Oil versus gas prices
The above chart shows the correlatiallbetween the average annual price of regular gasoline and the average annual price of crude oil. By using the average annual price we eliminate brief spikes and get a better picture of what we really pay over the long term. If we see a brief spike many of us will put off buying gas as long as possible hoping to miss the spike so over the long term we will pay closer to the average price.
But once we is able to see from chart gas and oil costs are relatively closely relevant. They tend to go up and fall-in combination but at some extremes oil rose faster while at other individuals fuel seems to rise quicker. Up to 1972 prices of crude and gas monitored really closely but since that time there's been more divergence.
There clearly was an easy explanation for this. Often the oil price remained underneath the gasoline cost with the major exclusion being during cost spike in 1979 -80. If you will see it also seems that Oil costs are much more volatile and erratic while gas costs do not fluctuate rather the maximum amount of. This really is partly as the oil companies have a tendency to balance out the fluctuations in gas prices making more income whenever oil is low priced and perchance even losing profits when oil is expensive. They're mostly worried about their particular normal profit across 12 months and do not desire to develop an excessive amount of an uproar among their customers so that they have a tendency to hold rates as steady that you can./p>
Throughout the 10 years from 1980 - 1990 even though oil rates dropped lower and lower fuel rates stayed relatively flat. Why? Will it be some collusion by the oil companies? No, actually it's never as sinister than that. It is in reality simply supply and demand. Throughout the last nearly 30 years (since 1976) there were no brand-new refineries built in the US due to tight regulations (while some have already been expanded, over 100 obsolete refineries have now been closed or merged), ecological constraints along with low prices making the oil business less profitable.
North American refinery capacity (including Canada and Mexico) in 1980 was 21, 982, 000 BPD plus 2011 it absolutely was 21, 382, 000 BPD so refinery ability was less last year than in 1980.
So offer features gotten tighter and tighter with it culminating around 2007 with just a few % excess capacity at refineries.
Whenever offer gets that tight a number of things happen, firstly, it goes from becoming a purchaser's marketplace to a seller's marketplace and secondly any slight interruption triggers a myriad of havoc. And that is exactly what has happened each time a storm shut down a refinery for just about every day we would see a fresh increase in fuel prices in the pump. However along emerged hurricane Katrina and contains shut down a dozen refineries for around six-weeks. Reducing offer by as much as one 5th. In many cases perhaps not because of problems within refineries but additionally considering transportation issues.