Monday, August 14, 2006

The Price of Gas

I bought petrol yesterday. That is gasoline to those of you in CONUS. I went to a Kuwaiti station and filled up my thirsty Ford Expedition I was driving. When I finshed filling it I was astounded at the cost of fuel here. It has just shot up lately!

As you can see in the photo it was KD 3.81 for 63.47 Litres. That comes out to .77 cents per gallon. What the hell is going on here? Last week it was only .73 cents per gallon. What will we do? I did not budget for this at all.

Kind of puts it all inperspective doesnt it? The price of gas is totally artificial. After exploration, drilling, pumping, and refining this is what it really costs. Where is the rest of it going?


Anonymous Fritz said...

I am not sure why we always tie the cost of gasoline to a barrel of oils costs because I think it is misleading to make that tie. Having said that I have not been able to find a Petroleum Engineer who will explain how a barrel of oil breaks out. In working in the industry for years I have always been under the impression that benzene is actually a waste product and that in order to get the allotment of benzene for the local economies the refiners have to change the temps in the columns during the refining process and they hate to do that because they loose polymer product which for them is where the money is. At least that is what I have always understood. Hussein is going for his Petroleum Engineering Degree (to add to his Civil P.E.) maybe he can help me understand it better. Then there is the tax issue as well as the speculative market influences. Local price at SAM'S here in FL is 3.97 per US Gal.

11:18 PM  
Blogger DirtCrashr said...

In Europe aren't the taxes piled on until it pays for most of their social entitlements?

10:05 PM  
Blogger R Roberts said...

The price of gas has long been disconnected from the cost of production. Gasoline, and to the same extent, the crude it comes from, can be viewed as just another commodity, like gold. Its price will fluctuate day-to-day based on what the market determines as its current worth, just like stocks, precious metals, etc.

That analogy breaks down in view of the artificial nature of the oil market, ie, very few entitities own the oil, so can eff with the price to keep it inflated, very few entities are in the refining biz, adding to the artificial nature of the price of a gallon of go juice.

Based on their profits recently, the oil co's might be good stock investments.

6:34 PM  
Blogger R Roberts said...

That Hussein, professional student. Just kidding!

Crude is a commodity, just like gold, so its price is disconnected from the cost of production. Extraction, transportation, refining, etc are only a fraction of the price. Its cost will fluctuate based on what the market determines to be its worth. Yeah, that is almost entirely an artificial number since only a few entities control the supply and refining sides of the equation.

Don't worry, in another 50 years,(assuming we don't get all Revelations on each other), or so, we'll all be driving Hydrogen cars. Until then, read em and weep boys...and hold yer nose and buy stock in Exxon.

Whew, I feel so innielexual. Should we smoke?

6:41 PM  

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