gas prices -- what am I missing????

[Babywhite]

I try to read some news daily -- print or online, and I try to catch tidbits of the news throughout the day but...

I do not understand why gas prices are increasing. Oil prices per barrel are still very, very low, but gas prices are increasing.

I read some news info stating that while barrel prices are lower than before, the oil refineries feel that they aren't making enough b/c we have cut back so much. So they are going to (continue) cutting production in order to make more $.

I read the above info in one article and (basically) in the next article read how they (the oil refineries) are making record profits.

Ok -- what gives...they can't both be true.

I just saw where oil prices have dropped to $40 or less (can't remember exactly) per barrel and then heard to expect gas prices to continue to increase in February ---????

It is so frustrating.... the less gas costs the more $ we have in our pockets to spend on other things which would help stimulate our economy.

Is there nothing our government can do when it is the oil refineries that are causing the increase and not the cost of the barrels?

Maybe I'm confused about the big picture or maybe it's a small detail causing me to "not get it" -- but whatever it is --- please explain it to me. :)

TIA for your help!
Babywhite

[mamaoftwins]

I don't know the specifics, so I can't answer you completely, but I do know that gas prices are based on "futures", meaning that they are based on what oil is forecasted to be selling for in the future - 3 months maybe is what they use? So, even if oil is low right now, it doesn't mean gas prices will be low. If the price of a barrel is forecasted to go up in 3 months, that's what gas prices now are based on.

It's weird, and I don't understand it completely.

Maybe there is a more enlightened BBB'er here ...

[Babywhite]

Well, I see that a lot of people have read this post but did not answer. As much as I would really like to get some answers, I'm glad to think that I'm not the only one who doesn't know. :)

Sometimes, I feel like I get so caught up being 'mommy' that I've lost touch with being an adult. Not understanding things in the economy (like this gas topic) make me feel this way.

If at any point anyone finds the answer to this question, please come back and post it. I think there are many of us who would like to know... :)

Thanks for reading...(and making me "not feel so dumb" ) :) :)

Babywhite
PS - Thanks 'mamaoftwins' for your post -- that is something I'll think on... :)

[wendibird22]

I was justing thinking the same thing about gas prices and commented to DH this weekend that I'm confused that while the economy continues to tank and unemployment is increasing daily why are gas prices climbing after they finally went down. He wasn't sure why either. Gas just returned to above $2 a gallon here over the weekend.

[AngelaS]

Supply and Demand.

When the prices were high, people used less and prices dropped. Now that the prices have gone down, people are using more and the prices are going back up.

[vonfirmath]

I think the futures thing is more like it. People buy contracts to purchase gas at X date in the future. And because they need the cash to take delivery of gas, gas stations price at the price they are going to have to have in hand.

I know that what ramped up prices so high was that there were people speculating that the price of gas would go up, and buying these contracts never intending to take actual delivery (when the price went up, they would sell their contract for less than the new price to someone else who DID want to take delivery, then they got a "bargain") -- thus making the "demand" for gas more than just people wanting to buy it at the pump, but also people wanting to buy it as an "investment" (it's hard for me to consider something an investment on that short of a leash). When the loan crisis hit, people could no longer get loans and thus couldn't buy the contracts and the price of gas plummeted, probably overcorrecting the other direction (ie becoming cheaper than its true value).

So I always expected gas prices to go back up. How far it goes back up is going to depend, in part, on whether something was done to prevent the speculating by people who never intend to actually take possession (And no, I don't know what can be done, I just know they ramp up the price of gasoline)

Here's a bit about it: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/01/MNDGVBO58.DTL -- Investors fuel gasoline price increase

Here is a description from the Foundation for Teaching Economics (geared more to high school students I think) http://www.fte.org/hottopics/index.php?page=gasprices.inc