Gasoline Price Factors
by Bob McDowell, Contributing Author: In the Tulsa, Oklahoma area, we have been subjected to numerous rather large variations in the price of gasoline at the pumps. A number of individuals, both in and out of the media sources have pontificated on the reasons. Most placed blame on "greed" by the marketing companies and/or station operators. Actually, there are a number of factors that can, and do, have an effect on what the ‘price at the pump’ (PATP) ends up being on any given day.
Having grown up with a Dad personally involved as an executive in the marketing end of the business in a semi-integrated oil company, I was exposed to the ins and outs of the oil business. Then I had career in the exploration, production, and transportation of the crude oil and natural gas for 50 years with my last production operations in 1999. The decision to end a business, I truly enjoyed and loved was reluctantly arrived because of the increase in onerous and expensive compliance regulations and an unfair and selective way in which the regulations were applied. Unfortunately, my business ceased to be ‘fun’ any more and was decreasingly profitable.
Many demigods in politics and media seem to ‘make hay’ by accusing the major oil companies of ‘price gouging and manipulating markets.’ They, in my opinion, they evidenced a malicious envy or total ignorance of the business facts. They love to claim that the ‘greedy oil companies’ are reaping evil profits’ from the ‘poor consumers.’ Recently a story appeared in a trade publication which compared their profits, per share of stock, with leading companies in other businesses. It turned out that the oil company profit levels were the lowest and were several percentage points lower than other businesses such as Nike and Microsoft.
At the local level, we still have the ‘what traffic will bear’ pricing operation. Here in the Tulsa area, it is obvious that Quick-Trip is the leading marketing company. As far as I know, they do not own oil and gas production or refining, Thus, they are "marketers" who must buy there gasoline from refining companies at ‘market price’ or under contract at a price fixed at so much above the price of crude. Naturally, they need to make a profit, or they will go out of business. It appears to me that they are the ones setting the price of gasoline in my general area.
I remember how my Dad would complain about small ‘price cutter’ marketers selling under the markets and starting "price wars", which of course were welcomed by the consuming driving public. In those days, the 1930s, prices varied in the $0.08 to $0.12 per gallon, without the present $1.99 +9/10 pricing done since the invention of the metering and pricing pump machines. These small marketers naturally had much smaller staff and overhead costs than the large companies. A few even had their own small refineries, many of which produced a lower quality gasoline and no lubricating oil.
Back to the present, if the price goes up $0.10 per gallon over night, the wise consumer should look for a station that has not raised its price, it might be privately owned and has not heard of the price jump, or it may have decided to try for more volume of sales. Some in may raise or lower their price when a new load of gas is delivered so that their profit margin in the sale remains the same.
A hint from a friend who is a delivery tank truck driver cautions to wait at least two hours after a delivery to buy gas. This allows the storage tank sediment to settle out and not to get into your vehicle’s fuel tank!
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Robert "Bob" McDowell, Jr. is a retired Professional Engineer and Geologist with over 50 years experience in creating drilling prospects, supervising drilling, well completion, production operation, and pipeline design for oil and gas including repair of problem wells. McDowell is a conservative activist and member of the Oklahoma Republican Assembly. He Contributes opinion and commentary articles to the ARRA News Service.
Tags: Bob McDowell, gasoline, prices, factors To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. and "Like" Facebook Page - Thanks!
Having grown up with a Dad personally involved as an executive in the marketing end of the business in a semi-integrated oil company, I was exposed to the ins and outs of the oil business. Then I had career in the exploration, production, and transportation of the crude oil and natural gas for 50 years with my last production operations in 1999. The decision to end a business, I truly enjoyed and loved was reluctantly arrived because of the increase in onerous and expensive compliance regulations and an unfair and selective way in which the regulations were applied. Unfortunately, my business ceased to be ‘fun’ any more and was decreasingly profitable.
Many demigods in politics and media seem to ‘make hay’ by accusing the major oil companies of ‘price gouging and manipulating markets.’ They, in my opinion, they evidenced a malicious envy or total ignorance of the business facts. They love to claim that the ‘greedy oil companies’ are reaping evil profits’ from the ‘poor consumers.’ Recently a story appeared in a trade publication which compared their profits, per share of stock, with leading companies in other businesses. It turned out that the oil company profit levels were the lowest and were several percentage points lower than other businesses such as Nike and Microsoft.
At the local level, we still have the ‘what traffic will bear’ pricing operation. Here in the Tulsa area, it is obvious that Quick-Trip is the leading marketing company. As far as I know, they do not own oil and gas production or refining, Thus, they are "marketers" who must buy there gasoline from refining companies at ‘market price’ or under contract at a price fixed at so much above the price of crude. Naturally, they need to make a profit, or they will go out of business. It appears to me that they are the ones setting the price of gasoline in my general area.
I remember how my Dad would complain about small ‘price cutter’ marketers selling under the markets and starting "price wars", which of course were welcomed by the consuming driving public. In those days, the 1930s, prices varied in the $0.08 to $0.12 per gallon, without the present $1.99 +9/10 pricing done since the invention of the metering and pricing pump machines. These small marketers naturally had much smaller staff and overhead costs than the large companies. A few even had their own small refineries, many of which produced a lower quality gasoline and no lubricating oil.
Back to the present, if the price goes up $0.10 per gallon over night, the wise consumer should look for a station that has not raised its price, it might be privately owned and has not heard of the price jump, or it may have decided to try for more volume of sales. Some in may raise or lower their price when a new load of gas is delivered so that their profit margin in the sale remains the same.
A hint from a friend who is a delivery tank truck driver cautions to wait at least two hours after a delivery to buy gas. This allows the storage tank sediment to settle out and not to get into your vehicle’s fuel tank!
---------------
Robert "Bob" McDowell, Jr. is a retired Professional Engineer and Geologist with over 50 years experience in creating drilling prospects, supervising drilling, well completion, production operation, and pipeline design for oil and gas including repair of problem wells. McDowell is a conservative activist and member of the Oklahoma Republican Assembly. He Contributes opinion and commentary articles to the ARRA News Service.
Tags: Bob McDowell, gasoline, prices, factors To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. and "Like" Facebook Page - Thanks!
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