Continuing Consternation with Oil $ vs. Gas $

One of my original posts was about the disparity between a barrel of oil and the cost of a gallon of gas. Specifically, how when oil rises in price, gas quickly follows. Yet, when oil drops in price, gas takes weeks to drop even a few pennies.

Particularly troubling in this equation is that oil is typically purchased 30 days ahead of delivery. Theoretically then, we shouldn't see an increase in gasoline prices until 35-45 days after contract purchase (assuming the price of oil has risen), because the oil already being processed was paid for at a lower price per barrel. Yet, the same day a contract purchase increase occurs, we are seeing prices at the pump jump as well. Why?

I know that gasoline commodity shares are traded separately from oil; but they seem closely tied together whenever oil rises--but then look like two disparate entities when oil drops. Again...Why?

A few months ago, the price of gasoline in my area reached a peak average of about $3.17 per gallon (for regular unleaded). It has gone up to as much as $3.27 and as "low" as $3.09 Right now, the gas in my area is about .25 cents above the national average ($2.92).

Over the last few weeks, with increased uncertainty in Europe and the US, the price of oil has dropped from a high of $87.63 (?) per barrel, to the current price (at today's trading close) of $70.08. That's a 20% drop in the price per barrel. Yet, the gas in my area remains unchanged. Why?

If oil rose 20% you can be damned sure we'd see at least a 20% increase in the cost of our gasoline. Why does the reverse NOT hold true for a commodity so closely tied to oil futures?

I keep hearing all sorts of excuses coming from the oil companies as to why. They state things like Financial unrest in Greece, Uncertainty in China, Economic trouble in Europe due to the ash cloud from Iceland, etc. On Friday, I head another great excuse..."The further a market is from the refinery gasoline pipeline, naturally, the more the gas will cost in your area."

I know this excuse to be a load of poo, because there are four refineries in my area, just 55 miles away. That fact totally blows the oil industry's excuse right out of the water. Further, of the 5 states (in the continental US) with the highest average gas prices, four of them have at least 2 refineries operating in their borders. Makes me wonder what excuses we'll be hearing next...especially in those five states.

Meanwhile, the price per gallon of gasoline remains well above the national average. In the next two weeks, we're supposed to see a drop of about 10% in prices to an average of $2.64. Did I say that right? Yep--a mere 10% price reduction for a 20% drop in oil prices. That just doesn't seem right...probably because it isn't!

Let's look at the cost of gas from another angle. During the terrifying speculator-driven run-up of oil from 2006-2008, the price of oil peaked at about $147 per barrel. Gasoline was selling for about $4.45 average. That's about a 300% increase on both commodities from the pre-run-up prices of both.

Currently, oil prices are about 70% above pre-run-up prices; Yet gasoline is up 153%. (I used $1.15 per gallon gas, and $36 per barrel of oil as my basis for these numbers.) WHY? WHY? WHY? This makes no sense whatsoever. The only explanation that really makes any sense is that of corporate greed. No other reasonable explanation exists...as far as I am aware. In my opinion, the oil companies really like the massive profits they've been rolling in by the ship loads, and really don't want to give up those incredible net profits.

I'm sure there are other factors I'm not aware of; other influences I know nothing about. However, the numerical aspects do not lie. There IS a monstrous disparity between what oil costs, and what we pay at the pump. The gasoline markets are tied extremely closely when oil rises; but are disparate when oil falls. The excuses from oil companies continue to spew out rhetoric that just isn't true. And the American public seems to be the snicker doodles in the proverbial cookie jar that is Big Oil.

Guess who loses?