The One Chart That Will Infuriate Drivers (If Not Big Oil)

Tyler Durden's picture

We have all said it. Anecdotally, it feels like when oil prices rise, gas prices at the pump rise; but when turmoil pauses in global geo-politics - or some entity decides that high oil prices just will not do for the world's economy - gas prices at the pump seem not to drop so quickly. Yes there are pipeline, inventory (and even tax) issues but the following chart suggests 'gouging' on a national level...



Chart: UBS

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Dr. Engali's picture

That's why it is absolutely necessary to thorw out food and energy when figuring inflation. It's just too darn volatile, besides it's not like people need it anyway.

Cognitive Dissonance's picture

Food and energy consumption is completely voluntary.....just like our tax system.

Caviar Emptor's picture

As they say at the Fed : if it weren't for necessities, there'd be no inflation

FunkyOldGeezer's picture

Oil companies have to make a profit somehow. Don'cha know, they're ever so poor.

I thought it was only articulated joints that became dislocated.

GetZeeGold's picture



Not if they're anywhere close to the Gulf of Mexico.

mayhem_korner's picture



Maybe just shut down all the profitable oil production companies.  Y'know, just to see what happens.

you can't fix stupid

Flakmeister's picture

Why don't you plot it against Brent...

WTI don't mean diddly shit, except to analysts computing margins for mid-continent refiners....

mayhem_korner's picture



...also refinery capacity is the bottleneck between crude and refined products.  Crack spreads and premiums for refined gasoline can vary based on which refineries are on-line and what season it is.  Demand for distillate (#2 home heating oil) and winter-grade gasoline changeovers can elevate premiums.

There's a lot of distance between the lip of gasoline and the cup of crude...

adr's picture

Considering gasoline futures contracts set the price of wholesale gas, and are open to algo driven speculation. It is perfectly concievable that gasoline could stay above $3.00 a gallon even if oil dropped to $60 a barrel.

Silly rabbit thinking demand and fundamentals mean anything anymore. There is no true price discovery.

Flakmeister's picture

Silly Rabbit don't know SFA about how oil and refined products move about.... Gasoline stocks are at historic lows in PADD 1 because, drum roll, European refiners are shutting down (~2 mmbpd of capacity shuttered in the past 4 years)....

Edit: given all the junks, it is pretty clear that this one went over alot of heads here...

mayhem_korner's picture

There is no true price discovery.


Name a product that has better price discovery than retail gasoline.  It is distributed by local franchisees who post the price in large numbers that can be seen from 1/4 mile away.  Apart from cigarettes (sold at gas stations) and a few other items, what other products can you discover the price without actually going into the store?

Dr. Engali's picture

You're kidding right? Around here they are all priced the same up and down the streetsI have had owners tell me that they just look down the streeta t such and such station to see what they are charging then they will throw up the same price.

mayhem_korner's picture



Not kidding.  When you see the same price at 8 different gas stations in a 1/2 mile stretch, you are really looking at one station/micro-market.  Drive 5 miles away and you will see another cluster.  Where I live, I see gasoline price variances of $0.40/gallon within a 15-mile radius.  No one is forcing you to choose to buy gas at the cluster of stations closest to you.

Remember that markets require buyers as well as sellers.  Everyone buying at your cluster is a willing participant in that cluster's price.

mess nonster's picture

Where I live the same distributor provides gas for a Philips sation, a Sinclair station, and an off-brand station. It's all the same damn gasoilne, from the same truck. The marketing agreements vary, and the sign merely indicates which retailer gets screwed how much by the sign provider for having the sign. Where does the distributor get his gas? He's locked in to one of three bigger ditribution systems as permanently as if he was a serf bound to the land on a Russian estate.

It's a truly fucked-up system. Opt out.

machinegear's picture



They don't let you in the "store" until price is discovered.

SelfGov's picture

Or could it be the quality of crude on the market? The easy stuff is gone, after all.

GetZeeGold's picture



The easy stuff is gone


....and cheap stuff is banned.


GetZeeGold's picture



All our off shore oil rigs have moved to Brazil.......not sure why. Canada has to sell their oil to China....I guess we don't want it.

Spastica Rex's picture

I have a new carburetor design that allows high power American v8 engines to get 60mpg highway while pulling a full size SUV at 80mph.I have the plans hidden in a Brazilian vault because the oil industry paid me off a few years ago.

GetZeeGold's picture



They've got 60mpg cars in Euroland......but we can't buy them in America.

Flakmeister's picture

Not that most americans would drive a turbo-diesel econobox....

