...It's A Mystery...

This one absolutely baffles me. Over the past 4 years, the price of oil has multiplied 300+% for the same 44 gallons of product that were selling for $36-$40 previous to the current (and ongoing) speculative run-up.

Naturally, as oil has risen, the price per gallon of processed fuel has also risen. Along the way, we have all become familiar with the record profits being recorded by nearly every oil company quarter after fiscal quarter.

Now, along the current trajectory of the oil costs, there are fluctuations in the average price per barrel. Oil goes up, gas goes up. Oil goes down, gas stays up.

Did I get that right? Well, not exactly. The price of gasoline definitely rises exponentially every time a barrel of oil costs more. It's not uncommon for the American consumer to see a .05, .10, or even .15 cent overnight (or intraday) jump in a gallon of gas. However, once up, that same gallon of gas takes days or even weeks to retreat even a few cents; even when the barrel price has retreated by dollars.

Further, oil is traded 1 month ahead of the actual purchase (or order fill) window. For example, oil contracts traded today will come due in late August. That is, delivery from the supplier to the oil company happens approximately 30 days from the time the contract (xx number of barrels at $xx) was purchased.

So, when we see a run up in oil that won't even reach the pumps for at least 30-45 days, why are we (the consumer) being instantly strapped with huge, sometimes daily increases at the pump?

But the really baffling question for me, is, why does the price of gas jump when oil costs more, but the price of gasoline per gallon either stays the same, or takes literally months to decline, even after oil has fallen significantly? This makes no sense to me, and is an unjustifiable mystery.

I once heard a conversation on the radio about the oil costs vs gas costs, and the host was talking about how oil companies tell people they just don't understand the ecomonics of the whole thing. He (the radio host) told his audience "Minds infintely greater than mine might understand it [the whole oil thing], but this whole system just doesn't make sense." I completely agree with that viewpoint.

While the oil companies do have an obligation to their shareholders to perform well, run smoothly and efficiently, and return some money to their stockholders, why, in this era of 300+% energy inflation, do they charge what they do for a gallon of gas? They could charge $1 less, and STILL have huge profits.

The late, great columnist Jack Anderson wrote an article a short time before his death in which this subject was the topic. He quoted a long-time friend of his in the oil industry who stated that a gallon of gasoline costs no more to produce [at the time] than it did 25 years before...about .25 cents.

My question again...why does the price of gas stay at a higher level even after oil per barrel drops? It costs the refiners hardly anything to convert each gallon. The price jumps when oil rises, but it almost refuses to come down. Why? What incomprehensible ecomonics are in motion that is so tough to explain? Why can't the oil companys sprout a conscience and actually take less profit so the public isn't so hard-put to meet their food budgets, let alone any other type of budget?

I'm not going to call for some boycott because those just don't work. Everyone fills up either before or after the boycott. The only real damage inflicted is upon the station owners who lose pump and convenience store purchases.

Just think about this. Ask yourself what you might be able to do to help even a little bit. I certainly don't have the answers, but I'm sure that someone in the oil industry, with a mind infintely greater than mine, might be able (or at least attempt) to justify the actions of the companies holding every American household financially hostage.