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October 07, 2008

Just a Little Economic Aside.

Nothing to do with the bailout, tonight's debate, or Obama's ties to domestic terrorists, but I did finally buy gas for less than $3 a gallon today. I paid $2.94 for 10% ethanol mix at Wight & Short this morning. Straight gas is running an extra dime a gallon, so it'll probably be under $3 by Thursday at the latest if it stays on this pace.

Yeah, my life is fascinating. So what?

Aside to the aside [Dave in Texas]: A week or so ago I mentioned gulf refineries hitting capacity again after Ike, and a commenter asked a question (or made a complaint, I forget which) why gasoline prices don't rise and fall with the price of crude. The answer is they do (and are now). Crude oil over the past 5 years or so has averaged anywhere from 52% to 58% of the cost of a gallon of gasoline. Almost all of the other costs are fixed (extraction, transport, refining, marketing and distribution, rack blends and delivery, and of course, taxes). The fluctuation of oil price has to make its way through the system. At 4 bucks a gallon, crude represented about $2.10 of that. It's since dropped anywhere from .75 cents to a dollar a gallon, depending on where you are. Roughly 30% 33% (loose shit on me).

About the same drop as crude from $150bbl to under $100.

SO what? Do I like the lower price? Well hell yes, I do, feeding the DiT Silverado is a bitch at four bucks a gallon. But the drop in crude is almost directly tied to a market expectation that demand will be lower, because of a shrinking economy. Do I like that part? No.

So it's a mixed blessing for me. I'm glad to fill up for less than $70. The rest of it, maybe not so much. Thoughts?

Also, thank God for bacon.

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posted by Russ from Winterset at 01:58 PM

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