Also, there is a hidden factor, imperial vs. US gallons....

GetZeeGold's picture



Be nice to have the option......just sayin.

Flakmeister's picture


Oh yeah, you gotta to be able to drive stick as well...

GetZeeGold's picture



You don't know how to drive a stick?

akak's picture

I doubt more than one American in eight knows how to drive a vehicle with manual transmission.


PS: My pickup doesn't even have power windows or locks.

Flakmeister's picture

Every car I have owned since '94 has been a 5-speed....

akak's picture

It always cracks me up (and makes me shake my head) here in Alaska to see drivers, particularly in the winter, slam on and ride their brakes all the way down a mountain road, frequently losing control in the process, rather than just downshift and coast.  I think the majority of idiots behind the wheel here firmly believe that a driver simply MUST have their foot on one or the other of the floor pedals at ALL times.

Flakmeister's picture

Look GZG... You are not allowed to make shit up because you want it to be true..,

Could you remind us of how much oil the Canadians export to China and how much they export to the US?

Can you provide any shred of evidence that the DW rigs are heading to Brazil?

GetZeeGold's picture



I see you know a little about Saul Alinsky.

Flakmeister's picture

Nope, never heard of the guy (aside from refrences from fucking whackadoos here that I would not trust with a burnt out match)

But it is clear that you know almost nothing about oil and its flows....

GetZeeGold's picture



Ever heard of Google?

Flakmeister's picture

Why the fuck would I care about someone that only the whackadoos seem to care about...

Hell, why not look at the Koch Bros. daddy Fred to find someone that had actual influence....

Arnold's picture

Really If we agree with you will you leave?

Paper CRUSHer's picture

............time for a SPR

firstdivision's picture

You can thank BP and the blow-out for the disconnect.  All was well until the Gulf-spill.  Now there's a premium ontop of the price for risk of future disaster.

Vendetta's picture

pricing in the stupidity and negligence?

goldenbuddha454's picture

Charts are completely irrelevant given the amount of money printing between the Fed and the Treasury.  Yes, there is a lack of demand for oil and will continue to be, but as the U.S. and Japan continue to deflate the value of our currencies, the less product we can buy so what we have is an artificial price level for gasoline that one day will explode when they decide to reveal that, yes, there is really inflation globally and its not just "transitory".

moonman's picture

Isnt oil priced in dollars?


Glass Seagull's picture

No...priced in dollhairs.

goldenbuddha454's picture

A few possible scenarios concerning oil and the price of gas: 1)  Oil will plummet to 65 a barrel and stay there til demand increases in the summer vacation season.  2) Oil will maintain its current level for the next few months, then rise,  regardless of demand due to the printing of money or some other x factor in the near future ie... threat of Israel taking out Iranian nuke plants  in the future. 3) Oil will rise from its current level due to an overreaction of oil producers to cut back production to the impending recession and a softening in China. 4) Oil will go hyperbolic in the new year due an inclusion of food and gasoline in the Fed's report on the economy.  5) oil will rise sharply due to new EPA regs curtailing refinery production in the U.S.  Pick one, which will it be or none of the above? 

Flakmeister's picture

EPA regs curtailing refining... more people making shit up...

Is that why we recently had record refining capacity in the US?

paulbain's picture



goldenbuddha454 wrote:

A few possible scenarios concerning oil and the price of gas: 1)  Oil will plummet to 65 a barrel and stay there til demand increases in the summer vacation season.  2) Oil will maintain its current level for the next few months,

[snip, snip]

GoldenBuddha, your analysis is good as far as it goes, but it neglects the strong liklihood that, when the price of gasoline breaches $6 per gallon, the Federal government will impose price controls on fuel.

-- Paul D. Bain





Flakmeister's picture

BTW, Keystone XL will fix it, by dragging the bottom curve up (~95% of the spread) while pushing down the gas curve down (~5% of the spread)... 

rzero's picture

This is solely from the disconnect that has emerged between WTI and Brent, due to a shipping bottleneck for WTI.

US gasoline has been tracking Brent, which is now the best indicator for the true price of oil. WTI is now basically meaningless.

strangeglove's picture

Same as with Coffee! Drops like a rock but the price rise sticks.

tnquake's picture

But the bag keeps getting smaller! For the $$$$$ brew, just go one cup...

toomanyfakeconservatives's picture

Kona... not the blended shit. Real Kona.

BeerBrewer09's picture

mom just sent 3 pounds from Hawaii. nice stuff.