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#2041920 - 10/01/15 04:49 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
GuitarDude Offline
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I don't understand how lower gas prices are resulting in so many layoffs. Admittedly, I am a bit dense when it comes to the economics of energy production, so can someone briefly explain it for me? Apparently, the classic economic model of supply and demand, when factoring in costs of production, does not apply to fuel.

It would seem that lower oil prices, which translate to lower gas prices, would cause demand to increase, resulting in increased revenue and the need for more workers. The refineries' cost of material (crude oil) being low should benefit their profit margin. So, are the lower gas prices coming from their profit margin? Or is the top brass just taking more for themselves? Or both?
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#2041926 - 10/01/15 05:07 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Or is it because their business model was based on $75 barrel, not ever thinking the price would ever go below that amount. So they set salary and wages based on a $75 instead of a $50 barrel price. Went hog wild hiring people thinking oil would stay at $90+ and they would be raking in all this $$, but instead the price dropped, killing their business model.
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#2041927 - 10/01/15 05:08 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Supply and demand does not work for oil prices in the classic sense. Because OPEC (as a group) out produces the US by about 5 to 1, they basically set the price at whatever level they see fit. However in 2014, the US out produced Saudi Arabia which is the highest producing single country within OPEC. The US breakeven price for oil is around $50 and is significantly higher for Saudi Arabia. Our shale oil is quick and easy to get to thanks to fraccing. So Saudi Arabia pitched a bit of a fit and flooded the market with their supply even though they are selling their oil below their breakeven. They're attempting to "bully" the US out of out producing them again. Now the rest of the countries in OPEC are losing money as well and have started to put pressure on Saudi Arabia to reduce their supply in hopes of driving the price above their breakeven point. There is an emergency meeting in November where OPEC members will hopefully vote to reduce supply and raise prices.

Right now US companies are stacking rigs because it doesn't make economic sense to drill or fracc any new wells. Those expenses will not be covered by the profit. To the credit of most of the oil companies, they've really held off laying anyone off for months longer than they could have. The mom and pop rigs went out of business around here back before the summer. The giant companies; Devon, Chesapeake and Halliburton have held out for as long as they can.

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#2041930 - 10/01/15 05:14 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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now if they continued to produce and stockpile it when it goes up due to some fake reason the really will make a killing,
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#2041941 - 10/01/15 06:03 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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That makes sense now. Thanks!
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#2041944 - 10/01/15 06:05 PM Re: Gas prices fall below $3.00 per gallon edAudit
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Pulling people out of the ditc...
Originally Posted By edAudit
now if they continued to produce and stockpile it when it goes up due to some fake reason the really will make a killing,


I don't think there is anywhere else to stockpile it. the nation's strategic petroleum reserve is at 100% capacity, every storage tank in south La. is full, and I understand other tank farms are at capacity as well...
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#2041947 - 10/01/15 06:21 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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I understand there are tankers off shore or port that are full as well.
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#2041953 - 10/01/15 06:34 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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The diff between regular and premium is crazy! Historically, it is about 40 cents, but many gas stations are at an 80 cent differential. Another rip off!
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#2041973 - 10/01/15 07:31 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Really Pale? Around here it's very unusual to see a difference of more than 10 cents additional for mid-grade and another 10 cents for premium.
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#2041975 - 10/01/15 07:34 PM Re: Gas prices fall below $3.00 per gallon GuitarDude
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Originally Posted By GuitarDude
Really Pale? Around here it's very unusual to see a difference of more than 10 cents additional for mid-grade and another 10 cents for premium.


Around here we are 60 - 70 cents. 40 cents for mid grade.

But by you when you are paying $1,909,876.76 per gallon a few cents do not make a difference.
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#2041981 - 10/01/15 08:00 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Around here it isn't quite as bad, Pale. The price has doubled in past few years; we've gone from a 10 cent difference between grades to a 20 cent different. Diesel is about 70 to 80 cents higher than the cost of Regular gas.
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#2041983 - 10/01/15 08:03 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Pulling people out of the ditc...
we used to see difference from unleaded to medium grade of 10 cents, then a 15 cent difference from medium to premium - or 25 cents above regular. now it is 30 to medium and another 30 to premium. and since most higher end imports now require premium, is it any surprise? you want the fancy car, you pay the fancy prices. oh, and those new 21 or 22 inch tires, those will set you back about $400 each when you need to replace them.
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#2041986 - 10/01/15 08:15 PM Re: Gas prices fall below $3.00 per gallon burkemi
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Originally Posted By burkemi
Diesel is about 70 to 80 cents higher than the cost of Regular gas.
Which is lunacy because it's much easier to refine than gasoline.

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#2042011 - 10/01/15 09:13 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Pulling people out of the ditc...
our diesel is running about 30 cents over regular...they claim the higher cost is due to the conversion to clean burning diesel that was required in 2013, and the costs associated with converting refineries...

which is all a bunch of hooey...
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#2042029 - 10/01/15 10:03 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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If only cars could run on hooey... But it would probably take a specially programmed VW to meet emissions standards. wink
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#2042069 - 10/02/15 01:30 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Somewhere in the middle
Last night traveling up I77 from Charlseton WV, I got gas for $1.96 30 miles south of my hometown, when I cross the state line into OHIO, gas was $2.59. Love the local Gas Pigs mad
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#2042231 - 10/02/15 06:09 PM Re: Gas prices fall below $3.00 per gallon CompliantOkie
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Originally Posted By CompliantOkie
Originally Posted By burkemi
Diesel is about 70 to 80 cents higher than the cost of Regular gas.
Which is lunacy because it's much easier to refine than gasoline.

It is however, more regulated.

Pale my area is like yours, Reg is 2.39 and Prem is 2.99
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#2042925 - 10/06/15 07:52 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
J Offline
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It's 1.85 here in South Alabama!

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#2042955 - 10/06/15 09:23 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
Kathleen O. Blanchard Offline

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Not when I bought gas in Gulf Shores today. Guess I pay resort prices.
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#2043021 - 10/07/15 02:05 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
J Offline
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I'm over in Mobile, AL. No resorts here, thankfully. This morning, my regular place was 1.89 so it went up 4 cents. Can't complain though with all these prices being posted!

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#2043052 - 10/07/15 02:42 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Production is way off here in the US, so get ready for price increases. After 3 years of construction, that liquefied natural gas stuff is now being produced near Lake Charles and another plant is coming on line in Texas. Plenty of natural gas.
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#2043105 - 10/07/15 04:34 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Gas jumped 15 cents in the last 5 days, around here. O_O
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#2043113 - 10/07/15 05:02 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
DD Regs Offline
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Somewhere in the middle
Had an away game with the son last night. over a 70 miles stretch gas varied from 1.98 to 2.54. I made my purchase at 2.12.
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#2045061 - 10/20/15 12:30 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
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Sunday the price of regular gasoline dropped to $1.99 per gallon locally. I paid $1.93 per gallon about 50 miles north of here on Saturday.
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#2045064 - 10/20/15 12:34 PM Re: Gas prices fall below $3.00 per gallon HappyGilmore
burkemi Offline
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Gas is at 2.09 around here. Dropped that low a few months ago, then surged back to around 2.50. Maybe this time it'll make the drop below 2.00????? Here's hoping.
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