Never Knew Gasoline Prices were this important!

(edited)

Summer Driving Season is on its way so I thought why not discuss gasoline prices.

For someone not very well aware of the gasoline market of US, the below lines were surprising for me. Even a slight change can result in quite a consequential monetary gain/loss.

From the article < A key link between the U.S.’s ongoing economic recovery and the oil price is the price of gasoline, with the rule of thumb being that every US$10 per barrel change in the price of crude oil results in a US$0.25 change in the price of a gallon of gasoline. In turn, the American Automobile Association in Washington has stated that for every US$0.01 that the average price of gasoline falls, more than US$1 billion per year in additional consumer spending is freed up. The point was underlined by Bob McNally, the former energy adviser to the former President George W. Bush that: “Few things terrify an American president more than a spike in fuel prices.” This is the principal reason why whenever there is a spike in the WTI oil price the ‘Trump price cap comment’ kicks in, as evidenced most recently when WTI oil spiked through the key US$65.00 pb technical resistance level, when he Tweeted: “Very important that OPEC increase the flow of Oil [sic]. World Markets are fragile, price of Oil getting too high [sic]. Thank you!” >

Link: https://oilprice.com/Energy/Energy-General/Can-Trump-Rely-On-The-Saudis-As-Oil-Prices-Crash.html

@William Edwards, @Tom Kirkman, @Marina Schwarz (also: how many barrels did you sell then? ), @ceo_energemsier, @Top Oil Trader, @Jan van Eck, @Jan van der Meer 

Edited by Osama
Had to mention more people

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Continuing to increase U.S. Shale Oil production seems likely to eventually push down oil prices, with a resulting (relatively corresponding) decrease in gasoline prices.

For the life of me, I can't figure out what price range Trump actually wants oil to be at.  My best guestimate is ... perhaps Trump wants Brent capped around $65, and WTI ranging around $65 to $70, although I don't realistically see WTI going higher than Brent any time soon.

 

/ Note, the use of the term "gas" to mean "gasoline" may be possibly confused by some international lurkers as "natural gas".  Kinda like American Football / Soccer.  Any comments in this thread that discuss "natural gas" may wish to take this into account, and clearly indicate any references to Natural Gas.

Touchdown!

 

Man-City-vs-Newcastle.jpg

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1 hour ago, Osama said:

also: how many barrels did you sell then?

Couple of hundred, you know, just for kicks. :D

49 minutes ago, Tom Kirkman said:

Touchdown!

ROFL!

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20 hours ago, Tom Kirkman said:

Continuing to increase U.S. Shale Oil production seems likely to eventually push down oil prices, with a resulting (relatively corresponding) decrease in gasoline prices.

For the life of me, I can't figure out what price range Trump actually wants oil to be at.  My best guestimate is ... perhaps Trump wants Brent capped around $65, and WTI ranging around $65 to $70, although I don't realistically see WTI going higher than Brent any time soon.

 

/ Note, the use of the term "gas" to mean "gasoline" may be possibly confused by some international lurkers as "natural gas".  Kinda like American Football / Soccer.  Any comments in this thread that discuss "natural gas" may wish to take this into account, and clearly indicate any references to Natural Gas.

Touchdown!

 

Man-City-vs-Newcastle.jpg

Trump, as he sets his eyes for another $325 bn worth of tariffs, may want a little higher price at this moment as it will fall steeply if they (Trump and Xi) once again failed to reach any agreement.

Yes he mostly tweets near or at $65...

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What Trump seems to 'want' is to be on the front page of every newspaper and blog post in the country. Whether prices go up or down doesn't matter as long as he's getting coverage.

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One issue not addressed is the tax revenues gained by federal government, state governments and municipalities from the taxes on gasoline. This is a significant amount of cash and goes into the infrastructure of the country, states, counties and cities/towns.

I am making the assumption that the higher the price of gasoline, the more money collected in taxes. I am not sure of the exact taxation mechanism.

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(edited)

Gasoline taxes are fixed per gallon. Usually a sticker right on the pump telling you how much is federal and how much is state.

I think it was the Carter administration that came up with the idea of boosting the Fed tax 50 cents  a gallon when prices started dropping off after the '73 embargo, with the idea of we needed the revenue, and boosting the tax wouldn't be felt since the price per gallon had dropped. And then when prices went up, you'd lower the tax, make the price per gallon essentially level for the consumer. It didn't go anywhere.

Edited by John Foote
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2 minutes ago, John Foote said:

Gasoline taxes are fixed per gallon. Usually a sticker right on the pump telling you how much is federal and how much is state.

Yes, gasoline taxes are excise taxes, based on units (in this case, liquid measure, the gallon). 

It would get interesting if gasoline were to end up taxed on dollar amount of sale.  For some liquid fuels, that is the case inside the chain of transfer, where the wholesaler of heating oil adds a mandated "gross receipts tax" onto the wholesale price to the retailer.  That gross receipts tax is typically at 2% of the invoice value, and would be remitted to the State.  (Obviously, only in States that have passed gross receipts tax laws.)

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Gas does have sales tax as well. It is a percentage of the overall retail fuel price at 2.25%. So yes, the state likes higher prices.  

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as i said any escalation in Iran will bring prices up. And what this shows, without this incident oil could have been down at 45. This proves we have have a major oil glut, and if the war is over, we could head down to the 30s.

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3 hours ago, Douglas Buckland said:

One issue not addressed is the tax revenues gained by federal government, state governments and municipalities from the taxes on gasoline. This is a significant amount of cash and goes into the infrastructure of the country, states, counties and cities/towns.

