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The Rising Cost of Crude Oil's Effect on Gasoline Prices

General discussions of the systemic, societal and civilisational effects of depletion.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby Electric_Economy_2025 » Tue 17 Jun 2008, 01:59:06

Even if oil goes back down to $100 tomorrow we will still see close to if not $6pg gas with in the next few months.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby TreebeardsUncle » Tue 17 Jun 2008, 01:59:47

Actually, the price of gas in terms of $/gallon increases 2.4 cents for every $1.00 increase in the price of oil in $/barrel so that it takes an approximately $40/barrel increase in the price of oil to produce a $1.00/gallon increase in the price of gasoline.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby dohboi » Tue 17 Jun 2008, 06:13:45

Treebeard, you've posted that a couple places. What is your source? Since there are 42 gallons per barrel, a $42 increase in oil would mean a $1 increase in a gallon of OIL, not of gasoline. There are many other factors that go into the price of gas.

Of course, as prices rise and those other factors (refining costs, distribution costs, taxes) become a smaller portion of the total, we will get closer and closer to that ratio.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby VMarcHart » Tue 17 Jun 2008, 09:40:34

$this->bbcode_second_pass_quote('Drifter', 'G')asoline prices have not kept pace with current oil prices.
Aren't we lucky? (Sorry, early morning sarcasm.) Thanks for the chart, Drifter.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby MonteQuest » Tue 17 Jun 2008, 09:56:08

$this->bbcode_second_pass_quote('TreebeardsUncle', 'A')ctually, the price of gas in terms of $/gallon increases 2.4 cents for every $1.00 increase in the price of oil in $/barrel so that it takes an approximately $40/barrel increase in the price of oil to produce a $1.00/gallon increase in the price of gasoline.


That formula was for when the percentage of crude was 46% of the price of gasoline.

Now it is north of 73%.

Read my initial post. That is the topic. It is a moving formula.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby MonteQuest » Tue 17 Jun 2008, 10:19:37

Isn't this as close as we can get at the moment?


$this->bbcode_second_pass_quote('Montequest', 'D')o the math.

Today's price of crude $135.00 = $4.00

That's the ratio at the moment.

135/4= $33.75

So, for every $33.75 worth of crude you get a $1.00 in gas cost.

Or, for every $1 of crude you get a $.03 rise in gasoline.

Extrapolating forward.

200/33.75= $5.92

250/33.75= $7.40

So, with the percentage of crude oil's price rising, these numbers may well be much higher.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby jupiters_release » Tue 17 Jun 2008, 10:45:24

$this->bbcode_second_pass_quote('MonteQuest', 'I')sn't this as close as we can get at the moment?


$this->bbcode_second_pass_quote('Montequest', 'D')o the math.

Today's price of crude $135.00 = $4.00

That's the ratio at the moment.

135/4= $33.75

So, for every $33.75 worth of crude you get a $1.00 in gas cost.

Or, for every $1 of crude you get a $.03 rise in gasoline.

Extrapolating forward.

200/33.75= $5.92

250/33.75= $7.40

So, with the percentage of crude oil's price rising, these numbers may well be much higher.


Drifter already posted this thread which has the CBS video mentioning the time delay in price relationship of crude and gas.

$90 = $4
$135 = $6
$200 = $9
$250 = $11

The cheapest gas in my town is now $4.79 :?
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby yesplease » Tue 17 Jun 2008, 21:54:05

$this->bbcode_second_pass_quote('MonteQuest', 'I')sn't this as close as we can get at the moment?


$this->bbcode_second_pass_quote('Montequest', 'D')o the math.

Today's price of crude $135.00 = $4.00

That's the ratio at the moment.

135/4= $33.75

So, for every $33.75 worth of crude you get a $1.00 in gas cost.

Or, for every $1 of crude you get a $.03 rise in gasoline.

Extrapolating forward.

200/33.75= $5.92

250/33.75= $7.40

So, with the percentage of crude oil's price rising, these numbers may well be much higher.


We can get a bit closer using the graphics for the 2007 average prices compared to recent versions. For instance, in 2007 crude costs were $1.62 of the per gallon price, so if crude goes to $250, prices will go up 250/68=3.68 times, to $5.96. Distribution/marketing/refinery costs don't scale directly, but if we look at April of 2008 compared to the two charts we're at ~$.65 on average. Taxes have remained at ~$.40 per gallon since 2007, so unless both they and the other costs rise sharply, $250/bbl would result in ~$7+/gallon give or take. Course, as oil goes higher, the use of a single ratio is more accurate since the other costs impact the overall price less.

I don't see how a $6/gallon (Aside from regional price differences) average is possible w/ oil at ~$130-140/bbl. So far it looks like ~$4.50 is what CA is sitting at since diesel prices aren't going anywhere (They tend to lead gasoline prices by a couple weeks or so IME).
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby MonteQuest » Wed 18 Jun 2008, 00:36:24

$this->bbcode_second_pass_quote('jupiters_release', ' ')[
$90 = $4
$135 = $6
$200 = $9
$250 = $11



Ok, redo the math.

135/6= $22.50

So, for every $22.50 worth of crude you get a $1.00 in gas cost.

Or, for every $1 of crude you get a $.0225 rise in gasoline.

Extrapolating forward.

200/22.50= $8.88

250/22.50= $11.11

So, with the percentage of crude oil's price rising, these numbers may well be much higher.

Let's see if $135 brings us $6 gasoline.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby MonteQuest » Wed 18 Jun 2008, 00:41:32

$this->bbcode_second_pass_quote('yesplease', ' ')I don't see how a $6/gallon (Aside from regional price differences) average is possible w/ oil at ~$130-140/bbl.


If gas is $4 based upon $90.00 oil, then why isn't oil at $135.00 $6 gasoline?

