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While this is interesting, what took me a minute to realize is that while the line about US gasoline being produced in the US is (presumably) true, it doesn’t e

While this is interesting, what took me a minute to realize is that while the line about US gasoline being produced in the US is (presumably) true, it doesn’t explain why global oil prices tend to affect our gas prices. That line is about the refinery stage of the manufacturing pipeline. For the raw material, crude oil, you need to jump over to https://www.eia.gov/energyexplained/oil-and-petroleum-products/where-our-oil-comes-from.php https://www.eia.gov/energyexplained/oil-and-petroleum-produc...

MuffinFlavored 4y ago
the way i understand it america basically doesn’t want refinery in our country due to what it does to air quality it’s like, “let’s let another country bare the burden/suffer” we pay for the luxury i guess at least that’s how i understood it, could be wrong, would love to learn otherwise
- jjtheblunt 4y ago
  https://www.valero.com/about/locations/benicia-refinery https://www.valero.com/about/locations/benicia-refinery (there are refineries in the United States)
- repiret 4y ago
  Most of the oil consumed in the United States is refined in the United States. We import relatively little already-refined petroleum products.
- jcranmer 4y ago
  The US imports <1% of its gasoline: https://www.eia.gov/dnav/pet/pet_sum_snd_a_epm0f_mbbl_a_cur.htm https://www.eia.gov/dnav/pet/pet_sum_snd_a_epm0f_mbbl_a_cur.... (compare ~39M barrels of gasoline imported versus 3,477M barrels produced domestically). The US is in fact a net exporter of refined petroleum products, which means we (on net) buy crude oil to refine it in the country for other countries to use.
  - Brybry 4y ago
    And our big refineries are often not in remote areas either. If you look at the top 5 refineries[1] they're relatively near population centers in the hundreds of thousands to millions of people (ex. Baton Rouge, New Orleans, Houston), and 4 of them are a football field away from residential neighborhoods. [1] https://en.wikipedia.org/wiki/Petroleum_refining_in_the_United_States#:~:text=Largest%20petroleum%20refineries https://en.wikipedia.org/wiki/Petroleum_refining_in_the_Unit...
- thatcat 4y ago
  The US uses Louisiana and Eastern Texas as the places that bare the burden of environmental contamination from oil refinement since they have fewer restrictions on pollution.
  - kasey_junk 4y ago
    There is an oil refinery in Whiting Indiana less than a mile from the Chicago border. It’s the 4th biggest in the nation The largest refinery on the west coast is within Los Angeles county. Oil refineries are ubiquitous in the US.
  - MisterBastahrd 4y ago
    The #1 most horrifying thing I ever saw as a child was a tour through Monsanto's factory in Louisiana. It's where the company manufactures Roundup. .75 pounds of the stuff can kill an acre of vegetation. This place had thousands of huge barrels of the chemical. The right hurricane or tornado could send that crap flying everywhere for miles before it could get cleaned up, and the refinery is huddled up against the Mississippi river to boot.
- bluGill 4y ago
  Refineries have cleaned up. 30 years ago the area 10 miles around stunk. They figured the EPA fines were a cost of business. However they have changed, and have cleaned up so that they never pay fines. The above is about a specific refinery I know of. There are more than 100 in the US with different management.
mathattack 4y ago
Prices of commodities are global if they can be shipped. Gold has only one price. There’s no difference in a Bitcoin price if it’s mined in the US versus abroad.
- bluGill 4y ago
  Not quite, there is a world price, but shipping and storage means that your local price can be different. In agriculture we call it bias, and elevators post this price on the sign trying to get farmers to sell. It is understood when you bring in a load of corn they pay you the Chicago price minus the bias and the Chicago price is well known (rural radio stations report it every half hour), while the bias can be very different between two companies in the same small town. (In reality most corn is on a contract with prices set months before, but there is always a small percent not on contract) Likewise, oil at the well is worth less than at the refinery, and the difference is about the shipping costs (though I suspect shipping is all contracted out and so you won't find the real difference anywhere) I'm sure gold is the same, but I have less insight into that market.
  - deleted 4y ago
    [deleted]
