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

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
lance_manion's picture

 

This has alot more to do with the wide $20-30 spread opened up between WTI and offshore/light crudes such as Brent/ANS/LLS since 2010.  Many coastal refineries are not running or set up to run on WTI, hence the disconnect between WTI and average gasoline price.

Flakmeister's picture

Most of the Gulf Coast guys want the heavy sour shit, the problem for the light crudes is the crack spreads are lousy. Hence many older refiners are going tits up....

Jason T's picture

Refineries were closed up all over Northest and in the Carribean.  

Hohum's picture

Oil inventories quite high; gasoline not so much.  That is another explanation.  Check out the weekly petroleum status report from EIA on Wednesdays instead of speculating about "gouging."  Mr. Durden, you have better things to do.

Flakmeister's picture

Yeah, this article is not up to the usual ZH standards....

I see it as throwing raw meat to the know nothings that are starting to dominate the boards...

LongSoupLine's picture

Fuck you you troll cunt. The chart shows years of this fucking shit.

It's just another fucking way the corporate elite rape the middle class knowing all along Bernanke wont include it in CPI. Out of fucking sight, out of fucking mind.

Take your EIA piece of shit fucking data and shove it up your well oiled fucking ass.

Monedas's picture

Obama's libs get giddy about high gasoline prices .... your own people love it, LongSoupSlime ? You're off the Liberal Plantation on this one !

Flakmeister's picture

Go fuck yourself and don't forget to give yourself a reach around while you are at it....

You are an idiot and every post you make only reinforces it....

LongSoupLine's picture

Nah, not liberal, nor conservative...just a hard working educated middle class guy who's angry we're getting fucked up the ass at every turn and by every entity from wall street, regulators to the politically corrupt.

If being completely pissed off for all us makes me an idiot, then I'll wear the badge with pride. With that, I admit my anger was a bit misdirected in my last post, and am man enough to say sorry.

mess nonster's picture

If you're tired of getting fucked, then leave the orgy.

LongSoupLine's picture

orgy??

Those are reciprocal events...retarded fucking analogy.

Moric's picture

This is an absolutely retarded article and point to make. WTI isn't even a relevant number when it comes to gasoline. I might concede the point if this was a Brent VS Gasoline chart. The only reason this phenomenon exists is entirely a transportation issue. Ever heard of Keystone XL?

Eally Ucked's picture

I'm not an oil expert but why graph was so correlated up until 2011 if WTI isn't relevant?

According to Canadian oil sources Canada sell oil to US for prices discounted to WTI by around 30$, so XL pipeline would really help to get more cheap oil to US.

Maybe that graph partially answers our question:http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFEXUS2&f=M

Flakmeister's picture

Look closely, it started in late 09, and there was a brief period when the WTI-Brent spread tightened...

The putative Keystone  oil is going to the Gulf coast, read the Valero 10-Q and all about tax-free export zones...

Yes, your graph does explain some of it, as the US consumer must now compete on the world market for gasoline. Hint, he is losing the bidding war....

Oh, there is another reason why WCS trades at big discount, it is crappy "oil"

http://www.cenovus.com/operations/doing-business-with-us/marketing/western-canadian-select-fact-sheet.html

Edit: another issue that I should have mentioned that the only significant increse in OECD production has been the Tar Sands and Bakken which are land-locked. This leads to a depressed price at Cushing... FWIW, the increase in the Bakken has basically offset the decline in North Slope production....

 

Uncle Remus's picture

Can I use my EBT at the pump?

Downtoolong's picture

I think there could be a micro explanation too. Most gas stations and retail outlets are mom and pop ops who don’t hedge their inventory. Their margins are typically so thin they simply won’t (can’t) sell their inventory at a loss when prices drop. Of course, they are quick to jack prices up when they rise quickly. When they get stuck with high priced inventory, they just keep offering it at a higher price until it’s gone. Sales volume may fall off a bit, but, eventually they liquidate and start over. It’s amazing how many people don’t even look or compare gas prices when they pull in to a station to fill up. I’ve seen spreads of $0.20 per gallon between stations across the street from each other when wholesale prices are moving up and down quickly. It’s another example of how volatility (risk) in wholesale fuel prices gets passed on to the consumer in the form of higher costs. One more thing we can thank Wall Street and their paper markets for.

yrbmegr's picture

Capacity utilization is quite high in PADD 3 (Gulf Coast).  Part of the disconnect could be a capacity issue.

