Gas prices rise, again

[Andy823]

I just read an article that says we now have the highest gas surplus in over 14 years, yet the prices of gas at the pump has gone up around 12 cents in the last few weeks where I live, and around the country it has gone up also, more in some places than others.

Here is a link to that article:

http://money.cnn.com/2008/02/22/markets/oil.ap/index.htm?postversion=2008022211

I also read the other day that it's no longer supply and demand that makes prices go up, but investers speculating that prices will go higher so they invest to make larger profits. I also have read that hedge funds have been buying up gas and storing it in order to make a killing when prices rise. It's all about greed, and yet our congress sits by and does nothing to help the people of this country.

[Warpy]

1. There was a refinery explosion in west Texas earlier this week

and that's why gas is going up now. With refineries at 100% of capacity all the time, having one offline is going to decrease the supply and force prices up.

We have dozens of mothballed refineries in this country. The oil boys don't want an oversupply of gasoline driving prices down, though, so they won't pull any of them out of retirement just to keep prices steady when there's a disaster someplace. They're acting like a classical monopoly.

[Captain Angry]

2. On investors...

Greed is certainly a factor. But with a lot of these contracts, it's one smart person and one very speculative one.

Consider this. Would you give me $200.00 if I promised to buy oil from you if it reaches $150 a barrel in the next 90 days? If it gets to $149.99, I keep your $200.00. If it does break $150, I pay through the nose. Now multiply that by millions.

There are people writing those options right now. People that understand how long price shocks take to go through a system, what the odds are, how trading limits kick in, etc. So they know that they're going to keep your $200, since the ability for oil to spike like that is very unlikely.

I don't think hedge funds are buying and physically holding gas since storing it is VERY expensive and pretty risky. My guess is that they're just buying options and writing some pretty intense futures contracts.

[Andy823]

5. Couldn't find the recent article

But did find this one from back in 2006:

http://www.fool.com/investing/general/2006/10/03/dont-get-comfortable-with-cheap-oil.aspx

[Frustratedlady]

3. Our gas prices jumped over 10-15 cents the afternoon they announced

that it had hit $100.10. That burns me no end. I found one station that hadn't had time to change his and filled up.

[Richard D]

4. If you look at gas prices over the last 7 years . . .

. . . you'll see a wave-form pattern to it with cyclical ups and downs on an ever rising curve. My belief is that it's don't to psychologically harden people to price rises. E.G. it gets really high, then goes down, but not as far down as in the last cycle. Then six months or so later it rises again past the previous high. I charted it out once but can't find it now.

[Selatius]

6. Lack of competition = higher gas prices for you.

When the US gov't allowed these oil companies to merge together, they essentially let a few gain enough power to distort the market. They can do this by artificially constricting the supply of gas by taking off oil refineries or idling them. Because the barriers to entry for new firms that could threaten this relationship are so high, the oil men don't have to worry too much about new competitors.