Thursday, September 29, 2005

Why are gas prices so high?

Sure there are taxes (those of you in California have them listed out for you on the pumps), but really a lot of it is driven by speculation (i.e., buying and selling of futures).  Mark Cuban has a great post about the effect of futures trading on gas prices.

With oil and gas its different . There is a finite supply at any given point in time. The current and future availability of which can be impacted by any number of issues, from natural disasters to man made events. When enough speculators come in and start going long, it drives up prices not of a piece of paper, but of products whose pricing impacts me , you and everyone we know and don't know.

When a bunch of “momentum speculators” jump in trying to make money off the price movement and push up the price, everyone in this country is the loser with higher gas and oil prices.

3 comments:

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David Skul said...

Midwest Gas Price Investigation - Investigation Likely To Continue For At Least Three to Four More Months

The Federal Trade Commission (FTC) issued an interim report to Congress on its investigation into Midwest gas price increases that was cited at the reasons that the FTC launched the investigation. It also provides a status report on the continuing investigation, including progress and a description of the work not yet done. The report details the history of the price spikes of reformulated gasoline (RFG) in the Midwestern part of the country and how these increases caused Commission staff to initiate a preliminary investigation in June and prompted the Commission to begin a formal investigation during the latter part of July.

The report analyzes many conditions reported as potential causes of the gas price spikes - ranging from higher than normal crude oil prices, to the expectation of compliance with EPA Phase II regulations for summer-blend reformulated gasoline in high-ozone urban areas, to the damage to the critically important Explorer pipeline during March. However, the report says that "although it is likely that each of these supply factors contributed to the dramatic recent price spikes in the Midwest, no single factor appears from staff's preliminary investigation to be likely to provide a full explanation, and staff does not yet have sufficient information to assess the impact of these factors in combination."

In accordance with the report, Commission staff is investigating "the possibility of collusion or tacit coordination, conduct that could be illegal under Section 5 of the Federal Trade Commission Act." Due to the abundance of potential interwoven causes as well as the monstrous amount of evidential information being collected for the course of the investigation, the report also states that "this investigation is likely to consume, at a minimum, another three or four months."

The report shows that on June 29, Commission staff issued the first round of subpoenas to the nine refiners that currently supply the Midwestern markets and that within the month, staff has accepted and logged approximately 200 boxes of documentation. Around mid August, most documents requested from the first round of subpoenas will be delivered to the Commission offices.
The Commission also issued a second round of subpoenas to other refiners last week, and has issued Civil Investigative Demands (CIDs) to the refiners recently, requesting that the refiners compile data and answers to all of the Commissions written questions. Commission staff issued another set of subpoenas on July 25 to the entities that own or control the gas transportation pipelines serving the Midwest markets of the United States. Documents from that set of subpoenas are expected to begin arriving shortly at Commission offices.

The report further details the Commission’s plan to conduct a series of in depth interviews as part of the investigation. Staff has already conducted nearly 15 interviews with market participants, consumers, corporate consumers and many others with knowledge of investigation relevant information, and continues the process of capturing pertinent industry-wide data from the Oil Price Information Service (OPIS). After the documentary evidence has been reviewed and analyzed, staff will take depositions under oath of key participating personnel throughout the gasoline distribution chain in the Midwest United States.

Federal Trade Commission staff will also coordinate all of the investigative efforts with the Attorney General of Michigan, Ohio, Wisconsin, Illinois, Iowa, Minnesota, Kentucky, South Dakota, Indiana, Missouri, and West Virginia.

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Robb Levinsky said...

A new spin on the gas war....

While I loathe the Oil companies and hate the fact they are assuredly raping the public, a far worse problem is the waste and destruction caused by our oil-dependent lifestyle. ANYTHING that will make people buy small, fuel efficient cars and travel with them sparingly, and think about their use and need for oil products, is worth it. In fact, our planet's and our own and our children's survival depends on it. And it is sad but true people only act in their own self interests, not the greater good. No message about protecting the environment, or the Ozone layer, or Global warming matters to anyone, unless it directly costs them money or is killing them in a way they can see. If gas is $10 a gallon and it costs $1200 a month to heat your house, then and only then will people decide to do things that are necessary to save all of us, like drive small sensible cars and invest in really good alternative energy sources and vote for politicians who support this. When a few more cities are destroyed like New Orleans was, people will decide that building on wetlands might not be such a good idea and that global warming might actually effect them. When people see their children regularly having melanoma's burned off their skin at 16, they'll figure out that the Ozone Layer might actually be worth something to them. And so on. Sad things have to work this way, but there it is. If half the people who are so up in arms about high gas prices voted for politicians who weren't bought, sold, and paid for by the oil companies, we might, though conservation and real investment in viable alternative energy sources, not be nearly as dependant on or effected by increasingly unstable foreign oil. I think everyone who is looking for ways to boycott Exxon-Mobil should instead look for ways to make themselves and our country less dependant on their products. Here's the REAL way to bring down gas prices;

1. Trade the big SUV or Van in for a fuel-efficient 4 cylinder car.

2. Trade the 2nd car in for a monthly public transportation pass if you live in a city, or a car alternative such as a small scooter if you live in a suburb. If those truly are not workable for you, see #1 above in regards to your second car.

3. Combine trips for shopping and errands, car-share for work commutes, share driving with neighbors and friends. Do you really need to make three separate trips to the mall, the market, and to pick up your kids at school? Can you do the shopping while your neighbor gets the kids?

4. Think about where and how you live. Is a 5 bedroom house in a far off, totally car dependant suburb really a necessity? Do you need to heat a 4000 square foot house with a 3 car garage on a half acre of land? Do you need to pump money and chemicals into maintaining a golf-course sized green lawn? Do you enjoy commuting a hour each way to work and having to drive 20 minutes through traffic for a loaf of bread or to see a movie? Wouldn't it be easier, cheaper, and less stressful to live in a 2000 square foot townhouse with a one car garage close to city services (public transportation, shops, restaurants, schools, etc.) on a 8000 square foot lot nicely landscaped with plants and stones and mulch instead of all that chemical-poisoned grass? You might not be able to move today, but you can start thinking and planning for tomorrow now.

5. Pledge to write one email to your senator and congressperson, promising them (and sticking to it), that no matter how else they vote on any other issue, you will not support them unless they vote for REAL environmental changes, like mandatory increased fuel standards for ALL vehicles, a windfall profits tax on oil companies with the money invested in public transportation, a limit on greenhouse gases to slow global warming, etc. Realize that the environment and our resources are not about protecting baby seals, they are about whether your city will be livable or flooded or destroyed by a hurricane, and if you will have oil to heat your home next year and what it will cost you.

If people choose to make some very modest and non-invasive changes now, their need for oil and gas will be drastically reduced, and the resulting conservation will naturally bring down prices and reduce our collective dependence on the people who blew up the World Trade Center on 9/11. Think about it folks. Invest the energy and passion that are being generated to get back at the oil companies into ideas that will have a much more lasting effect on our quality of life. Nobody is perfect, we all have our lives to lead and conserving energy and protecting the environment can't dictate everything we do. But all of us can make at least some of the changes we need for a better life for everyone, now and in the future.

H. Robb Levinsky