Gasoline prices are a mystery

April 27, 2012


Last week I paid 10-cents-a-gallon less for gasoline than I did the week before, at the same service station. While $3.79 seemed a bargain, it did cause me to wonder.

Last weekend, I noticed the price sign at the station showed regular gasoline dropped an additional 5 cents to $3.74 a gallon.

“What’s going on?” I thought, as I recalled how one of my friends and former colleagues used to argue with me routinely about the true causes of the rise and fall of gas prices in this country.

Then Monday evening I pulled up to the pump at this national oil company station/convenience store. The advertised cost per gallon was a full 20 cents less than I had paid just two weeks before, $3.69.

That’s when I really remembered my former colleague becoming frustrated every time I mentioned the American people were being suckered by “Big Oil” and “greedy, manipulating speculators” who were playing the oil market like Las Vegas high-rollers and we poor consumers were being bilked in the name of free enterprise.

“Supply and demand,” my friend/adversary would say each time we debated oil prices.

I would insist there’s no supply problem, and all demands are being met.

“Do you see any lines at the pump?” I would ask.

He would say something like, “You just don’t get it.”

And I admit, I don’t get it. I’m not an economist. I know very little about the oil industry beyond its record quarterly profits reports. But, I also know that over the past few years speculators have been driving the price of oil while the market analysts, media observers and so-called financial experts come up with some reason prices were rising.

It seemed every time Iranian President Mahmoud Ahmadinejad sneezed, the price for a barrel of oil would escalate. Even though the daily market values were for “future” delivery, the cost of gasoline would jump immediately. Why?

For months now, we’ve been told that Iran’s flirtation with nuclear power, turmoil in Libya and China’s demand for foreign oil were contributing to the increased cost of gasoline in this country. Adding to those troubles were refineries taken off line for maintenance or seasonal changes in formulations.

And we must not forget price hikes whenever a hurricane forms in the Atlantic (although 1,000 miles away) that forecasters say may hit offshore oil rigs in the Gulf of Mexico.

As I’ve driven around the past few days, I’ve noticed gasoline prices falling further. Some stations had regular unleaded priced at $3.64 a gallon. On Tuesday the website fortworthgasprices.com listed more than a dozen area stations with prices under $3.60; the lowest were several selling regular at $3.54.

Had I missed some national or international news that was drastically and rapidly affecting prices at the pump?

Ahmadinejad is as irrational as usual, although sanctions against Iran seemed to be getting the attention of Iran’s leaders. Libya is still unstable, and folks in China continue to buy more cars.

Analysts say that China’s economy, as well as manufacturing in some European nations, may be contracting, and there’s real concern over the recent presidential elections in France with a strong showing by a Socialist Party candidate. There also has been more oil production coming out of Saudi Arabia and even an upswing in U.S. production, they say.

But the speculators are still there, and I agree with President Barack Obama that there should be greater oversight over the oil markets to mitigate the over-manipulation by those who profit through speculation. It’s been a troubling trend for too long.

Maybe the president’s announcement had something to do with the current price drop.

Of course I can hear my former colleague, Jack Z. Smith, saying, “It’s supply and demand, Bob Ray. You just don’t get it.”

— Bob Ray Sanders is a columnist for the Fort Worth Star-Telegram. His email address is bobray@star-telegram.com.


bozo_the_clown 6 years, 2 months ago

I'm with Jack on this one Bob, you still don't get it. And when our president makes similar claims as yours, you gotta realize his words are nothing more than political pandering.

There's a difference between speculation and manipulation. If you remember, it was about a month ago Iran was threatening to close the Strait of Hormez and our government and Israel were talking about preemptively attacking Iran. That poses a serious concern to oil shipments coming to us and the market reacted appropriately. When supply is threatened to decrease, price increases.

RoeDapple 6 years, 2 months ago

It's called "Futures Trading" and the fuel is paranoia.

Michael LoBurgio 6 years, 2 months ago

Oil Price Increase Is Being Driven By ‘Gamblers Wearing Wall Street Suits’

Many experts, though, have pointed out that its not for a lack of drilling that oil prices are increasing, but rampant speculation in oil markets. Michael Greenberger, a former regulator at the Commodity Futures Trading Commission (CFTC) who oversaw the futures markets, told McClatchy that the increase is due to “excessive speculation” on the part of Wall Street:

“It is similar to the gambling Wall Street did on whether or not people would pay their subprime (below-market rate) mortgages in the mortgage meltdown,” said Michael Greenberger, a law professor at the University of Maryland and a former federal regulator of financial markets. “Now they are betting on the upward direction of the price of oil” … “It is excessive speculation, which is a fancy word for saying that gamblers wearing Wall Street suits have taken these markets over,” he said.


