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Can someone please explain the economics

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PieterCoetzee

Custom
Please help me understand the economics of raising the price of gas (or any commodity), NOW because it might become more expensive next month? I get that gasoline prices could (will) increase because of the troubles in the gulf; but thats not the gas that we have at the pumps now, its also not the primary source of our supply, so why are prices rising now?

It seems, at least it seems to me, like the price of roses. All year long they are $__X__ but come February 14th they are $XXXXX. I used to think that was marketing, Now it seems like its "because we can" and that seems to apply to gas prices as well.
 
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Your gonna have to 'splain that one.

Gas companies know they have all the customers hooked. Sure we can say I wont buy from Exxon but we'll just go to Shell and is there really a difference

The whole electric car push flopped and it will flop even more if/when the gov stops linking road taxes to gasoline
 
It’s no different than the ammo crunch during Covid. Simple supply and demand. Of course like the ammo skne folks will fear monger.

The bigger issue with the Straight of Hormuz is while Iram has not been successful shutting it down Lloyd’s of Lindon is the maritime insurance underwriter for almost all the shipping and have refused to insure ships so companies are ported refusing to risk it.

However the relief is the US has offered risk insurance and are starting to escort ships through which will smash the strong hold Lloyd’s of Lindon has had

So while gas will increase it most likely will come down soon


 
Jester560 said:
Do you not understand the futures market in investing?
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Yes I understand futures. Im not Gordon Gekko; but I think Ive got a grasp on it

I can accept that a higher cost of crude will raise prices; just not the raising the price of the stuff on the shelf that was bought before the new stuff went up in price. Thats like looking in my freezer and charging me extra for the stuff I bought last week because next week the food will be higher
 
Has anyone else recognized a pattern to how people are manipulated regarding gas prices?

For the sake of simplicity, let's assume a starting price of $2 a gallon. A series of price increases then begins. $2.25, then $2.50, then on to $3 a gallon.

People get irritated and vocal. Then the regression incrementally begins. Down to $2.80, and so on until it drops to $2.25. Now people are saying how great it is that gas prices have come down.

Really? The net increase is still beyond the price where the process began. And, as a bonus, the sellers were able to reap the benefits of the interim higher pricing.

I understand the factors in play regarding gas prices. Cynical old me has seen this cycle repeated far too many times to dismiss it as coincidence.
 
Well, in a very general sense the factors impacting gasoline prices are global crude oil cost, refining costs, distribution and marketing costs and federal & state taxes, which are generally reflected in the wholesale costs that gasoline retailers pay to distributors.

It’s a constantly changing series of costs.
 
So what Im hearing is the general consensus is that the fighting in the middle east is the excuse but has nothing directly due to the cost of the gas here prior the the first shot being fired

Oh yeah and buy more ammo(y)
 
PieterCoetzee said:
Yes I understand futures. Im not Gordon Gekko; but I think Ive got a grasp on it

I can accept that a higher cost of crude will raise prices; just not the raising the price of the stuff on the shelf that was bought before the new stuff went up in price. Thats like looking in my freezer and charging me extra for the stuff I bought last week because next week the food will be higher
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Except that you're not reselling the meat in your freezer. If you were, you would have to sell it at the price it's now going to cost you to replace it ... same as gasoline. When those 8 thousand gallon tanks go empty and wholesale prices of gas has increased, you will have to pay that increased price in order to refill those tanks with gas, and gas is typically what brings a customer into your gas station. The lower the gas price, the more stop in customers you'll have and hopefully get their TB&A business. Station owners don't make a killing on gasoline ... typically pennies on the gallon. Your markup/profit will ultimately break out about the same both before and after a price increase. Now it's actually a little more complicated than that, but you asked why they increase prices on on-hand product when prices go up. You could argue that they will make it up when prices go back down for them and they're selling product for the higher price, but the reality there is they've already paid the higher price for what's in the tank now. Dropping the price to the consumer actually costs them money in that case. You wouldn't sell that meat out of your freezer for less than you paid for it would you?
 
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jumpinjoe said:
Except that you're not reselling the meat in your freezer. If you were, you would have to sell it at the price it's now going to cost you to replace it ... same as gasoline. When those 8 thousand gallon tanks go empty and wholesale prices of gas has increased, you will have to pay that increased price in order to refill those tanks with gas,
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When ammo prices went up during the riots and covid, some shops raised their prices to as much as $100 a box for 9mm. Thats price gouging One shop in the area kept their regular mark up, sure a box went from $14 to maybe $19 but not $99. Buyers remembered, some of those $199 shops resorted to radio advertising (who pays for that...), they advertised a sale on ammo "Now only $75 a box"

When the crisis was over customers remembered. Some of those shops went out of business when customers realized they were cheated.

The problem here is that this is all the gas stations
 
I agree with you on ammo price gouging during the Covid debacle. One of the things we should have learned from Covid ammo shortages is we should NEVER rely on foreign suppliers for critical supplies, like ammo. But that's another subject.

But comparing ammo and oil prices are apples and oranges.

You cannot disregard insurance costs in the price of crude transiting the Middle East. Lloyds of London insures oil tankers. When the shooting started Lloyds of London and other lesser insurance companies dropped coverage of those oil tankers. We are talking many $billions of exposure. That makes the oil companies self insured. Those willing to continue will offset the risk with increased costs. Like all companies, insurance costs are passed on to the consumer. Mix that in with supply and demand forces over the interrupted supply and it is driven up. Even further, Iran the Rabid Dog is attacking its neighbors' oil production capacity to further restrict supply. The sooner Iran is neutered, the sooner prices of oil will fall
 
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