Refiners - a factor in the price of fuel.
We've all watched the price of fuel drop slowly when there's a glut of crude oil and then watch the price of fuel jump overnight when the price of crude goes up. This is old news. Something I've b...
Forum Discussion
Trackrig wrote:
We've all watched the price of fuel drop slowly when there's a glut of crude oil and then watch the price of fuel jump overnight when the price of crude goes up. This is old news.
Something I've been watching for a while is why the price hasn't (particularly of diesel) been going down more with the excess of crude production vs usage? My thoughts have been that the refiners have been charging more and more.
Here are two quotes from a Seeking Alpha story a few minutes ago:
* Even as the E&P and oilfield services sectors have slumped again, stocks of refiners such as Valero Energy (NYSE:VLO), Tesoro (NYSE:TSO), Marathon Petroleum (NYSE:MPC) and Western Refining (NYSE:WNR) have jumped 25% or more YTD.
Their stock price is way up because they've been generating a lot more profits.
* West coast refiners are big winners right now: Earlier this month, according to Credit Suisse, regional refining margins hit almost $60/bbl, - higher than the oil price itself.
That's a lot of profits, and growing.
Bill
There's a couple of problems with that whole idea.
1) The wholesale price, like that of beef, gold, or corn, is driven by the BUYERS, not the sellers. If the wholesale producers try to price of oil, beef or gold higher than buyers want to pay they just buy it from Canada, Russia or wherevere else they can get it for less.
2) The math doesn't work. If refining costs $60 / bbl and crude is at $54 / bbl that's $114 / bbl. but the current avg. price of gasoline is ~$2.70 / gal. which (times 42 gal. / bbl) is $113.40 / bbl. that leaves ~$0.60 / gal. for all pipeline, trucking, handling, and retail markup.
3) Almost every petroleum company, including all those you listed, are "vertically integrated". They drill the well, pump the crude, refine it into gas, ship to their stations and sell it to you & I. When they make more on crude, they don't need to make as much at the refinery or retail stage and vice versa.
To try to break it out as individual pieces is paramount to saying beef farmers only get ~$3.25 / pound but Mickey D's charges $4.69 for a quarter pounder or $18.76 a pound so we must be getting ripped off because they're marking it up by 575%.
