Monday, June 02, 2008

There's Some Relief: Falling Gas Prices in Michigan

Gas prices in Michigan have fallen for 8 consecutive days, according to (blue line above), reflecting falling crude oil prices over roughly the same period (red line above).


At 6/02/2008 9:51 AM, Blogger Shawn said...

hmm. what's the big drop in crude prices there?

At 6/02/2008 12:53 PM, Anonymous Fred said...

Refiners are getting squeezed. The high cost of crude is an expense for them. The price they get for gas is up against what people will pay and the reduced use of gas that goes with high prices.

This is a replay of the early Reaagan years when refiners went out of business because they weren't making a profit. There is a valid reason we haven't built a refinery since 1975: It wouldn't make money built in the face of excess capacity.

At 6/02/2008 2:04 PM, Anonymous Anonymous said...

Why compare retail gasoline prices to crude oil prices?

Just use the RBOB and add on about $0.60 for taxes and distribution. Otherwise, you miss rising and falling refinery margins (crack spreads) which impact the retail price.

It is interesting that refinery crack spreads are rising in the face of falling gasoline demand.

Gasoline prices as refinery output have risen more in percentage wise terms than the equivalent crude oil price increase input since the crack spread bottomed in March 2008.


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