Crude Oil versus Gasoline prices

An Anonymous reader asked in my last post on Gold and Silver, why does there appear to be such a lag in the drop in price of Crude Oil versus the cost of gasoline at the pump? I said I would check it out and report back if I found anything relevant. So this morning I have posted 2 charts. One is on Crude Oil prices over the past 2 years and the other tracks Gasoline prices over the same period. Here are the charts:


There does appear to be a longer lag time most recently as gasoline prices should be lower. I can't explain it so as my reader suggested, maybe the Oil companies are trying to gut us to improve their profits as he suggested. Another possibility is that because demand has dropped significantly with the slowdown in world GDP, the Gasoline available today was produced using higher priced Oil and that it will take more time to use this Oil up, hence the lag in Gasoline prices. You wouldn't lower the prices of something you paid higher for until you sold it and then might drop your price of that product. The same is most likely true for Gasoline as well. The real gouging may take place on the front end when Oil prices rise rapidly. They most likely feel justified to raise prices then as everyone knows Oil prices were going up, hence the rise in the cost of Gasoline. It's a psychological game played with Consumers the losers. You can bet on that.

Thanks Anonymous for the question.

Market comments for Sept. 19, 2011

We are technically still in that tight range of between 11,000 and 11,500 and not emphatically broken out of the range on either side of it. Europe is still in crisis and the group of European Finance Ministers did not listen to Treasury Secretary Tim Geithner this weekend in his plea for them to stand together and do whatever is necessary to bail out Greece, even if it means to print more Euros. This has caused our Futures markets to be down before the open. The Dow for example is down about 185 points. The European markets are down today about 3% or more and this will come here as well. Oil is down over $2/barrel. So we now make a reverse turn after Friday's Sept. Options Expiration and head back towards Dow 11,000 and retest once again.

This week the Fed plays a big role in market impact. Stay tuned to see what they have decided.

Market comments for June 23rd UPDATE

Initial jobless Claims remained above the 400K level again this week. The data released was 429K for the week and last week's data was revised upwards from 414K to 420K. This data comes after Fed Chairman Bernanke had a news conference yesterday where he said the Fed saw a slowing economy and these words prompted a market reversal yesterday, where the Dow closed down.

There was news also on the Oil front this morning with rumors causing Oil prices to drop over $4/barrel. When the IEA held an emergency meeting, they announced they were releasing 60 million barrels of Oil stock, prices rebounded some. The Oil market will settle down some later but where it settles is anyone's guess.

Today's expected drop in US stock markets should see the Dow below the 12,000 level again. The big question still confronting nervous markets is whether Greece will enact tough austerity measures, as they must or default, and whether the US will pass a measure to raise its debt ceiling and calm jittery financial markets. Because the bluster from the Republicans has quieted on this issue in recent weeks, I do believe they have decided to extract as much cuts as they can in the deficit and then declare victory and raise the debt limit to get us to the next hurdle which is fighting for more cuts. This fight will be fought as an election issue during the Presidential campaign, in my view.

UPDATE: 7:15am PST

No sooner do I get this Blog up and make comments that I believe that the Debt Ceiling would be raised because Republicans have been noticeably quiet this past 2 weeks about their reluctance to raise the Debt Ceiling without drastic cuts in spending, that Eric Cantor issues a statement that the bipartisan negotiations have reached an impasse. These were the negotiations headed by VP Biden. Cantor says that only the President and Speaker Boehner can break the impasse. Here we go again!

Market comments for March 11th

Much news in the world today. There is the big 8.9 magnitude earthquake in Japan with a Tsunami following. There is the trouble in Libya, the unrest still in Egypt, and new protests in Saudi Arabia. But if that isn't enough, the Michigan Sentiment for March came in at only 68.2, while expectations were for a 78.0 reading. That is a huge drop and most likely based upon the recent rise in Oil prices because of the trouble in Libya and Egypt. The prior reading was a 77.5 reading. The reading today was the lowest since Oct. 2010. See the chart below.

The market is meandering today after the big sell-off yesterday. It has been both down and up today but the total range is about 94 points today for the Dow. It does not change my view that we are headed lower next week.

Market comments for March 8th, 2011

It appears as though we are approaching a very critical time for the Dow. We are within days of testing the uptrend support line and whether the market will break lower or rise. Based upon world events it doesn't appear the news is favorable for a market rise with concerns over $200/barrel oil according to a Bloomberg.com story this morning because a Day of Rage has been called now for Saudi Arabia.

As the chart below shows, we are at the edge with time running out.

As I have stated clearly here many times, we are headed down in my opinion and it is going to get very ugly for those who did not take profits yet and are hoping we climb much higher. Greed is not your friend here.

Which single issue will determine the Democratic nominee and ultimately President?

It comes down to that single issue. Which issues do we select the next President on. Here are some choices and you can vote in my mini poll on the right side of the page.