Michael LoBurgio 6 years, 2 months ago

Last year, the 5 major oil companies raked in more than $260,000 in profits every minute of every hour of every day

Michael LoBurgio 6 years, 2 months ago

Despite Backing Subsidies For Big Oil, Mike Pompeo (R-Koch) Says Wind Energy Doesn’t Deserve Financial Support

Koch Rep. Mike Pompeo (R-KS) — who is deeply indebted to Koch Industries for more than $100,000 in donations — is outspoken against clean energy investment. Recently, he celebrated when the Senate failed to extend the wind energy tax credit in a 49-49 vote. However, he is celebrating the threat to 37,000 jobs in the relatively young industry, when the production tax credit is set to expire at the end of the year.

Even as the oil industry enjoys $4 billion in subsidies a year, Pompeo lamented the cost of the production tax credit, claiming the wind industry would be fine on its own:

“The program has been around an awfully long time and it’s time to let that industry stand on its own two feet. And I’m confident that they’ll do it,” he said. “There’s great, creative engineers and innovators in the alternative energy field, and I’m confident they’ll be successful.”

It now costs the government more than $1 billion a year to hand out 2.2 cents per kilowatt-hour of wind power — and enough is enough, says Rep. Mike Pompeo (R-Kan.).

“We’ve been subsidizing some of these industries with tax credits for multiple decades, and every time they get to the end of the line, they get within a year, they say, ‘If you just give me’ — fill in the blank — ‘one more year, four more years, that’s all I want. Just a little more time,’” said Pompeo, who is leading a charge against the PTC and other energy subsidies.

“What history would demonstrate is they would continue to come back to the federal trough and ask for more time yet again at the end,” he added.


Fossick 6 years, 1 month ago

It's amazing how often those who rightly confess ignorance of a situation still know whom to blame for it, no?

just_another_bozo_on_this_bus 6 years, 2 months ago

A carbon fee and dividend would reduce the demand for fossil fuels and hasten an end to the massive externalized costs of mining it, transporting it and refining it for consumption. And, it would also stabilize the costs for those who have no choice but to use it.

just_another_bozo_on_this_bus 6 years, 1 month ago

A carbon fee and dividend wouldn't remove anything from the market.

As for the rest of your unsupported assertions, I doubt that you've ever let a few facts come between you and your ideology.

MarcoPogo 6 years, 1 month ago

Hey, you stole that "language move" from Tuschkahouma.

MarcoPogo 6 years, 1 month ago

Somehow, he will consider your comment racist. I don't know how but it will happen.

JackMcKee 6 years, 1 month ago

really? then why does good look exactly the same against every free floating currency?

JackMcKee 6 years, 1 month ago

Comidities, in general, have been on a tear since the banking crisis. It doesn't take a rocket scientist to figure out why.

JackMcKee 6 years, 1 month ago

Comidities? Commodities. Darned iPhone spell checker.

Flap Doodle 6 years, 1 month ago

The current regime keeps pointing out the same people as targets for the howling mob. The howling mob dashes furiously off in pursuit. Repeat as necessary.

jafs 6 years, 1 month ago

That's an interesting clip.

It's notable that you didn't comment on the vast majority of it, which laid out a number of ideas and policies to reduce our dependence on foreign oil, increase alternative energy production, etc.

And, of course, whenever you use name-calling like "Pewlosi" in your posts, it tends to discredit them in my view.

Corey Williams 6 years, 1 month ago


Domestic oil production seems to be rising in the last few years. How did they do that with less permits?

bad_dog 6 years, 1 month ago

"It takes 5 or 6 years from start to finish for a well to produce."

Au contraire. Not around these parts. In Kansas you can drill a 5,500 foot well, test the production zones, log it, run casing, complete the well and set the pump jack in 3 weeks or less if you are so motivated. The actual drillng would take only 7-10 days depending on how much testing you do. Add a week or two for dozers to clear and level the drill site before & after and Voila, you have a producing oil well. Eastern Colorado or Northern Oklahoma would be similar although you would have to add a few more days to drill the extra 2-3000 or so feet.

jafs 6 years, 1 month ago

It exists to protect the environment, not to help oil companies make money.

I'm glad if it's doing that more now than in previous years - I like things to work the way they're intended to work.

jafs 6 years, 1 month ago

When we have an administration that allows it to function as intended, it protects the environment.

This is a fundamental problem of our system - the executive branch has a lot of power, and can either allow/nurture the correct functioning of various agencies, or hinder it.

The SEC under Bush failed to take steps regarding Madoff, even though they were informed numerous times about him. That's a problem.

That's why I prefer political candidates and parties that want things like the SEC and the EPA, FDA, etc. to function as intended.

I don't agree with your "conspiracy theory" about these agencies, or with your favorite solutions, which seem to involve removing them entirely.

jafs 6 years, 1 month ago

We've had this conversation before.

I find your theories insufficient to protect the environment, because of the nature of it, which is fluid. And, a "zero tolerance" for pollution would disallow almost all of our daily activities. Don't your day to day activities involve pollution to some degree?