  - llampx 4y ago
    By Chicago price do you mean the price of the current futures contract at the CME?
    - bluGill 4y ago
      I think so, but it has been a while since I checked.
  - deleted 4y ago
    [deleted]
  - lazide 4y ago
    When you actually sell/buy gold, it’s the same. Rather than being one bias price (due to one commodity form - like a bushel of corn ears), it also has the element of product/form and associated spread/premium/discount (depending on the type of transaction, location, local market forces, etc). All buy prices generally will be lower than sell prices (hence spread), no matter what. Everyone needs to get enough of a percentage to make a transaction happen, after all. It’s not a charity. Also for instance with Gold, raw gold dust or random blobs of unattributed melt will always sell at a discount compared to an authenticated coin or bar of the same purity (maybe as much as 10% or more), due to difficulty in figuring out it’s actual purity and ability to sell it on. If someone is operating a mine/refinery, they can negotiate something better if they have a good long term track record, of course. A easily validated coin or bar, for instance, might even be sellable same day to a retail customer, where dust or a random no name bar might require tracking down a wholesale buyer (and get a lower price) and require more time and work to validate - and have more risk for the middleman due to fraud or price slippage. Some coins or bars will also not be in high demand at the moment, and require a larger spread to be worth it for a given buyer. Certain high demand or standardized products will also be able to demand a premium (American eagles, or Canadian maple leafs, or whatever is in vogue now.). Sometimes as high as $75 or $100 above normal spot. Standardized (and tracked/serialized) COMEX bars are used to set the market price, but are huge, and not something that folks can typically get value from by holding in their hand, as they need to always have a documented chain of custody or go through an expensive recertification. So smaller amounts will also have a corresponding larger spread. Same for all commodities. They are standardized, but that sets the baseline. Almost every actual individual product has some normal offset from it for whatever specific difference applies. That difference includes things like quality, transport/delivery costs from its current location, usability/marketability of that specific form, etc. Fascinating eh?
repiret 4y ago
Global oil prices affect our gas prices because global oil prices affect local oil prices (and gas it made from oil). Global oil prices affect local oil prices because oil is a (mostly) fungible [1] commodity and it's (mostly) easy to move around. If oil from Canada became more than a little bit cheaper than oil from Texas, the Texas refineries would buy Canadian oil and have it shipped down. The increased demand for Canadian oil and decreased demand for Texan oil would cause Canadian prices to go up and Texas prices to go down, until the difference between them was very close to the transportation costs. Likewise, if Canadian oil were more than a little more expensive than Texas oil, the Canadian refineries would start buying their oil from Texas, and the prices would equalize that way too. As it turns out, this is the same reason Gold (And silver and platinum and copper and so on) has very close to a single global price, except all of those things are even more fungible and even easier to move around, so there's even less regional variation in their price. [1]: Fungible means that every barrel of oil is commercially equivalent. I say oil is mostly fungible because there's quite a bit of nuance in various grades of oil, but in broad strokes, you can make the same stuff from any grade of oil, it's just harder with some grades than others, which keeps price stability between the various grades - if one grade gets too expensive, the consumers of crude oil will make due with a different grade. Gold is more fungible - 14k gold is 14k gold. Dollar bills are fungible - you don't care which one the cashier gives you as change. Fine art is not at all fungible.
- deleted 4y ago
  [deleted]
- mlindner 4y ago
  Except Canadian oil is in fact generally cheaper than Texas oil. There's a price differential there because it's difficult to ship oil out of Canada. Similarly there aren't enough export ports for US oil so US oil prices are lower than global oil prices.
- code_biologist 4y ago