There is a lag time between crude rise and gasoline rise.

Sure, we see some rise instantly, but not all of it.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby yesplease » Wed 18 Jun 2008, 02:06:18

$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('yesplease', ' ')I don't see how a $6/gallon (Aside from regional price differences) average is possible w/ oil at ~$130-140/bbl.


If gas is $4 based upon $90.00 oil, then why isn't oil at $135.00 $6 gasoline?

There is a lag time between crude rise and gasoline rise.

Sure, we see some rise instantly, but not all of it.
The figures I used were the 2000-2007 and 2007 averages you posted so they should pan out as per the percentages plus however much seasonal demand from the summer driving season exacerbates it. The EIA said that the average price will peak at ~$4.15 based on oil's surge to $138 and change. According to the chart Drifter posted, historically gasoline prices have tracked fairly well w/ oil prices over the span of a month plus (give or take) so based on using older data that should be fairly immune to larger short term swings, past trends, and the EIA's statement, I don't think we're still at $90/bbl oil. AFAIK the gap is due to the pipeline/refining/transportation network and is around a month or two so we're using ~$125-130/bbl oil right now.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby 3aidlillahi » Wed 18 Jun 2008, 07:26:09

Drifter and MQ (or anybody)

How long is the lag between a rise in oil and at rise at the pump? Is it 1-2 months? Or longer?
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby 3aidlillahi » Wed 18 Jun 2008, 07:38:50

$this->bbcode_second_pass_quote('Drifter', '')$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('yesplease', ' ')I don't see how a $6/gallon (Aside from regional price differences) average is possible w/ oil at ~$130-140/bbl.


If gas is $4 based upon $90.00 oil, then why isn't oil at $135.00 $6 gasoline?

There is a lag time between crude rise and gasoline rise.

Sure, we see some rise instantly, but not all of it.


MQ is right. Gasoline prices have not yet caught up with current crude oil prices.


Why weren't you saying that 1 year ago? Or 2 years ago? 3? 4? 5?

Because in all of those time frames, we had a "decoupling" of oil and gas if you look at those graphs at gasbuddy.com (man, they are getting some good advertising here.)

$this->bbcode_second_pass_quote('', 'I') don't think we're still at $90/bbl oil. AFAIK the gap is due to the pipeline/refining/transportation network and is around a month or two so we're using ~$125-130/bbl oil right now.


It depends on how long the lag is which is why I asked the question. If it's 1 month, then we're at $127. If it's 2 months, then we're at $114. If it's 3 months, then we're at $105. It takes a four month lag for us to be at $90. I highly doubt that we have a four month lag. I'm pretty sure it's only a couple of weeks to maybe 2 months. It seems to me like we're between $114 and $127 so about $120 we can estimate. NOT $90 a barrel.

It seems like Monte and Drifter are simply choosing the data points that they want to get the results that they want. You will never be able to achieve good extrapolations or models like that.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby VMarcHart » Wed 18 Jun 2008, 07:39:43

$this->bbcode_second_pass_quote('3aidlillahi', 'H')ow long is the lag between a rise in oil and at rise at the pump? Is it 1-2 months? Or longer?
By eye-balling the graph Drifter posted on page 2, there was no lag until about September of last year. Since then, it seems the lag (and the gap) has only been increasing. One would have to assume that such gap is cutting into the profits of the oil companies. If true, I wonder why they'd let that happen.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby 3aidlillahi » Wed 18 Jun 2008, 07:45:19

$this->bbcode_second_pass_quote('Drifter', '')$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('yesplease', ' ')I don't see how a $6/gallon (Aside from regional price differences) average is possible w/ oil at ~$130-140/bbl.


If gas is $4 based upon $90.00 oil, then why isn't oil at $135.00 $6 gasoline?

There is a lag time between crude rise and gasoline rise.

Sure, we see some rise instantly, but not all of it.


MQ is right. Gasoline prices have not yet caught up with current crude oil prices.


Nope, there's about a month or two lag. Which means we're still in the high teens to low 20's. At $140 we should be around (140/40 + 1 = $4.50). We'd need a 4 month lag to be at $90. If you guys aren't picking and choosing your data points to fit what you want, then show how it's a four month lag. I'm certainly not seeing a four month lag on any charts I can come up with.
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby 3aidlillahi » Wed 18 Jun 2008, 07:47:56

$this->bbcode_second_pass_quote('VMarcHart', '')$this->bbcode_second_pass_quote('3aidlillahi', 'H')ow long is the lag between a rise in oil and at rise at the pump? Is it 1-2 months? Or longer?
By eye-balling the graph Drifter posted on page 2, there was no lag until about September of last year. Since then, it seems the lag (and the gap) has only been increasing. One would have to assume that such gap is cutting into the profits of the oil companies. If true, I wonder why they'd let that happen.


The Gasbuddy graphs are tricky. If you look at different timelines then you end up with different results! It makes it appear that the beginning of any graph is always coupled and that there is an immediate effect of crude on gas. But that ALWAYS happens in each graph so it just shows the flaws inherent in the graph (probably because the timeline of the graph sets the x- and y-axes). Go to gasbuddy.com and you can see this (I swear to God, I'm not a shill for gasbuddy.com Aaron).
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Re: The Rising Cost of Crude Oil's Effect on Gasoline Prices

Postby 3aidlillahi » Wed 18 Jun 2008, 07:50:45

$this->bbcode_second_pass_quote('', 'L')ooks like 3aidlillahi may lose his bet.


BRING IT ON! Unfortunately, it seems like we may have to wait a while for oil to hit $200 a barrel and we may forget about it. :( The momentum may be dying out with a slowing demand growth. Maybe not though. If oil tops out here though, then I'd expect gas to top at ≈$4.50.
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