Why does the cost at the pump never reflect the price of crude?
Ok, we all know there is a delay in transferring the price of crude to the pump. My issue is when the price of crude goes down drastically it takes a considerable amount of time for the price at the pump to reflect it, but when the price of crude goes up it is almost instantly reflected at the pump.
So basically it seems that the speculators only work in favor of big oil companies. The price at the pump has not reflected the price of crude for some time, and the gap continues to grow with each rise and fall.
The individual chains of gas providers come up with the price that a barrel of crude is selling for the previous day.
I'm paying 20% less for gasoline than I was a few months ago. The pump price does reflect the commodity price. It goes up more quickly than it goes down just as prices, and taxes, always do in all industries and governments, but in the end it all washes out for the consumer. Markets rule.
Here in the UK there are many factors affecting the price, not only is it subject to the huge profit making machine called the suppliers it also has retailer profits and 2 government taxes to contend with, the price here at the moment is an average £1.34 ($2.10) a ltr. It will always be the same now that both supplying companies and the government know that we are a slave to our automobiles.
Last year the UK government collected over £50 billion ($78billion) in fuel taxes from approx 20 million drivers.
Oil prices are set on the mercantile exchange's futures market and open to all manner of speculation. This is why even though we are producing more oil (in the USA) than we have in the last 10 years one little hickup out of Iran can cause the speculators to lose confidence which drives the market price up. The oil companies will take that futures price and base today's price on it. Understand the price on the futures market is what speculators "think" the price will be when the oil is pumped out of the ground 6 months from now. So you see, supply and demand is not what drives the market price but fear and greed. My next car will be an electric.
One of the most manipulated resources in the world and because it is under the rule of a monopoly well controlled and subject to change at the drop of individual owners' and franchises' hats. We have to comply because the only other alternative is to walk.
Speculators and intermediaries play a large role in prices but so does the increasing worldwide demand. Think of the delay in lowering the price at the pump as the companies' way of wringing a bit more money out of consumers. As gas hungry as our nation is, what can you do aside from get an electric car or run on cooking oil? I doubt you'd get the best answer to your question here and the truth will certainly not be forthcoming if you asked the big oil companies. However, there are certainly some great points I hadn't thought of.
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