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chaos_5
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In the wake of two major hurricanes that disrupted the drilling for and the refinement of crude oil products!Ivan Seeking said:4). The price of oil is based solely on supply and demand
This week investigations began as retail prices have outpaced wholesale prices by as much as 70%.
Your premise is fundamentally flawed. Oil is traded as a commodity. Stock brokers who trade in the futures market are responsible for the high price per barrel numbers you hear about. In that sense, the supply and demand as a consumer of oil is slightly diminished; however there are supply and demand forced driving the price of that commodity market.
The Price of gas at the pump is what we all notice. This is most certainly driven by supply and demand. Obviously the cost of production is dictated by the price per barrel (which lags behind the stock price); however there are other forces that will push the prices up further causing the disparity in “retail” and “wholesale” prices you are complaining about.
In some local areas, after the hurricanes, where panic buying occurred, the prices of fuel rose dramatically and rapidly. I concede the point that $5-$6 dollars a gallon is excessive. However the administration did two things to facilitate a decline in the cost of fuel at the pump. The release of the strategic oil reserves was the lest effective, this mostly political maneuver may of helped maintain a supply of crude products to crippled refineries, but that’s about all. The second and most important action that was taken was the suspension of formula regulations. Given the variation of gas formulation from one area of the country to the next, distribution is hamstrung when a disruption of locally refined products occurs. The repealing of the formulation laws allowed refined products to be more freely distributed. The result is lower gas prices. Hear in San Diego we have had a 1c a day decrease in the average gas prices over the last 10 days.
The bottom line is this - there is no Saudi/Halliburton conspiracy to drive up the cost of gas so Bush gets rich. What we have is a supply problem. With a refining capacity that is 30years out of date, and increased environmental pressures on distribution and exploration, prices will continue to rise. In order to fix the problem there are four things that we need to do, and in this order.
1. Drill more oil (I don’t like foreign oil)
2. Build more refineries (NIMBY ha! Ok, you’ll pay for that attitude)
3. Repeal the insane formula laws (find one or two good clean formulas and stick with it)
4. Invest in new technology (Lets face it, technology is the long term answer.)
Well, that’s my 3.5 cents.
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