Refiners - a factor in the price of fuel.

[Trackrig]

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. Let's say that if crude drops 5%, the refiners have lowered the refined product only 4%. Or, if the price up crude goes up 5%, they've been charging a 6% increase in refined product. The storage capacity of crude tanks is almost full in this country.

We're producing almost a million more barrels of crude per day than we're using - the price should be dropping further, but the refiners keep upping what they take out of the middle. Crude has dropped from $63 per barrel in mid to late May to $48.45 today. That's a 23% drop in the price of crude. Has anyone seen the price of fuel drop anything close to 23% also???

They think (and apparently so) that everyone is so happy with the lowered fuel price that they won't notice if the refiners take a larger chunk out of the middle.

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

[westend]

wa8yxm wrote:
There is a political statement I will not make here.... But.

The oil companies cry about the high price of crude from overseas.. Which we could get by quite nicely without if we wished (The reasons we still import are political and thus I will not discuss them here).

But every quarter the Kotch Brothers post record breaking profits for their oil comnpanies... Something is clearly wrong here..

And there is so much more political stuff involved as well.

To put some perspective in the discussion, who is the world's largest oil producer? The USA.

While I was fueling those Mississippi tow boats, I also did custom work for Koch refineries. While working there one boring night, the dockman and I figured out that each Koch brother (if earnings were divided between the two) was making as much as winning the Lotto twice a day.

A large part of the oil we import from the Mideast is due to the exchange of our North Slope oil with Asians in the form of vouchers for barrels of Mideast crude.

[JaxDad]

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%.

[OkSixpack]

I read one time where only about 4 percent of oil is actually used to make gasoline, and I guess diesel is included in that. The rest is used in plastics and and other things. So they could just start using a little more oil to make fuel.....
Jim

[wa8yxm]

There is a political statement I will not make here.... But.

The oil companies cry about the high price of crude from overseas.. Which we could get by quite nicely without if we wished (The reasons we still import are political and thus I will not discuss them here).

But every quarter the Kotch Brothers post record breaking profits for their oil comnpanies... Something is clearly wrong here..

And there is so much more political stuff involved as well.

[John_S_]

The effect is that the world is uses refined product not crude. There has not been a new refinery built in the U.S. In decades. The companies have to deal with various blend requirements and CA is the worst. Also diesel oil can be shipped off shore especially to Japan now. They shut their nukes down and now use diesel. We have seen gas fall to about two bucks while it is still over four in Ca. That is taxes and regulations.

[JamesBr]

End all be all. Since fuel process are traded on a speculation market, the reason for the price of any of it comes down to one thing.

Because they can.

However, because they can raise prices faster then they can drop them, usually means when they go up and stay up I spend a lot more time driving less.

[westend]

Gasoline and diesel have their own market price, differentiated from the price of crude oil. A lot of those price structures revolve around the amount of storage capacity for those fuels that is available. Yes, fuel prices are effected by the price of crude but less so than in days past.
The petroleum market, how it is perceived, how it is effected, and how it is controlled are mysteries to nearly everyone. It is different than other commodity markets in that supply and demand are not the only things that effect the price. Speculation and owner control have more impact on price than other marketable commodities.

At least more folks are starting to sense the "smoke and mirrors" techniques used by big oil and that all bodes well for the consumer. You can only have so many publicized refinery mishaps and then folks start to see the truth. The bad thing is that the media is clueless and will use the American Petroleum Institute for facts and figures.

Two interesting stories:
First. In 1974-75 I was employed on petrochemical tankers. I have a Merchant Mariners card with various endorsements. One of my workmates has a brother that works in the same capacity but for a different company, Royal Dutch/Shell. At that time his run was from the Red Sea ports to Rotterdam, from Rotterdam to Newark, and back to the Red Sea to continue. Crude is carried form the Arabians to Rotterdam and the ship is then filled with gasoline to deliver in Newark. Remember this is during the time when US consumers were lined up at the pumps to buy gas at inflated prices and shortages are blamed on OPEC. The RD/Shell tanker, fully laden, two days out from Newark was ordered to empty tanks and return to the Red Sea, there was no storage open in Newark to take the gas. That is just what they did, removed the tanker's pipe blanks and discharged the whole cargo in the Atlantic.

Second. In 1990-92 I was employed at the Port of St Paul, MN for the only midstream fueling service at that location on the Mississippi. I pumped about 4 million gallons/year to tow boats needing fuel. In 1991 on the day that the US intervened in Kuwait, I read my daily NYMEX consultant wire release that said Big Oil had met to raise the price of diesel by $.05 but that the pending US intervention would push the price considerably higher. I advised the General Manager of our company that we should order and store as much fuel as possible, that morning. He deferred to wait and see what the market would do. By the time he realized I was right, the refinery had chained their gates shut and no orders were moved. The next day, the price of fuel had nearly doubled.

I think these two anecdotes say more about the underlying mechanisms of fuel pricing than anything you see or read from the media. The media is the same one that would have everyone believe that the US is dependent on foreign oil and that has never been true.

[goducks10]

http://www.rvbusiness.com/2015/07/report-diesel-prices-tanking-amid-global-glut/

[samhain7]

It is as simple as than this.
Fact. They can charge literally whatever they want, and we all will pay it. So they do.

[3oaks]

RV-1/2n-FUN wrote:

3oaks wrote:
Here in Pennsylvania, as the price of gas at the pumps drop, our governor adds more tax per gallon. The consumer can't win. :M

More fuel efficient cars + all electric cars = less or no taxes collected so taxes raised.

If the bureaucrats would trim the fat and cut the waste, there would be no need to raise fuel taxes. That goes for all the state and federal ignoramuses. :M

[DougE]

Keep in mind that most gasoline in an area is produced by one regional refinery, regardless of the brand name on the station. Among the major retailers, they just put their own additive package in the truck so that if you're at a Shell station you're getting the regional gas with Shell additives. If you purchase a "non-branded" gasoline getting adequate additives is suspect, thus some auto manufactures are starting to put recommended brands in their owner's manuals.

[OFDPOS]

Here in Ca. it don't matter there is ALWAYS an excuse for why the fuel is high 😞
Change to summer blend, change to winter blend, Refinery fire , Refinery shut down for maintenance, cold winter back east so more heating oil instead of gas fuel being produced. Blah Blah Blah !!!
Oil is trading at $52 a barrel so why is gas selling for $3.50 a gal ?
A couple months ago on the news "the market is glutted with fuel and they have run out of places to store it" WTH ???
But our prices are still high, now its there is plenty of crude oil , but supposedly they can't keep up with demand.
Gas prices jumped over $.70 a gallon in 3 weeks around here in some places over $1.00 more!
Next night on news reports now that more fuel efficient cars and electric we are not using as much fuel!! Once again W.T.H !!!

Strange how fuel prices can jump $.10 or more a day , but when it comes down its only $.01-.02 per day !!

[RV-1_2n-FUN]

3oaks wrote:
Here in Pennsylvania, as the price of gas at the pumps drop, our governor adds more tax per gallon. The consumer can't win. :M

More fuel efficient cars + all electric cars = less or no taxes collected so taxes raised.

[3oaks]

Here in Pennsylvania, as the price of gas at the pumps drop, our governor adds more tax per gallon. The consumer can't win. :M