Gas Prices dropped in your area ?

[scaeagles]

3.01 1/2 mile from my house yesterday.

I'm not usually a conspiracy theorist, but it is bothersome to me that oil has dropped 50% and gas has only dropped 25%.

[wendybeth]

Wouldn't the answer be the same that is applied to the question of why gas is so expensive in the first place- refining? I imagine it takes time to refine, and it will be a while before oil refined now hits the market. I don't buy that argument, but that's all we've heard when people question why gas costs so much in the first place and criticize the oil companies for price gouging. I suspect it's really the same phenom that affects grocery prices- 'price stickiness'. (Greed).

[Kevy Baby]

Originally Posted by scaeagles

I'm not usually a conspiracy theorist, but it is bothersome to me that oil has dropped 50% and gas has only dropped 25%.

I have been meaning to do a price of oil vs. price of gasoline comparison. The 50% vs 25% doesn't mean too much in and of itself as gasoline is only one part of a barrel of oil. Also, the cost of gasoline production includes much more than just the raw input material cost.

For example, if the cost of oil represents 50% of the total cost of gasoline, then the numbers make sense. If gas started at $1.00 per gallon, $0.50 of that is crude oil cost, then a 50% reduction would bring the crude oil cost down to $0.25. The other $0.50 stays the same, reducing the total cost of the gasoline to $0.75. This would be a 25% reduction from the starting point of $1.00.

(This info is from one web site, but others corroborate it):

One 42 gallon barrel of crude oil yields:
19.5 gal of gasoline
9.2 gal of distillate fuel oil (Diesel and home-heating oil)
4.1 gal of kerosene-type jet fuel
2.3 gal of residual fuel oil (used in industry and marine)
1.9 gal liquefied refinery gases
1.8 gal coke
1.3 gal asphalt and road oil
1.2 gal petrochemical feedstock
0.5 gal lubricants
0.2 gal kerosene
0.3 other

[Ghoulish Delight]

Originally Posted by Kevy Baby

The 50% vs 25% doesn't mean too much in and of itself as gasoline is only one part of a barrel of oil.

The 2nd part of your analysis is right, but this part is not, just to be pedantic. If pay $180 for a barrel of oil and use, say, 70% of that barrel to make gasoline, than I paid $126 for the portion of oil used for gasoline. If I then buy the next barrel at $90 and use the same amount of oil, then I've paid $63 for that portion of oil. That does indeed scale.

But you are correct that just because raw material costs drop doesn't mean overall production costs drop in proportion.

[Kevy Baby]

Originally Posted by Ghoulish Delight

The 2nd part of your analysis is right, but this part is not, just to be pedantic.

Alright Mr. Pedantic...

I actually rewrote the post and forgot to clarify that one line. It should have more correctly stated that "One cannot expect the cost of gasoline to drop the same percentage as the cost of oil as the raw material cost only represents a part of the cost of a gallon of gas."