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An interesting bit of breaking news from the Jamaica Gleaner a few minutes ago:The Jamaican Government has bowed to public pressure by rolling back the gas tax from 15 to 10 per cent. In a press release just issued , the government said that effective Thursday the ad valorem tax on fuel will be reduced from 15 to 10 per cent. This the release says will result in lowering of petrol prices at the pump of between $4 and $5 per litre.

"This temporary measure is to cushion the impact of rising oil prices on the world market on local consumers, and will be reviewed on a quarterly basis in keeping with the changes in world oil prices," the release said.

Government rolls back gas tax - News - Go-Jamaica



That seems a very responsible reaction to the extreme profiteer price of oil at the moment - it's topping $130 a barrel and headed up still. Reducing the government tax by a third for as long as the bulk price stays over a trigger limit means the consumer isn't hit by rises on top of rises.

I've not worked out what effect a one-third tax reduction on UK fuel would be but it would be a lot more than the derisory nominal 1p the treasury allowed in the last budget.

Me being the sad git I am, I've just spent a pleasant hour or so correlating the cost of petrol to the cost of your average barrel of crude oil. The thought was that I might see whether there was a lag in the cost of raw materials to the cost of the finished product.

The figure is, very roughly, the number of barrels of crude you can buy for the cost of a hundred gallons of petrol at the pump and, given the huge variation over the years, it suggests that Spot was off the mark - it's not the oil producers that are profiteering but the petrol companies and the government with their post extraction mark-up :-

Year Barrel / 100 Gallon

1989 26.03

1990 19.04

1991 13.97

1992 21.42

1993 23.91

1994 39.19

1995 26.77

1996 25.34

1997 27.04

1998 46.18

1999 53.65

2000 24.36

2001 29.54

2002 31.08

2003 21.73

2004 22.51

2005 15.56

2006 13.89

2007 13.11

2008 09.09

2009 18.15

2010 12.36

2011 09.73



Interestingly it suggests that the profiteering was in the late 90s and that we have managed to force the profit levels down to a long term low - which is a total necessity given that a barrel of oil then was $20 and is now $140. Imagine a seven hundred percent price hike in eleven years rather than the doubling we have actually seen.

If that can cut costs by that much now then how much profit were they making then?

Why do you think it is all just due to oil companies profiteering?

Will Federal Regulators Crack Down on Oil Speculation? | The Nation

It’s almost impossible to make sense of 2008’s massive commodity price spike without concluding that the speculators played an outsized role. When enough money floods into a booming market, Greenberger says it can “unmoor” the prices of commodities from their underlying supply-and-demand fundamentals. The basic mechanism by which this might happen should be familiar; it’s the same principle that drove the housing market bubble or the tech stock boom. When a bunch of people think the price of a stock is going to go up, they rush to buy it so they can realize the imminent gains. Of course, a surge of demand itself pushes the price up and the price cycles upwards until it pops. The difference being, no one puts Pets.com in their cars, trucks and airplanes.

“The most conservative thing that can be said right now [is that] this would be no time to dismiss the role that speculation plays,” says Greenberger. ” A moderate statement is that speculation is creating volatility that is aggravating the uncertainty in the market. If you start talking to industry people, they’re pulling their hair out. American Bakers Association is going bananas. They all believe that the markets are going screwy because of Wall Street.” A host of businesses and organizations from Virgin’s Richard Branson to Oxfam all make the same case.


Supply and demand? We don't have an economy where things are grown or made and financial services aid the process we have an economy where financial services have become parasitical and is destroying the host.

I think the retail sector has a lot to do with this current rise. Wholesalers have had it up to their armpits with small retailers complaining about the minuscule profit made on gas and watching one after another go out of business due to same, so, I expect we're witnessing the the advent of real profit in the gasoline retail sector.

Case-in-point: local grocery stores are now offering significant discounts on gasoline instead of discounts on food with their point system, and these large grocery retailers are building gas-stations all over the place where I live. Theres a reason after all these years they've now decided to get into the gasoline business, and as we all know, large businesses do stuff like this only when high profit is to be gained. And have you noticed the increases in food prices?

Americans will now need to grow up and transition away from being the spoiled child in the family IMV, because I think the day's of discounts of essentials for us is over for good.

gmc;1359311 wrote: Why do you think it is all just due to oil companies profiteering?

Will Federal Regulators Crack Down on Oil Speculation? | The Nation



Supply and demand? We don't have an economy where things are grown or made and financial services aid the process we have an economy where financial services have become parasitical and is destroying the host.


In the short term having the speculators rushing in increases the demand and yes, it skews the supply and demand equation and affects the price but, in this instance, the demand was already approaching the top of the capacity to supply, increasing the price sensitivity, the destabilisation of the oil producing areas is decreasing that capacity and the fear factor is leading to stockpiling by the users.

I don't think we need to introduce new mechanisms to explain the spike - create an ongoing shortage in a product and fears of a break in the supply chain and watch the users scrabble for what little is available. It matters little whether it's motorists on the forecourt after the refinery exploded or the big corporations who make it in the first place, the reaction is the same.

The main point is that the petrol companies managed to cut their cost ratio by a factor of six as the spike progressed which suggests, to me, that their profit margin was way too high in the first place.

It's a well thought out table in that it eliminates price inflation but I'd be interested in a column for a comparable commodity. Potatoes?

spot;1359321 wrote: It's a well thought out table in that it eliminates price inflation but I'd be interested in a column for a comparable commodity. Potatoes?


Whilst a chart of the weekly price for crude is freely available the data for potatoes might be a tad more difficult to obtain - would you accept gold as a substitute?

Bryn Mawr;1359325 wrote: Whilst a chart of the weekly price for crude is freely available the data for potatoes might be a tad more difficult to obtain - would you accept gold as a substitute?


I'm not sure gold would be a good substitute, since most of its value seems to be set by the speculators.

Ahso!;1359313 wrote: I think the retail sector has a lot to do with this current rise. Wholesalers have had it up to their armpits with small retailers complaining about the minuscule profit made on gas and watching one after another go out of business due to same, so, I expect we're witnessing the the advent of real profit in the gasoline retail sector.

Case-in-point: local grocery stores are now offering significant discounts on gasoline instead of discounts on food with their point system, and these large grocery retailers are building gas-stations all over the place where I live. Theres a reason after all these years they've now decided to get into the gasoline business, and as we all know, large businesses do stuff like this only when high profit is to be gained. And have you noticed the increases in food prices?

Americans will now need to grow up and transition away from being the spoiled child in the family IMV, because I think the day's of discounts of essentials for us is over for good.


It's a loss leader, big retailers live on volume, with a thirty day to pay for the fuel if they can sell out and take the profit before they have to pay the bill they make more profit, a small petrol retailer just can't do that - what a supermarket can sell in a day might take them a week or a month. If you can sell four times as much as your competitor you can cut your prices. lower profit margin is made up for with the greater volume. It's basic retailing arithmetic. If people go there to buy the petrol they are more likely to shop as well, what you will see is local indpendent petrol stations shutting.

posted by spot

It's a well thought out table in that it eliminates price inflation but I'd be interested in a column for a comparable commodity. Potatoes?


You get the same kind of speculation, derivatives started in the commpdities markets and went on to the share market. Both the EU and US stopped short selling for a while because opf the detrimental; effect it has on a company's share value. Besides the cost of food in the shop is directly affected by the cost of fuel.

Debate as U.S. ban on short-selling ends: Did it make any difference? - The New York Times

People speculate on the value of a company with no regatd to it's real value profit is made on gambling which way the price will go.