuesday to release oil from the nation's Strategic Petroleum Reserve. He declined, and said it is important to keep adding to the reserve, citing national security, the Associated Press reported.
Some of what will dictate prices this summer depends on whether the Organization of Petroleum Exporting Countries decides to cut production, which could cause prices to rise more. The organization had previously said it would cut production starting April 1 but is now wavering because prices are already near 13-year highs.
"OPEC is walking a fine line," said Jim Cox, managing director of the Pixley Group, a commodities trading firm in San Francisco. "You try to get as much money as you can for the oil until the person you are selling to wants to go somewhere else and look at alternative sources."
Russ Hampton, the owner of the Shell Station in South San Francisco where drivers were fueling up, said the rise in prices hasn't helped his profit. He insisted that he is simply passing on higher wholesale costs to his customers.
Rather, Hampton put much of the blame on Shell. He said Shell charges him 20 cents more per gallon for wholesale gas than it charges stations in the East Bay, a practice known as zone pricing that oil companies have acknowledged takes place.
"When prices go up, I keep the margin the same," Hampton said.
=============================================
That last line screams at at you one of the major reasons for high gasoline prices.

[HighRoller]

The high prices aren't nearly as offensive as the oil companies lying to us about the reasons for high prices. As a trucking owner/operator, I followed fuel pricing and trends very closely and noticed some distinct patterns. First, every year the oil companies' PR machine will kick into high gear just before a major travel holiday to get the fuel prices up. Two years ago it was Mem day, last year Labor day. And this is no coincidence, the "bad news" was perfectly timed in both instances so that fuel prices spiked two days before the holiday. Coincidence? I think not. And mysteriously, five days after the holiday the prices had dropped ten cents! The second thing is how the prices fluctuate. Two years ago a gallon of regular was 1 dollar. Then it skyrocketed to 1.50 but came back down to 1.20. Then it rose to 2 dollars and came down to 1.50. Now it's going up to 2.20 or 2.30 and will settle back down to 1.80 or so.(Cali prices) See a pattern? Finally, the seasonal price fluctuations are the oil companies' greatest invention ever! How is it that summer causes prices to rise, but winter causes prices to....rise? Every year you hear some schlub from the oil company whining that cold weather created excess demand. So you run a multi billion dollar company capable of delivering oil to every street corner in the country daily, but a predictable seasonal weather change "caught you off guard"? Not likely. Face it, the only way gas prices will ever change is if the oil companies get broken up like the Bell Telephone companies were. But nobody has the juice to stare down the oil companies because big oil owns everyone in government from top to bottom.

[Essex502]

HighRoller - read up on zone pricing and that should also clear up some questions about price diferences between stations of the same brand only a few miles apart. Another great invention of our big oil companies.