Gas price Jan 2009

[cjbcpa]

Terry wrote:

Watching gas prices is interesting. First, did you ever check to see how much of it is taxes? Amazing. Second, Sunoco loses money on its Philly refineries even at these levels and is closing them. Seems inexplicable but is evidently true or they wouldn't be doing it. Third, why is diesel so high compared to gas? (Higher taxes are a big part. ) Fourth, it seems obvious that the traders are bidding it up based on fear of another war in the Middle East, and these speculative bubbles always burst at some point. Personally, I think gas prices peak just when I go to the track.

I don't know much about it, but I understand refining is a very tough business and profitability is not correlated to the price of crude nor the retail price of gasoline.

Diesel is a funny animal. The taxes are higher since such a large amount of it is used by trucks that cause more roadway wear and tear. In addition, there is more energy (btu's) in a gallon of diesel fuel than a gallon of gas, so on that basis it should be higher (that's the reason my TDI can go 50 mpg versus 33 mpg for the gasoline version). On the other hand, it is easier to refine crude oil into diesel fuel than into gasoline, so you'd think that would work in favor of lower prices. Lastly, the market for diesel fuel is much smaller than that for gasoline and could partially responsible for the higher price.

Saw an interesting chart on CNBC yesterday morning. It plotted the price of crude oil futures going out 12 months. March 2013 forward price was $91/barrel so there seems to be some feeling the price will come down or is above its normalized price.