Byte Me's picture

suggests 'gouging' on a national level...

 

More like INTERnational

Monedas's picture

The Obama administration has been quite open about how it admires high European style gasoline prices .... listen to what they say !  

Coast Watcher's picture

Not this year, but in O's second or third year he'll propose "fixing" the Obamacare clusterf*ck with single payer national health care financed by -- ta-daaa -- a whopping increase in the fuel tax, just like all those admirable Euriopean countries do. (Canada, too, IIRC.)

Zymurguy's picture

Yeah, it's bullshit that the fuel in the tank that is in the ground and has been there for a couple days all of a sudden goes up in price because oil rose today.

I know of no other product that alters the live price on the shelf based upon instantaneous changes in the market.

It's total bullshit.

Monedas's picture

They have to charge more to prepare for that next shipment which will cost more ?  Anyone here ever run a business ?

mess nonster's picture

Everybody who deals in volatile commodities on a retail level does this. When I go to buy steel, the guy pulls it off the rack where it has sat for 10 years, covered in a thick greasy crust of rusty oxidation, and then he charges me the going spot rate for new steel. I can't do anything about it because that's what everyone does. All I can do is pass the cost along. The price just goes up, and the guy I buy from is happy to move old stock for a profit.

Monedas's picture

When there is high price volatility in any commodity .... are retailers obligated to lose money to prove their street creds .... if I have to jump through hoops .... I want to be compensated for the trouble .... and a little price cushion is helpful .... sometimes people get burned with volatile prices .... and inventory they paid too much for !  PPP .... Puritanical Price Police !

wagthetails's picture

With so much competition in the gas station industry, i don't really see it as gouging.  I see it more as a function of high gas prices reducing the preceived pain of a 20 cent swing.  I'd when gas is a $1, people think a 20 cent swing is huge, but not so much when gas is $4/gallon.  unfortunately, most people are morons. 

FrankDrakman's picture

Up here in the Great White North, the great socialist Trudeau imposed metric measurement on Canada. When you go from a 4.55 litre imperial gallon, gas that was $0.80/gal suddenly started selling for $0.20/l. Everybody thought it was a great deal, because they can't do simple arithmetic.

But the worst was the spread between regular and premium. It used to be about $0.05/gal (I'm talking the 70's, before unleaded). When they went metric, they get the same spread of $0.05, but now it was per litre.

But I don't blame the gas station retailers. I worked pumping gas in high school, and my owner was decent, gave us raises without us having to ask for them, let us work on our cars in his shop. Some people have enough money not to care about the price of gas, some people figure the time and extra gas burned to drive five miles in city traffic isn't worth the savings of $1. And finally, some people are so stupid they won't drive across the street when the gas is $0.04/l cheaper. That's what free markets are all about.

Disenchanted's picture

 

 

 

"Ol' man river,

Dat ol' man river,

He mus' know sumpin'

But don't say nuthin'

He jes' keeps rollin'

He keeps on rollin' along."

 

 

 

As Mississippi River level drops, prices could rise

 

? Cost $545 million to import foreign oil because 5 million barrels of domestically produced crude oil would not be able to be transported on the river.

Flakmeister's picture

Sandy gets all the headlines, but the pricetag for the ongoing AGW fueled drought is going to dwarf that for Sandy....

Cerin's picture

If you think the WTI spread is bad now, just wait until the river gets shut down here in STL (or further south near PAH). Corps already had to restrict flow in the upper Missouri basin last week due to ag concerns. Another 2-3 feet and we're screwed down here-- 1988 style, maybe worse if we continue this through mid-month. All of those petrol barges are going to have to truck or train it in to the refineries and they will have to sell at a discount to offset the increased transport cost borne by the refineries.

