Bing hit this one right on.
We all know the summer price of gas has nooooothing to do with the fact that more people drive greater distances in these months.

I still think I’ll see $10 gas in my lifetime and much sooner than I originally thought. You are right in that they (oil companies, refineries, the mom & pop gas station, oil producing countries) will do whatever they can, as long as they can to get away with the highest prices possible.

Part of my going green is that I’m now saving $75 per week on my communte switching from the Yukon to the Geo. All just to stick it to ‘em (and be a better greenie).

I find it interesting that S.A. comes out today and says that they believe the prices are unwarranted, too. A half hearted attempt to ’stabilize’ at a higher rate? Hmmm…

You may be absolutely right. The whole oil/gas pricing this is so full of twists and turns we will probably never figure it out. So there’s only one solution: get out of the game. Become independent of any country besides the U.S.A. for oil, and that will take some hard decisions. But as long as we are jerked around by OPEC and the other mental midgets, we’ll be puppets on the end of a string.

The blame points to who enforces the “ANTI-TRUST” legislative “LAWS”–not rules or guide lines.

“RULES and GUIDELINES” merely give way to mumbo-jumbo and hocus-pocus we wish we could get a focus.

Helter skelter, summer swelter, fuel energy vaporized the links to our comfortable shelter.

have an idea; let’s just sell Wheat for $134.35 a bushel (the Current July Light Crude Price) to the oil producing countries that can’t seem to grow their own food. We can eliminate Farm subsidies this way and get the price of gas back down to a buck. After we suck to Middle East dry, we can drill ANWR and see how they like $1000 per barrel oil.

Thank goodness media companies don’t raise their prices based on what someone is willing to pay.

3.25 a gallon , never gonna see it again, China is building 19 refineries & 280,000 barrels per day, India is building the world largest refinery, any slack in the market is spoken for.
Bottom line 5% of the worlds population (US) can no longer consume 25 % of the worlds oil.

Dump your Hummer and buy small fuel efficient cars or start walking to work/walmart.
We are in a long protracted down turn, lots of long downs and small ups in the US economies future, ask Warren Buffet and what does he say, get used to small profit margins; so what does he do, he goes to europe where the margins are higher.
The smart money is moving out of the US to invest in greener pastures.
Gas is high because of specualation but after that is factored in and plays out, future demand from the 2 million additional cars added to the world market by India and China will sustain demand and the price.

3.25 gas is like the unicorn, everybody talks about it but nobody will ever see one.

Be glad you don’t live in UK where the price is now heading north of £1.10 a LITRE therefore roughly $8.80 a gallon, yes we pay high tax on it but we have good transport alternatives, I for one when in london like to cycle to work or at worse get on the tube. I do hope transport companies take advantage and begin to offer commuting alternatives to Americans, although to change the mindset may take years.

Good post, Herr Bing. I’d not be so quick to pin all the blame on the titans of industry, though. Even they are subject to the laws of supply and demand.

Peel back the spculators, the shieks and executives, and all the other petro-miscreants, and you’re still left with a rotten supply-and-demand picture. New sources of crude oil aren’t being found fast enough – end of story. And the stuff we still have is dirty, heavy and hard to get at.

It doesn’t take a big drop in energy supply or a big increase in demand to cause a big swing in prices. All that’s needed is for demand to slightly exceed supply, as it does now. Such is basic economics.

Speculation and such have made the situation worse, no doubt. But the energy crisis is not just smoke-and-mirrors, liable to disappear when the grown-ups are back in charge.

I’d like to thank Greg from Chicago for the single most hilarious inside comment that I’ve received in a long time.

Who are “they”?

Producers? Refiners? Ahmed, who owns the local Exxon station down the street from my office?

Producers with access to low-cost crude are making buckets of cash. If you’re someplace where you can stick a straw in the ground and get high-grade crude out for about $3 a barrel in costs, you’re flush with cash. If you’re sitting on the rights to oil sands and your costs are $80 a barrel to get the oil out of the ground, you’re finally making a return. In a few months, you might not be, if crude prices ease.

