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Oil under $3/barrel, why is gas so expensive then? In my area, a gallon of gas costs more than a barrel of oil.

2,790 698 April 20, 2020 at 10:28 AM
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It can't be all taxes, why is a gallon of gas more expensive than a barrel of oil? Refining can't add that much cost can it?

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#2
You have to get it out of the ground, into a pipeline, to a refinery, refine it, then distribute it across the country, deliver it, and bake in overhead, property tax, and upkeep on the buildings and pumps where you buy it. Oh and then its taxed both federally and by the state and those are flat taxes so they dont scale based on oil prices.


The price can go negative because there are environmental costs to burning it off or dumping it into the ground, and all storage both landside and over the water are completely full and contracted out already.
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Last edited by jd2010 April 20, 2020 at 02:39 PM.
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#3
So by your same logic you would expect a negative futures price resulting in Mobil paying you to take their gasoline?

This oil price crash isn't as bad as it seems — here's why [cnbc.com]

While many people may see this and think the overall price of oil is negative, there's nuance. The short answer is that no, not all oil is free.

Futures contracts are tied to a specific delivery date. Toward the end of a contract's expiration date, the price typically converges with the physical price of oil as the final buyers of these contracts are entities like refineries or airlines that are going to take actual physical delivery of the oil.

Futures contracts ultimately are contracts for physical delivery of the underlying commodity or security. While some people in the market speculate on the contracts, others are buying and selling because they have use for the commodity itself. Near the contract's expiration, traders just start buying the next month's futures contract. Those who stay in the position to the final day are typically buying the physical commodity, such as a refiner.

The West Texas Intermediate crude contract that fell more than 100% on Monday is for May delivery, and it expires Tuesday. With the coronavirus pandemic leading to unprecedented demand loss, and with storage tanks quickly filling up, there is no demand for this oil contract expiring Tuesday.

That's why it turned negative, meaning producers would pay to get this oil off their hands because there is no one that needs that crude this week with the country shutdown.

Longer term, he said the picture looks brighter.

"The higher priced, longer-dated futures contracts are indicative of the market expecting some level of clearing in the cash market over the course of the next several months," he told CNBC. "Given the rapid decline in the U.S. oil rig count and the expected cutback by OPEC+ members that is a reasonable assumption."
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#4
Quote from Dr. J
:
So by your same logic you would expect a negative futures price resulting in Mobil paying you to take their gasoline?

This oil price crash isn't as bad as it seems — here's why [cnbc.com]

While many people may see this and think the overall price of oil is negative, there's nuance. The short answer is that no, not all oil is free.

Futures contracts are tied to a specific delivery date. Toward the end of a contract's expiration date, the price typically converges with the physical price of oil as the final buyers of these contracts are entities like refineries or airlines that are going to take actual physical delivery of the oil.

Futures contracts ultimately are contracts for physical delivery of the underlying commodity or security. While some people in the market speculate on the contracts, others are buying and selling because they have use for the commodity itself. Near the contract's expiration, traders just start buying the next month's futures contract. Those who stay in the position to the final day are typically buying the physical commodity, such as a refiner.

The West Texas Intermediate crude contract that fell more than 100% on Monday is for May delivery, and it expires Tuesday. With the coronavirus pandemic leading to unprecedented demand loss, and with storage tanks quickly filling up, there is no demand for this oil contract expiring Tuesday.

That's why it turned negative, meaning producers would pay to get this oil off their hands because there is no one that needs that crude this week with the country shutdown.

Longer term, he said the picture looks brighter.

"The higher priced, longer-dated futures contracts are indicative of the market expecting some level of clearing in the cash market over the course of the next several months," he told CNBC. "Given the rapid decline in the U.S. oil rig count and the expected cutback by OPEC+ members that is a reasonable assumption."
don't listen to cnbc it's a rigged news channel
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#5
Quote from bimmerboy
:
don't listen to cnbc it's a rigged news channel
What does that even mean? Roll Eyes (Sarcastic)

Let's see if you're capable of intelligent thought or if you just regurgitate whatever you heard on Info Wars. Could you point out a single factual error with that article?
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#6
Quote from shinyraindrops
:
It can't be all taxes, why is a gallon of gas more expensive than a barrel of oil? Refining can't add that much cost can it?

A. It can.

B. You now pay more in tax per gallon than gas in many places.

C. The economic fallout of this will be crushing. Cheaper gas won't make up for it.
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#7
simple one word:
tax
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#8
Lets all remember Peak Oil from the 90's... 20 years later they have to pay to give it away. I look forward to seeing all the other things that we are being sold on today that will end the same way.
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