Mercury Rising 鳯女

Politics, life, and other things that matter

Getting gaslighted on gas

Posted by Charles II on May 14, 2012

The American people are being propagandized that high gas prices are due to Obama Administration drilling policies. If we had a functioning press, people would know that the price of gasoline is determined by (a) the current cost of oil production, (b) the cost of refining, (c) expectations about future supply, and (d) miscellaneous factors such as distribution costs and taxes (regulations can be thought of as a cost of production, refining, or distribution).

So now Javier Bias of Financial Times reports that in January, refineries were shut down to remove 1.6 million barrels per day of gasoline from production. Not so coincidentally, RBOB gasoline futures leapt from $2.70 to $3.40. Now refineries are being put back on line to add 1.3 million barrels per day. Industry analysts say that over the longer term refineries will be closed to “rebalance supply and demand.”

In other words, to gouge consumers.

If people don’t want to vote for Obama, that’s their business. But they shouldn’t do so because of a lie. Neither the Keystone pipeline nor regulations nor taxes are driving gas prices. What’s driving them is speculation, market manipulation, and the rising cost of recovering oil from deep wells and unconventional sources.

6 Responses to “Getting gaslighted on gas”

  1. jo6pac said

    4 Northern Calif. refineries are down at the same time

    This is interesting, another twist on how to steal from the public by big oil

    Yes I’m not voting for 0 only because it’s time for me to move on to Green

    • Charles II said

      Seasonal shutdowns of refineries are the norm and, much as I think they have been used to manipulate regional prices, some degree of maintenance is necessarily, and the effects at the pump have been much smaller than 70 cents (25%). I can’t remember what Wyden was suggesting, but I think it was on the order of 10 cents. The Powerine refinery, which did 20-25,000 barrels per day was expected to influence price by 2-3 cents per gallon–but since gasoline is mostly a regional market, that has to understood in that context.

      I think the Brent story is actually an example of markets working. Europe is heavily dependent on North Africa and Iran for its oil supplies. When a price disparity opens up, as happens between West Texas and Brent, competitive markets should act to equalize prices. This doesn’t work perfectly because many refineries are incapable of handling sour (high sulfur) crudes, so for example Venezuela is not able to ship unrefined oil as freely as, say, Saudi Arabia. But a huge price gap should not exist. The fact that we are now exporting oil is a healthy, and overdue sign.

      • jo6pac said

        Yes local gas has gone up in town .25 in 2 weeks in Tracy, Calif. because of the shut downs. The 2-3 cents would have been nice but the fuel dogs aren’t helping.

      • Charles II said

        Right… the 2-3 cents estimate is just for one small refinery in a captive market.

  2. There’s also the Iran Scare factor. Netanyahu and Avi Lieberman wanted to bully the US into nuking Iran for them, and Obama — backed by several former Israeli defense and government figures — told them to go pound salt. This has helped let some of the air out of the speculation bubble that was contributing to high gas prices.

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