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03-16-2011, 04:48 PM
Dry Island Reject
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Originally Posted by Tikkanen View Post
Simply using Afghanistan as an example. If it's simply supply and demand and supplies are high then a tsunami in Japan should have zero effect on gas prices the very next day in Orange County. Bad news=an excuse by oil companies to go on a money grabbing binge. Again, I'll ask for an answer-why has gas gone up about a dollar in the last month? I'm simply looking for a factual answer so I know why I'm suddenly paying $4 a gallon for gas.
Who said supply was high? And for what product? There are 2 distinct prices at play: crude oil prices and gasoline prices. Crude can be balanced on a global scale while at the same time gasoline can be imbalanced locally. Crude oil is a globalized commodity. Gasoline (a refined product of crude) is more localized.

To answer your question, gasoline prices are a combination of several things. Reason #1 is the biggest driver of your gasoline price, but everything else contributes.

1) Crude prices went from ~$75 barrel in the beginning of 2010 to ~$100 today (mostly since the beginning of 2011). There is a lag effect of crude prices going up versus what you see at the pump. Gasoline Prices were bound to rise.
2) This rise in crude prices are more attributable to tension in the Middle East than the tsunami.
3) In fact, consumption (demand) in Japan is expected to decrease, thereby placing downward pressure on global crude supplies.
4) Several refineries got knocked off line in Japan. Gasoline in free market countries bordering the Pacific will have short term pressure to the upside.
5) US regulations localize gasoline by regions, which is highly inefficient. Effectively, two or three refineries in the LA area provide gasoline to the entire LA region. The LA area can't simply trade gasoline with Phoenix or Salt Lake regions. This adds to your cost-- LA has some of the highest gasoline costs in the US through regulation and taxes. (New Jersey by contrast typically has gasoline ~$0.50/gallon cheaper.)
6) Refineries are beginning to plan for a turnaround to make summer blends of crude. This effectively takes refining capacity away for 2 weeks. This will pressure gasoline prices to the upside.

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