• Iraq war
• Economic recovery
• Healthcare
• Immigration reform

There are several possible outcomes and the calendar plays an important role here as does which States are left to vote in the Primaries. Which candidates are the best match-up?

Let's take the first one: Iraq war. The best match-up is McCain versus Obama.

John McCain wants us to stay in Iraq until we've won and has supported the President's strategy. Obama wants to get troops out and was never in favor of the war in the first place. Hillary now says she wants our troops to come home but had voted to give the President the authority to go to war in Iraq.

Economic recovery: Best match-up Hillary or Obama vs. McCain

McCain wants to make tax cuts permanent and both Hillary and Obama want to let them expire so that the wealthiest pay their fair share. They also both want tax cuts for middle class Americans.

Healthcare: Best match-up? First you must decide do you want Hillary's plan which includes penalties for those that don't purchase health insurance and fines they buy it or Obama's which is similar to Hillary's except no mandates. Both want to look for ways to reduce costs but no one really wants Universal Healthcare where our taxes pay for the Healthcare system and the Insurance companies become extinct and not in business anymore as we know them. Johm McCain wants to manage costs down by dealing with the Insurance companies to get them to contain more costs. We have been unsuccessful doing this since Managed Care (HMO’s) came into existence 15-20 years ago, and I don't think any will be successful in working with Healthcare providers. The system doesn't work. But Hillary claims her plan is Universal Healthcare, and it isn't. Many will be disappointed no matter which person is elected on the basis of this issue, as all have problems.

Immigration Reform: All the candidates are basically the same on this issue. All want tighter borders and all want the current system to be reformed so that legal immigration is easier than illegal immigration. And all want those undocumented (Illegal entry) persons to get at the back of the line of those that have been waiting and to pay a fine to get on the path to return.

So as you can see there isn't much difference in who you vote for in the remaining Primaries unless the main issue is the Iraq war. If you combine the Iraq war and the economy there are clear distinctions between the Republican position promoted by McCain and the position of Obama. The choice seems like a simple one. The economy is tied into the Trillions of real dollars that will be spent in Iraq, on the cist of the troops there and the cost of taking care of the nearly 30,000 seriously wounded Veterans that are returning with so much need for help. It also contributes to the price of Oil which has gone from $20-$24/barrel to $105/barrel under this President. That is a fact and it is killing the economy.

Why is Bush talking about Iran as cause of a potential WWIII?

Many are asking why President Bush used this language today as it was hyping fears around the Globe. Add to that, yesterday, Russia's President Putin warning the U.S. about Military action against Iran. Also why wouldn't Bush discuss why he wouldn't comment on Israel bombing a Nuclear Reactor site in Syria, in his news conference yesterday? Fears are ratcheting up on the World stage. So the question is why, especially since Bush has only one year yet in office. He did say today he was "going to sprint to the finish line" of his term in office as he had "unfinished business".

Do you want to guess why he said these things today? Let me take a stab at it and put this picture in a larger context and tie up all the loose ends. First, Alan Greenspan was asked recently and had written in his most recent book, that the Iraq war is all about Oil. He's not the only one to make that statement recently. But to emphasize the point again, it's all about the Oil!

Bush and Cheney are Oil men. Their blood is black not red. Both have been in the business themselves with VP Cheney as the CEO of Haliburton, while the President had his own small Oil company that went bankrupt and was bailed out by the Saudi Royal family.

Remember, when we went into Iraq we were told that the war would be paid for with Iraqi Oil. Did that happen? No! And that was when the price of Oil in 2003 was $30/barrell.

With each progression in raising the stakes in Iraq with more troops and add extending the length of this war, Oil prices continue to rise. Also, comments from the Bush Administration that Iran is trying to develop a Nuclear weapon and must be stopped at all costs, has one and only one effect, Oil prices continued to rise.

As the chart above shows, both this President Bush and his father have had one thing in common. Both created the highest price of Oil than in previous years to their terms and it will be shown that when President Bush leaves office, Oil prices will come down significantly. Why? Because whomever in the next President they won't be trying to create the conditions to increase Oil prices. They will be calming fears in the World.

And let me see if you can guess how the Oil companies have prospered during this time when their Raw materials have tripled in price? Do you think like other businesses that when their raw material costs went up they made less profit? Hmmmmm amazing isn't it?!

By the way, this chart only goes to $70/barrel, not $90, which you can estimate where that would extend if drawn on this page. Today's closing price of Oil was $89/barrell, three times the amount at the start of the Iraq war and we still can't get the war paid for with Iraqi Oil. That is why the Congress and Senate should pass a Windfall Profit tax on Oil companies. Oh, I almost forgot, that won't happen either, as most of the candidates running for President are getting some nice fundraising from Oil company interests, as are those running for office next year. I guess that's one piece of legislation that won't see the light of day.

Year Oil Price
1973 $20/Barrel
1979 $40/Barrel
1993-2000 $18.53 Clinton Presidency

Still a non-believer?