Congress is currently trying to suss out why gasoline prices are so high. Here's the answer:
When the price of oil goes up, so does the price of gasoline. To get the price of gasoline, just divide the price of oil by 36 and then add 70 cents. That's the dashed gray line. The actual price of gasoline is shown by the red line. For you nerds out there, this regression has an R-squared of .95. For you non-nerds, this means that the price of oil explains 95% of the variation in the price of gasoline. It would probably be an even better fit if I were energetic enough to adjust everything for inflation.
Now, it's true that the price of gasoline at the moment is about 40 cents above the price it "should" be at. If this lasts more than a few weeks, there might be something shady going on. If not, it probably just means that the Ukraine war has introduced more than the usual amount of uncertainty into oil prices, which have bounced up and down considerably over the past month. We'll see.
UPDATE: I'm back from lunch and my energy level is up. Here's the chart using oil and gasoline prices adjusted for inflation:
The new formula is to divide the real price of oil by 38 and then add $1.10 to get the real price of gasoline. It looks like a better fit to me, though Excel tells me that R-squared is still .95.
However, this does get rid of the anomaly at the end, which turns out to be an artifact of inflation. After adjusting for inflation, the current price of gasoline is right where it should be, only a few cents higher than we'd expect given the current price of oil.
Gas prices lag oil moves
The local station with the best cash price has lowered it by 10 cents since my last purchase, so I'm not switching to a Gas Buddy card & feel pretty fortunate. Also helps that I don't drive a huge vehicle.
Gas prices are down where I live
Bbbut Kevin! It must be gouging by the Oil Industrial Complex!
It is not gouging, it is rather stock buy backs with their rather large profits rather than investing in production (which does take a while to bring online). And while in the past wildcatters would probably be racing to get new wells into production, they are having problems getting financing and the costs of bringing a well into production are much higher than they were ten years ago due to the supply chain problems that Kevin insists don't exist.
The bigger problem is that no one wants to finance capital projects in oil/gas extraction when:
1) The Saudis have demonstrated a willingness to drive prices below the break even point for those new projects to drive them out of business, and
2) Most everyone's long term plan is t reduce fossil fuel consumption.
) The Saudis have demonstrated a willingness to drive prices below the break even point for those new projects to drive them out of business, and
Let me be a contrarian on this point. There are many in the oil business who believe that Saudi oil production has peaked or they have not been exactly honest about they're estimated reserves. Add to the fact the Houthi rebels can use missles to disrupt that production. Why have they invested so much in fruitless war in Yemen? It may well be they want a compliant government not just on their borders but one willing to have the Saudia and Armaco potential energy reserves in Yemen itself, which the Houthis, backed by Iran aren't allowing. It may well be they can't "ramp up" production even if they wanted to.
According to this link Biden's poll numbers have actually gone up in this particular: https://www.reuters.com/world/us/bidens-public-approval-rating-up-three-points-45-reutersipsos-2022-04-05/
I thought I would mention it here because it doesn't look like anywhere else in the media is doing so.
Eric Boehlert’s last column. His death is tragic:
https://pressrun.media/p/is-the-press-rooting-against-biden?s=r
Hopefully someone can take up his mantle of press critique from the Left. He was very good at it.
I don't think Biden has ever had good press relations to begin with. I don't think reporters or pundits have ever liked or respected the guy, seeing him as something of a blowhard, typical politician. Even becoming President hasn't changed that. Look at how they covered his 2020 campaign effort. Especially in the primaries. They had written him off for dead so many times they might as well have become obituary writers. Honestly I believe it was a shock to them that he won or hadn't seen what was going on beneath the surface to produce his victory and thus again bungled a political story because they're too lazy or too dumb to notice when circumstances change.
Naturally that coverage has followed him in the White House and if anything has gotten worse, especially after Afghanistan. I said at the time and I will repeat it, many in the media were upset personally by the withdrawl because perhaps in the inability or red tape surrounding the emigration of Afghans they knew from there who acted as guides and interpreters whenever they wanted to take a jaunt around the countryside. And the fact they lost a favorite spot that mixed both business and pleasure. They still haven't gotten over it. And thus his coverage has been uniformly negative regardless of what the fact on the ground are.
But that's okay. They've screwed up before with Biden and they'll no doubt do it again.
Kevin, I hope you say something about the tragic death of Eric Boehlert.
Anyone who has traded in the energy futures market could have told you this. And where gasoline prices "should" be according to a formula is fraught with dangers - refinery capacity, stock levels, seasonal demand, and a host of other variables will have an impact on the crack spread (as the difference between gasoline and crude oil prices is called). The power of the oil companies to drive up prices without regard to the supply and demand picture is largely fictitious, though it can make for popular political theater. As for drillers being able to finance their operations, you have to look as far out as June 2024 to find a futures price below $80/bbl, and November 2026 to get below $70 - I would expect that financing should be available with that kind of pricing. But these things don't happen quickly.
Speaking of the price of gasoline, the local television news in Los Angeles hardly mentions it, even though it's around $6 a gallon.
Are people in LA not that upset, perhaps because they see it as a byproduct of the Ukraine War and therefore a sacrifice they are willing to make? Are news editors making a conscious decision not to highlight the issue?
Gas prices stuck here in Milwaukee for the past month or so. About $4 a gallon. Business is busy, so a fair amount of travel to customers required and it increases overhead a bit. Not negligible but, busy, so still above even. If the billionaires and their likewise retarded but less wealthy followers engineering this are after something, they're not getting much further than Russians in Ukraine as far as I can tell. So far. Pretty sure they're just as idiotic--all of the predators--believing in their invincibility and ordained victory. Life goes on. Pretty sure it was Sondheim wrote the lyric for Bernstein in his Mass: "Half of the people are stoned and the other half are waiting for the next election. Half of the people are drowned and the other half are swimming in the wrong direction. They call it glorious living. ...." Deutsche Bank today predicted a recession. I don't think the kids agree.
Fox News isn't the only rabid fox around,
Fox caught on U.S. Capitol grounds euthanized; tests positive for rabies,
https://www.sfgate.com/news/article/Fox-caught-on-U-S-Capitol-grounds-euthanized-for-17062112.php
As oil prices rise, gas station owners will literally raise prices hour by hour to track it. When oil comes down, it's takes weeks for gas prices to follow.
Quelle surprise. Same with the "technical issues" that crop up at west coast refineries like clockwork every spring.
Kevin may be ex-MoJo, but it seems they do still at least occasionally think/report alike. From March 22nd: https://www.motherjones.com/politics/2022/03/gas-prices-oil-industry-crude-biden-russia-covid/