Just as I predicted, gas prices . . .

[MNBoxster]

Hi,

The lack of Refineries is not at all the whole story. Alarmists often cite the reduction in actual refineries rather than the true reduction in capacity simply because it has greater impact to do so - the use & abuse of statistics. The information below is sourced from the EIA (Energy Information Administration), a department within the DOE (Dept. of Energy).


Between 1981 and 1989, the number of U.S. refineries fell from 324 to 204, representing a loss of 3 million bbl/d in operable capacity (from 18.6 million bbl/d to 15.7 million bbl/d), while refining capacity utilization increased from 69 percent to 87 percent. Much of the decline in U.S. refining capacity resulted from the 1981 deregulation (elimination of price controls and allocations), which effectively removed the major prop from underneath many marginally profitable, often smaller, refineries.

Refinery closures have continued since 1989, bringing the total number of operable U.S. refineries to 132 as of January 1, 2006 . In general, refineries that have closed were relatively small and had less favorable economics than other refineries in their market area. Also, in recent years, some smaller, less-economic refineries that needed additional investments for environmental reasons in order to stay in business found closing preferable because they predicted that they could not stay competitive in the long term.

While some refineries have closed, and no new refineries have been built in 29 years, many existing refineries have expanded their capacities. As a result of “capacity creep," whereby existing refineries create additional refining capacity from the same plant, capacity per operating refinery increased by 28 percent over the 1990 to 1998 period. Overall, since the mid-1990s, U.S. refinery capacity has increased from 15.0 million bbl/d in 1994 to 17.1 million bbl/d in September 2005. As of November 4, 2005, utilization of operating capacity at U.S. refineries was averaging around 84 percent, down from 91 percent on September 16, 2005 following Hurricanes Katrina and Rita. In other words, we are still not using anywhere near 100% capacity of existing refineries.

There has been a major shift in Oil usage since the early '80's. The reduction in manufacturing in the US over these years has lessened the pressure on Oil demand considerably. But, other uses have increased. We consume about 43% of all refinery production as Gasoline (relatively constant since 1981), the rest is used in Industry, Diesel, Jet Fuel, etc.

Also, many people are unaware of how our foreign oil is sourced. Our #1 source of foreign oil is from Canada (1.9 mm bpd), followed by Saudi Arabia(1.6 mm bpd), Mexico (1.5 mm bpd), and Venezuela (1.4 mm bpd). So, OPEC isn't as prominant an influence as many believe since neither Canada or Mexico are members.

What all this means is that the primary factor in Gas prices is not OPEC, or refining capacity, it's mainly demand...

Happy Motoring!... Jim'99

[Brucelee]

Jim,

If you keep confusing us with FACTS, we are going to think you are a market economics fan!

[z12358]

Originally Posted by Brucelee

Jim,

If you keep confusing us with FACTS, we are going to think you are a market economics fan!

Hopefully, we can agree that facts need to be relevant to the point you are trying to make. If not, here's a fact in response: 2+2=4.

The original hypothesis in this thread was whether "someone" with enough motives and means could have influenced the price of unleaded gas to (get ready for facts): go down for months before Nov 7, bottom out right around that date, and then rally straight back up during the following month.

Nobody is questioning that supply and demand ultimately define a price for a market. Hence, anybody who can control one or both variables in that equation, wil be able to affect the price itself. Econ 101.

Z.

[Brucelee]

Originally Posted by z12358

Hopefully, we can agree that facts need to be relevant to the point you are trying to make. If not, here's a fact in response: 2+2=4.

The original hypothesis in this thread was whether "someone" with enough motives and means could have influenced the price of unleaded gas to (get ready for facts): go down for months before Nov 7, bottom out right around that date, and then rally straight back up during the following month.

Nobody is questioning that supply and demand ultimately define a price for a market. Hence, anybody who can control one or both variables in that equation, wil be able to affect the price itself. Econ 101.

Z.

The great thing about conspiracy theories is that they can't be DISPROVEN. However, if you go back and trace energy price movements over say, the last 50 yrs) you will see that they are highest in summer (auto driving and A/C demand) then tend to trail down in fall (less driving and less cooling demand) and then they move higher into winter (heating season demand, auto travel around holidays).

Now, since elections in this country happen in November ................................!

[z12358]

Originally Posted by Brucelee

The great thing about conspiracy theories is that they can't be DISPROVEN. However, if you go back and trace energy price movements over say, the last 50 yrs) you will see that they are highest in summer (auto driving and A/C demand) then tend to trail down in fall (less driving and less cooling demand) and then they move higher into winter (heating season demand, auto travel around holidays).

Now, since elections in this country happen in November ................................!

The pattern I described refers to the movement in unleaded gas futures contracts for most (if not all) delivery months (one, for example, being the contract for delivery in Jan 2007). What you described is a pattern that already is reflected in the term structure of that market (i.e. in the spreads between prices of contracts with different delivery months) which has been pretty constant and non-arbitrageable for a decade now. There's no particular seasonal reason for the Jan 2007 contract to dip into, bottom out at, and rally back after Nov 7, 2006.

Z.

[Steve Fine]

The bottom line: "we are still not using anywhere near 100% capacity of existing refineries."

Environmental Regulations aren't to blame for the high price of gas. Increasing world demand and a looming shortage of cheap to refine crude oil, along with concerns about the vulnerablity of some of the leading supplers have driven the price of crude up to stay, maybe they will go down a bit, but the long-term outlook is for higher prices.

Irronically, the Iraq war has also raised the price of crude too.

Concerns about global warming will most likley (if humanity is smart enough) lead to taxes on activities that release carbon into the atmosphere.

[MNBoxster]

Originally Posted by Steve Fine

The bottom line: "we are still not using anywhere near 100% capacity of existing refineries."... Concerns about global warming will most likley (if humanity is smart enough) lead to taxes on activities that release carbon into the atmosphere.

Hi,

You make a very good point. Many on this board aren't convinced of Global Warming. I remain somewhat skeptical as well, I don't think all the science has weighed in yet.

But, the disruption to the Carbon Cycle is definitely real and very measurable. For instance, Gasoline (at 72°) weighs 6.25lbs./gal. Gasoline is also composed of about 80% Carbon. This means that for every gallon of gasoline you consume, you are putting 5 lbs. (80% of 6.25) of Carbon into the atmosphere, think of throwing a 5 lb. bag of charcoal out the window every 17-21 miles!

Now whether this is effecting Global Warming or not is debatable, but certainly it is having some effect...

Happy Motoring!... Jim'99