The EPA, by setting acceptable limits on pollution, functions to protect the environment, while still allowing us to live comfortably. Of course, it only does that if the limits are well established and enforced.

Is the SEC designed to protect Madoff? I say no, it's intended to prevent him. But, under Bush, it didn't do that.

jafs 6 years, 1 month ago

If the SEC had been functioning as it should have been, Madoff would have been stopped.

And, that would have been a good thing.

Not true at all - it just means that a "private property rights" oriented system isn't a good one for protecting it.

I don't know what you're trying to say there - if we enacted a "zero tolerance" emissions policy, we'd all have a tough time driving, heating/cooling our houses, etc.

Boxing isn't battery because the people involved agree to fight each other - are you suggesting that a "zero emissions" policy would simply be voidable with such an agreement? If so, then it doesn't function well to protect the environment, does it?

It would only be illegal if we enacted your policies, and your property rights arguments.

jafs 6 years, 1 month ago

Just because it's called a "hospitality center" doesn't make something a concentration camp, either. As you so often do, you simply assert something without any evidence, or proof.

As far as I'm aware, there is virtually no way at all to do many of the things we do on a daily basis without using resources, and creating pollution.

Even building solar panels does that, as does building wind turbines, etc.

What on earth did your analogy with boxing have to do with this discussion then?

jafs 6 years, 1 month ago

The problem is, of course, that we all want the heating/cooling/driving, etc. but nobody wants the pollution (at least not in their own backyard).

And, that's just not possible, certainly not right now, and not for the foreseeable future.

Also, by the nature of the environment - particularly it's fluidity, and the way that air moves around - makes a private property rights solution rather unworkable.

For example, the guy who pollutes his own "airspace" can argue that he has the right to do that, while the one who gets that pollution wafted over to his house can argue the opposite.

And, both arguments are somewhat reasonable from the private property rights viewpoint - I "own" my airspace, so I can do what I want with it, but also if pollution wafts over to somebody else's house, it comes onto their "property".

Fundamentally, I find the notion of ownership of the environment somewhat odd, and flawed, to begin with - I don't feel like I "own" the air that flows on or off of my property at all.

And, I live on the earth, but don't feel that I own the little part of it that my house sits on.


I do in fact give the government more of the benefit of the doubt than you do - I believe there are well intentioned people who are trying to find solutions to our problems there. I also see that there are corrupting influences, and unintended consequences as well.

Seems to me that you take a very cynical, almost paranoid view - that anytime the government says or does anything, they're really doing the opposite.

That agencies like the EPA exist to harm the environment rather than protect it, etc.

jafs 6 years, 1 month ago

So you would interfere with somebody's ability to do as they wish with their own property, then?

Still waiting for how we can live anywhere near the way we do today without creating any pollution. Do you live up to that in your day to day life? Or do you simply live comfortably, and ignore the pollution you create? If you truly believe in a "zero emission" policy, why aren't you living according to that?

All of your assertions about me are simply incorrect, so it doesn't seem worth responding to them.

I act according to my own moral code, as best I can - that doesn't translate to any of your characterizations.

The government has the right to tax, based on the constitution - you know that.

Just as agents of the government have the right to incarcerate people, even though average citizens may not have that right.

George Lippencott 6 years, 1 month ago

I am perplexed. Who exactly are the speculators? Is it wall street? Is it the middle east equivalent? Is it Russia? Maybe Maxico? Seems to me as if there are a lot of speculators - the vast majority of whom are not under our control.

Is yerlping about "speculators" accomplishing anything except to amuse them? IMHO moving away from "oil" (rationally) and producing more of it domestically (energy independence) is a better solution.

To dampen speculation there is nothing compared to the potential of major new sources that will drop the price and leave the speculators holding a drippy brown bag

Sharon Nottingham 6 years, 1 month ago

Yet another reason why building the Keystone Pipeline would make no sense. We need to be proactive instead of reactive and reduce oil dependency globally.

deec 6 years, 1 month ago

Which they planned to do in the first place. It was never our oil. It was intended to be sold to the highest bidder, just like all oil.

woodscolt 6 years, 1 month ago

"Actually the Keystone would have been a great idea, the greater supply of oil coming to us, the lower the price. "says the clown

The old private sector myth

Actually, if all went well, it would be at least 3 years before the keystone pipeline could possibly have any affect on gas prices. It is controlled by the private sector which means speculating and selling to the highest bidder would make it so that actually, the keystone pipeline will have no favorable affect on gas prices. now or later. But it makes a great "dumb and dumber" political football for those who choose to ignore this fact.

just_another_bozo_on_this_bus 6 years, 1 month ago

"they've started building a pipeline leading to the western shore of Canada"

There you go again, making stuff up. Fact is, there are lots of folks in BC that aren't being any more cooperative with building that disaster through their area than the folks down here are.

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