There's Some Relief: Falling Gas Prices in Michigan
Gas prices in Michigan have fallen for 8 consecutive days, according to MichgianGasPrices.com (blue line above), reflecting falling crude oil prices over roughly the same period (red line above).CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Monday, June 02, 2008
Gas prices in Michigan have fallen for 8 consecutive days, according to MichgianGasPrices.com (blue line above), reflecting falling crude oil prices over roughly the same period (red line above).About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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3 Comments:
hmm. what's the big drop in crude prices there?
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.
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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