The price for all those barrels is set by whatever the last barrel cost. Small drops in consumption will drop world prices, which is worrying a few Sheiks so much that they announced yesterday that they’re working to drop prices just enough to keep everyone driving Hummers.

If you’re a refiner, you’re caught in a margin squeeze. Your raw material costs have gone way up, but your selling price has not. This will change over the next few months, as gas prices inch higher, and crude prices ease, but that’s just my opinion.

Ahmed has to charge more for gas because his gas station sits on real estate that costs money per square inch. He could get by charging less if his station was on the edge of town in Podunk, Nebraska.

Exxon made about 10% profit, more or less. 10% of a s#!tload of cash is still a s#!tload of cash, but it’s not an abnormal level of profit, like Microsoft makes.

Speculators can and do alter short-term prices, but can’t influence the long term price much. We don’t take delivery, so it’s hard to have much influence on the supply and demand equation. My wife would be rather unhappy with me if a tanker pulled up at the dock and wanted to know where to offload 50,000 gallons of whatever.

There is increasing global demand for fuel. As others have commented, India and China have dramaticaly increased production. Increased demand = increased price, until supply catches up or demand eases.

Add to this mix the fact that several large developing nations are currently subsidizing fuel purchases, which also inflates global prices.

Currency also comes into play. Contracts are also typically written in dollars, and dollars are worth less. If the dollar drops 20%, I want 20% more dollars for my oil. So would you.

All of this hits people harder out in those flyover states, where putting gas in the pickup truck represents a much larger share of the monthly budget than it does elsewhere.

All of this would be moot if we rode donkeys to work, and donkeys are cool.

What I’d like to know is why $3.25 per gallon is really $3.259. Do you know of any other product sold and marketed with an extra penny always added to each unit of measure? How have they been getting away with that for so long?

Leroy is right: many other century-old companies make 10% margins – GM, Ford….oh, wait….they don’t, because they have solid competition.

But many very large companies make 10% margins – companies such as WalMart….oh, wait, they don’t either.

No, there is no vast right-wing conspiracy here. But a little more competition would make a “commodity” producer get something more like commoditized profit margins in the 1-3% range.

Defending 10% margins on a 150 year old commodity company is very silly.

RKC:

You can put your money where you like, but if I can’t expect a 7%-10% return, I’m not taking an equity position.

Using mismanaged firms like GM and Ford as examples is very silly too.

RKC –

I do not believe that defending oil company margins is silly. Many commodity companies that have “competition” make more than 10% margins.

Monsanto, for example, a 150 COMMODITY company, that has “competitors”, has 17% profit margins, and to top it off, had over a 100% increase in profits last year. Do you really think that just because a company doesn’t have the so-called “competitors” that it must mean that they have great margins?

There are many large “commoditized” companies with margins greater than 10%, check it out. The reason Walmart has those margins, is because of the area of business they are in, they don’t necessarily deal with just “commodities”.

The definition of commoditization, according to investopedia, is “when a product becomes indistinguisable from others like it and consumers buy on price alone…” Many items could fit into this category, not just oil and food.

Talk about high gas price.
Does anyone know when Nixon was in office the price of gas went up in the mid 70’s as it is today?
Does anyone remember the GM car that was driven from Boston,Ma to Florida and back on one tank of gas. It’s true as it was in the news for weeks. Does anyone thing that a car from the 70’s got over 200 miles per gallon. Well, all the info is still online and this is true. As sure as if you put knots in the tail of that old red fellow and the other fellow made little green apples it’s true.
Ok when new car companies offer us
34 to 45 miles per gallon corporations are laughing in our faces all the way to the bank and we all can bank on that.
Have a great day folks and do go and take vacation before the gas price jumps to 9.99 per gallon in a few months down the road.