Can someone explain the following chart, specifically the price movements of oil vs. gas since ~march 2007? Why is oil +100% over this time period while gas is up nowhere near as much. http://22.214.171.124/ChartServer/ch.gaschart?Country=Canada&Crude=t&Period=72&Areas=USA%20Average,Canada%20Average,&Unit=US%20$/G
My dealer tells me the crack spreads are weak…
Because they are futures prices…the prices you see crude at are being negotiated for in the future…so you will see those prices in a few months…I work at a Nat Gas brokerage and they trade/broker some crude and that was the first question I asked them… Rest assured, greater price increases will be coming…
My guess is that while crude is internationally traded in the USD (at least benchmark light sweet), so some of that is a mathmatical inevitability of a weaker dollar, RBOB is domestically traded (similar to nat gas, which has regional pricing and designed to hedge regional producers), with little to no currency impact. Though, a commodities person could tell me I am full of it, as this was more of a guess than anything. mto, thing the question is not futures vs spot, this is the basis between crude and refined product.
RBOB also up - that graph is a graph of retail gasoline prices vs crude oil. In between crude oil and gasoline is: a) Refining costs b) Storage costs c) Transportation costs d) Taxes e) Required profit margins for oil companies and gas station owners. All of those other costs are relatively stable and crude oil prices are only one component of retail prices. That said, if we don’t get a grip on this prblem soon, it’s pretty clear that retail prices ought to be more affected by crude prices than they currently are and we could have some trouble.
Great time for walking as I do. Best economic decision I ever made…besides CFA of course!
Isn’t gasoline refining capacity also relatively loose compared to other refined products, especially diesel?
CFA-Halifax, I agree it’s great to be a pedestrian (and a prius owner as a backup) but the price of gasoline is still likely included in every single purchase you make.
JoeyDVivre Wrote: ------------------------------------------------------- > RBOB also up - that graph is a graph of retail > gasoline prices vs crude oil. In between crude > oil and gasoline is: > a) Refining costs > b) Storage costs > c) Transportation costs > d) Taxes > e) Required profit margins for oil companies and > gas station owners. > > All of those other costs are relatively stable and > crude oil prices are only one component of retail > prices. That said, if we don’t get a grip on this > prblem soon, it’s pretty clear that retail prices > ought to be more affected by crude prices than > they currently are and we could have some trouble. So refinery and distributor margins are being squeezed right now?
Not that I know of because the price of retail gas has grown. It’s like suppose that half the cost of something doubles and the other half stays the same. The product goes up in value by 50%.
Refineries are getting squeezed badly, retailing less so. Just look at Q1 results from any integrated producer, midstream (refining) is getting slammed while all the profit is from upstream (production). To the original question, it all depends on your time frame. 2008 YTD, crude is up 30%, natural gas is up 50%. However, the answer is just that they are two different commodities. On the supply side, you hear “peak oil” (whether you want to believe it is another story) all the time, but never hear “peak gas” because there is tons of natural gas out there, with many major gas fields untapped. On the demand side they are different too. For commercial uses, crude is often replaced with natural gas when the BTU differential changes (6mcf of gas = 1 barrel of oil on a BTU basis) so the prices are sort of related due to a loose substitution effect. However, most of oil consumption is for transportation which is not easily switched over to natural gas - thus there are different supply/demand dynamics between oil and gas.