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Gas prices up slightly as refineries improve margins

January 19, 2009 · · Filed Under Fuels, Oil Refining 

Some insight:

For a while, when the price at the pump was around $1.59 a gallon in the Iowa Quad-Cities, the refining margin on gasoline was negative, MacIntyre said.

“Refiners were losing money in that they were selling the gasoline to wholesalers for less than what they were paying for the crude oil that goes into the refining,” MacIntyre said.

However, they were making money on other products such as diesel and jet fuel, he added.

The price of gasoline is not set by the refiners, MacIntyre said. Gasoline prices, as well as the prices of all the other products refineries make from oil, are set by the market.


There are a lot of partial explanations. It’s partly due to some refineries cutting production, both to increase profit by reducing supply and to make repairs, at least in California. It’s partly due to the crude oil market being in contango, the term for when “the current month’s (Feb.) future price is trading lower than the futures price for the following month”—which means there’s a lot of oil being bought and stored in tankers for future sale. (The problem: we don’t know how this contango directly translates to higher prices at the pump. Does it create a shortage? Can anyone educate us in laymen’s terms?) Oh, it might also partly be due to the temporary spike in crude prices back at the end of 2008, because often pump prices lag crude prices.


Gas prices continue upward spiral — AAA says for the third consecutive week crude oil prices have declined and retail gasoline prices drifted higher. Consumer demand remains weak and supply is so ample that offshore oil tankers are carrying millions of barrels of crude oil and going nowhere.

Why Do Gas Prices Rise As Oil Prices Fall? — Alvarez has one theory that speculators are behind the increase, betting the crude oil will rise in the coming days. Alvarez does stress, however, that gas station owners have the final say on how they price their gas. 

I’ve written several times, bout OPEC cuts, and crude oil stowed at sea… is this having an effect? What do you think?


One Response to “Gas prices up slightly as refineries improve margins”

  1. Obama orders push to cleaner, more efficient cars | Fuelishness! Fuel Economy Blog on January 26th, 2009 7:12 PM

    […] all know these prices are bound to rebound. Prices are already making upticks at retail gasoline stations, even as excess oil sits idly in storage tanks and tanker ships around the […]

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