I recommend that folks use Louisana Light Sweet or barring that, Brent for a more realistic picture of what refiners are having to pay (and thus what the fair value of said gas should be).

goldenbuddha454's picture

If the price of oil was related to demand then we would be at $70/barrel or less and I wouldn't have just received an email from Airtran showing me a list of places I can fly to for $69 during the peak holiday season, Christmas!

Vendetta's picture

on a per person basis, aircraft have great mpg.

 

(Aircraft range (miles) divided by fuel capacicty) * number of passengers on board

 

737-800 = range ~6300 miles, fuel capacity: 6800 us gallons, passengers 130 to 215 lets pick 180

6300 mi/6800 gallons * 180 = 166 mi/gal per passenger

Irregardless of the impressive numbers, I don't really know how they make a profit given overhead

ItsDanger's picture

The price at the pump actually does correlate to the futures price. You're right that the pump price doesnt go down nearly as fast but the futures dont either.  It has to do with less than 100% of the volume on the down move  (and slower drop) vs the spike.

orangedrinkandchips's picture

Which is the real deal????? WTF, er, WTI or Brent????

 

seriously...Brent is what to follow, no?

 

thnx in adv.

mess nonster's picture

Yeah you were right the first time. Definitely follow WTF. All the rest is smoke and mirrors.

 

ableman28's picture

Oil to gas pricing is intentionally opaque and all pretroleum producers/processors simply like it that way.  The simplest way to recognize the intentional illogic of the market is to note this.

In 1999 oil was at $10.00 per barrel and gas at the pump was about $2.00 per gallon.  When oil costs 9 TIMES as much gas at the pump is about $4.00 per barrel.  Why doesn't gas cost a lot more now or a lot less then?

Oil is still, on a per barrel/per gallon basis a cheap commodity.  But tranport, refinining, taxes contribute to make it more expensive to the end user of one of its fractions.

But, and this is the key thing, the majority of the price of a gallon of gasoline is manipulated profit generating machine that makes it a phenomenally lucrative enterprise for everyone involved.

 

lostcause's picture

 Also, don't forget we have so many additives added to our gasoline. We have a summer blend and a winter blend. I live in California where we have so many additives I wouldn't have time to name them all. We use 40% of our corn (food supply) for ethanol which is such a waste! The EPA and the federal government is making it much more expensive with all the taxes and mandates. We also haven't built any new refineries in over 30 years! What happens when these start to break down. Look what happened in California a few months back. One refinery went down and the price shot up over 20% in just a couple of weeks!

Flakmeister's picture

Care to reconcile what you said with this?

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MOCLEUS2&f=M

The 30 year mantra about refineries is a well crafted talking point, strictly true but constructed to deliberately mislead. It is a favorite of the EPA bashers....

snblitz's picture

One has to keep on eye on the word "additives".  Something things like ethonal are a "subtractive".

Cerin's picture

There's little incentive to build a new refinery with flat demand (and after the 10-15% slump during the recession). Most refineries are investing in add-on infrastructure to process heavier grades of crude. For instance, the Wood River, IL refinery that I live near just dumped $3.5 billion to expand their capability to handle bitumen/heavy oil from the tar sands.

AlamoJack's picture

@ Bawnee Frank:  You da' bull, hot dog!  Pack your saddlebags and move on down here to Texas.  I'm cookin' down that black crude just as fast as the pipeline blows it out the south end.  Hey, all you HEDGERS, tell these gubmint dingleberries to STOP PUTTIN' ALKYHALL IN OUR GAZZMOLEEN.  It de-energizes our road (and off-road AND on-water) MACHINES.  Destructive gubmint twits.  They know nothin' about engineering.

roadhazard's picture

Butt, butt, PEAK OIL, BITCHES !!! 911 !