I am making the assumption that the higher the price of gasoline, the more money collected in taxes. I am not sure of the exact taxation mechanism.

It's the ad-valorem taxes on production collected by the states that is at a percentage and thus states collect more from higher prices and less with lower prices.  So Trump is screwing the states by tweeting lower oil prices.

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(edited)

22 minutes ago, Top Oil Trader said:

as i said any escalation in Iran will bring prices up. And what this shows, without this incident oil could have been down at 45. This proves we have have a major oil glut, and if the war is over, we could head down to the 30s.

These things don't prove anything.  So far the trade war hasn't slowed the economy down at all.  As to major oil glut, that remains to be seen.  The Saudis pumped a lot less in May than they had said they would so something isn't right.  I posted on that the other day and it got ignored entirely.  No reason was given for KSA to have pumped so much less and nothing was said about the fact they had reportedly planned to pump 400kb/day more than they actually did in May.  What I am seeing is a lot of preemptive short selling like just now as the rig count was reported to be down by 6, nothing going on prior but right after the news, 1mm shares USO dumped.  Eventually the decline in rig count is going to show up in US production.

 

https://www.reuters.com/article/us-saudi-oil-output/saudi-oil-output-may-rise-in-june-but-u-s-may-not-get-the-extra-exports-it-wants-idUSKCN1S90DY

 

Production from the world’s top crude exporter in May is expected to be around 10 million barrels per day (bpd), slightly higher than April but still below its quota under the OPEC-led pact of 10.3 million bpd, industry sources said.

Edited by wrs

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5 hours ago, Douglas Buckland said:

One issue not addressed is the tax revenues gained by federal government, state governments and municipalities from the taxes on gasoline. This is a significant amount of cash and goes into the infrastructure of the country, states, counties and cities/towns.

I am making the assumption that the higher the price of gasoline, the more money collected in taxes. I am not sure of the exact taxation mechanism.

Some states like Illinois, have a sales tax on top of the road fuel tax. Illinois July 1st will be no.2 in highest fuel tax at .38c (doubled from 19c current). The tax eventually will be passed on to the consumer in higher prices so is almost like a double dip. Business' not going to eat the extra cost. 

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(edited)

2 hours ago, wrs said:

These things don't prove anything.  So far the trade war hasn't slowed the economy down at all.  As to major oil glut, that remains to be seen.  The Saudis pumped a lot less in May than they had said they would so something isn't right.  I posted on that the other day and it got ignored entirely.  No reason was given for KSA to have pumped so much less and nothing was said about the fact they had reportedly planned to pump 400kb/day more than they actually did in May.  What I am seeing is a lot of preemptive short selling like just now as the rig count was reported to be down by 6, nothing going on prior but right after the news, 1mm shares USO dumped.  Eventually the decline in rig count is going to show up in US production.

 

https://www.reuters.com/article/us-saudi-oil-output/saudi-oil-output-may-rise-in-june-but-u-s-may-not-get-the-extra-exports-it-wants-idUSKCN1S90DY

 

Production from the world’s top crude exporter in May is expected to be around 10 million barrels per day (bpd), slightly higher than April but still below its quota under the OPEC-led pact of 10.3 million bpd, industry sources said.

OPEC-API-EIA blah blah they can’t get it right ever on their numbers but it always gets a knee jerk reaction in the markets. Every week or month we see a report with “unexpected” “unforeseen” “could” or “may” and Industry Sources said... All very ambiguous...👍🏻

Edited by James Regan
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(edited)

20 minutes ago, James Regan said:

OPEC-API-EIA blah blah they can’t get it right ever on their numbers but it always gets a knee jerk reaction in the markets. Every week or month we see a report with “unexpected” “unforeseen” “could” or “may” and Industry Sources said... All very ambiguous...👍🏻

EIA was only 2.6million barrels off the mark This week, 2.2 million the wrong way🤔🤔🤔

Edited by James Regan

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7 hours ago, James Regan said:

EIA was only 2.6million barrels off the mark This week, 2.2 million the wrong way🤔🤔🤔

Surprise, surprise!

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(edited)

so I know we are supposed to base prices on fundamentals, but With all the war action last week, and oil still sitting at 52, like a lame duck.  Had to go back to the charts and look at the crystal ball,  54 - 56 must cross for uptrend to resume, otherwise down to 47. The 50 it hit last week was a natural dead cat bounce.

Edited by Top Oil Trader
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On 6/14/2019 at 6:38 PM, Douglas Buckland said:

One issue not addressed is the tax revenues gained by federal government, state governments and municipalities from the taxes on gasoline. This is a significant amount of cash and goes into the infrastructure of the country, states, counties and cities/towns.

I am making the assumption that the higher the price of gasoline, the more money collected in taxes. I am not sure of the exact taxation mechanism.

Yes... But here the countries where oil is the main source if revenue would be most relevant

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On 6/14/2019 at 9:53 PM, Top Oil Trader said:

as i said any escalation in Iran will bring prices up. And what this shows, without this incident oil could have been down at 45. This proves we have have a major oil glut, and if the war is over, we could head down to the 30s.

I still see it down. Even after the tanker attacks.. Markets only yawned.... That shows the extent of bearishness in the market! 

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29 minutes ago, Top Oil Trader said:

so I know we are supposed to base prices on fundamentals, but With all the war action last week, and oil still sitting at 52, like a lame duck.  Had to go back to the charts and look at the crystal ball,  54 - 56 must cross for uptrend to resume, otherwise down to 47. The 50 it hit last week was a natural dead cat bounce.

It had dropped to 50 twicr recently but bounced back. 

 

Had it not been for the tankers and another inventory buildup... Oil would break the 50 barrier. 

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