N941WR

N941WR

Legacy Member
It is not my intention to turn this into a debate on politics or thievery, so please don't go there.

As of today, oil prices are below $35 a barrel and yet in and around Charlotte, NC 100LL prices are 2.99/gallon and the FBO said they will go up to $3.20 with his next load. (Auto gas is around $1.90 a gallon.)

How do they set fuel/gas prices? It seems to me that the price should be going down, not up.

Are fuel prices no longer tied to the price of oil?

A little help please. I have tried doing the research and can't find a reasonable answer.
 
Yes, and No

Crude price is only one factor in the final cost of gasoline.

It is a variable cost, subject to change, while there are other costs which are fixed----cost of labor, or cost of property taxes etc.

If the crude is 10% of the total cost, and crude drops by 50%, the final cost will not drop 50%, it will only drop 5%.

I know this is way over simplified, but it gives an idea of what is going on.

Hope it helped.
 
Last I had heard, OPEC needed oil to be around 44 dollars a barrel for them to be able to operate without issues. As you have noticed, oil is below that amount. Opec held a meeting and decided to cut production ALOT to drive the price of gas back up. I guess they are only happy if they make 40 Million a year.
I agree with you, price should reflect demand, but basic econ I guess doesn't play into the game with greedy people.

I wish AvGas was 2.99 here in Minnesota. Cheapest I have seen is 3.60, but it is better then 4.20 a gallon any day.
 
A tracking...

....of the wholesale 100LL prices quoted every Tuesday to our Airpark has shown a steady increase over the last 4 to 5 weeks.

Since I'm presently on a temporary e-mail system in cold, wet Liverpool, I don't have the full history, but last week it increased 14 cents and the increase was 13 cents the week before that.

The increases you are seeing seem in line with at least the AZ wholesale cost. An quick review of www.airnav.com local prices support this.

So I guess the connection to the quoted oil barrel price is somewhat tenuous...:)
 
Last edited:
Based on Production

Price of gas is based on what the refineries are producing. If they have a shortage of avgas they raise the price. Avgas is such a small percent of a refineries production the price vaires based on when they are refining some of if they are producing autogas, or what ever.

My local FBO just dropped the price of avgas $.75/gal due to changing from BP to Phillips. Turns out in STL there is no BP refinery to make avgas so it is trucked in. This is because BP refuses to buy fuel from other distributor. Bottom line is that price is also greatly effected by companies policies and geographical location.
 
I suspect one reason AvGas prices don't track mogas or oil prices very well is that your airport doesn't get deliveries several times a week like you local gas station does. So if the FBO fills his tank today at a cost that requires a $4 price, he won't change until the next delivery. At a local airport, the time between fillups was something like 60 days, last I heard. And that was before winter.
 
You must take delivery!!

I just had this conversation with my fuel distributor last week. He has a third generation fuel distribution business and very knowledgeable on the subject. His opinion of the problem can be expressed in two words?. Wall Street. Actually his term was investment bankers and their manipulation of futures contracts.

******He was of the strong opinion that you should not be allowed to trade in petroleum energy contracts unless you have the ability to take delivery of the product and consume it or store it. ********

Being involved in the petroleum business for 23 years now, I whole heartily agree. These money managers step in between the producers and consumers and create artificial demand that is based more on the amount of cash available then any supply and demand of the product itself. If political leadership would institute the simple paragraph above you would be gassing up your car with $1.60 per gallon gasoline when crude hovers at $35.00 a barrel.

Of course 100LL does have other issues but would generally track around $1.00 more a gallon unless regulators change the ground rules.
 
Gasoline futures speculation

According to "60 Minutes," not necessarily a reliable source, about 27x the actual amount of available oil futures has been traded on the commodities market in recent times.

Changing the rules to only permit companies that actually could take delivery would eliminate much of the speculation that de-stabilizes prices. The original purpose of futures contracts was to ensure that users had an uninterupted supply, not to enable speculators to make money on paper.

Destabilized energy prices have terrible effects on business; utilities can't make an informed decision re how to fuel power plants and auto company product planners can't determine what their product mix should be, for example.
 
Oil is a commodity and is priced the same way corn or beef or copper or any other commodity is priced. What throws people off is when the cost of crude goes up and the cost of gasoline goes down or vise versa. What really determines the price at the pump is what the market thinks is going to happen to the supply or demand of oil in the future. If the demand for oil is anticipated fall by 50% during the next four weeks then the price at the pump would plumet. If the demand was expected to go up by 50% during the next four weeks then the pump price would skyrocket. Neither of the changes in pump price would have anything to do with what the cost of putting the existing fuel in gas station's inventory had been. Aren't commodities markets beautiful.
 
Prices easing?

This weeks wholesale quote dropped by 5 cents, at least it's a move in the correct direction...:)

Reference my previous post #5 in this thread...
 
Last edited:
For decades, the standard benchmark for oil prices has been West Texas Intermediate (WTI). Historically, WTI has been priced at a premium relative to other feedstocks, such as Brent crude or OPEC crude.

Right now, WTI is cheaper than Brent crude by $8/$10 per barrel.

Composition of the different varieties is different, so refineries set up for OPEC oil can't handle WTI & vice versa. Sorta like putting mogas, or maybe even diesel, in your IO-360 :eek:.

If your avgas supplier's refinery uses Brent or OPEC crude, the price of WTI will be almost irrelevant to the price you pay at the pump.

http://www.energyscoutconnections.com/forum/topics/how-much-is-oil-really-worth

http://www.ogj.com/display_article/...MARKET-WATCH:-WTI,-Brent-price-spread-widens/

John Spivey
 
Welcome to VAF!!!!

Hey John, welcome to the good ship VAF:D

Slide rule collecting??????? interesting hobby, but you need to start flying;)

Good to have another petro guy on here to help us get our facts straight.

Good to have you aboard.
 
LarryT said:
snip

Changing the rules to only permit companies that actually could take delivery would eliminate much of the speculation that de-stabilizes prices. The original purpose of futures contracts was to ensure that users had an uninterupted supply, not to enable speculators to make money on paper.

Destabilized energy prices have terrible effects on business; utilities can't make an informed decision re how to fuel power plants and auto company product planners can't determine what their product mix should be, for example.
Click to expand...

Keep in mind that more speculators lost money in the past year on oil than gained, since it is well below the price of a year ago. The effect last year's speculation had was to wake up some Americans (specifically, the president and Congress) to the coming production shortage. Their reaction was to end the off shore drilling ban. Prices started their free fall precisely after that.

It should be noted that this ban will be reinstated shortly, so expect prices to again soar.
 
You must log in or register to reply here.