  Eh, I just read about oil on the internet but my understanding is that oil is not at all fungible. Refineries are constructed and operated with specific grades of crude in mind. Though they can can process other grades with a few years of process tweaks, it comes with an efficiency (ie. profit) hit. Our gulf coast refining capacity is built with heavy sour crude coming from Central and South America in mind, but most of our indigenously extracted oil is light sweet. It's more profitable to just trade for the crude our infrastructure is built for than to refine the wrong crude, but this does expose us to the global market prices. [1] https://www.fsmetals.com/about-us/blog/americas-light-sweet-problem https://www.fsmetals.com/about-us/blog/americas-light-sweet-... [2] https://epic.uchicago.edu/news/why-do-we-import-russian-and-other-foreign-oil-when-we-have-a-lot-of-it-in-the-u-s/ https://epic.uchicago.edu/news/why-do-we-import-russian-and-...
largepeepee 4y ago
Refineries actually use a blend of different grade of oil for various products. And many countries only produce a specific type of oil, which is why we import several types of raw oil even in the US and that affects our local prices.
anovikov 4y ago
It will be wholly dependent on global oil prices even if refining stage had nothing to do with it. Just because oil producers have a choice of selling their oil at home or abroad, and refinery owners have choice of buying their inputs from local or overseas producers, and petrol station chains have a (rather limited and almost not used in practice) choice of buying the gas they sell, from local or overseas refiners too. Markets are global. You can only "disconnect" the prices by banning foreign trade in oil and oil products. But that wouldn't work out because you need both heavy and light crude to produce most refined product, and there's almost no heavy crude produced in US, and you need to sell excess light crude (which is by the way more expensive and rare in the world overall), somewhere. Also, if your goal is reducing gas prices, disconnecting markets by banning foreign trade isn't an answer anyway, even if we ignore light/heavy crude problem. With significantly reduced prices, oil production will fall and eventually, imports will be needed again to provide necessary amounts for the market. America already has by far cheapest gas of the developed countries. Reducing it even further won't make anyone much benefit.
- victor22 4y ago
  Did an oil mogul write this?
gumby 4y ago
The simplest answer is: if the price in, say, the EU is higher than in the US, there's an incentive for someone pumping oil in Texas to sell it in Europe rather than to a refinery in the US. If the price in the US rises to the same as EU (net of shipping) you might as well just sell it here.
megablast 4y ago
Apart from the obvious?? Would you rather make more money or less money selling the same product?
- ggm 4y ago
  People often conflate an opportunity loss with a real loss. Almost all conversations about market prices include moments when this mistake enters the room. You didn't make it, but I can almost guarantee somebody would start acting like taking $2 as a price, when you could take $5 means you "lost $3" when what you suffer is an opportunity loss. Long term pricing contracts, futures are about price stability and prediction. Predicating that there is a "better price" out there demands you not consider the long term consequences of seeking it and charging it. Sometimes, It's better for everyone (yourself included) NOT to seek the highest spot rate price for something. "I got $5 but I bankrupted my customer and now I can't get $1" is not in the end, a good move.
yuliyp 4y ago
Note that they said that our gasoline is produced in the US. It does not say that the oil used to make that gasoline was domestic too. Even if the oil was also domestic, global oil prices would still have an effect on domestic oil (and thus gas) prices because that oil could get shipped overseas or stay local.
CalRobert 4y ago
Why would you sell to anyone but the highest bidder?

MuffinFlavored 4y ago

the way i understand it america basically doesn’t want refinery in our country due to what it does to air quality it’s like, “let’s let another country bare the burden/suffer” we pay for the luxury i guess at least that’s how i understood it, could be wrong, would love to learn otherwise

jjtheblunt 4y ago
https://www.valero.com/about/locations/benicia-refinery https://www.valero.com/about/locations/benicia-refinery (there are refineries in the United States)
repiret 4y ago
Most of the oil consumed in the United States is refined in the United States. We import relatively little already-refined petroleum products.
jcranmer 4y ago
The US imports <1% of its gasoline: https://www.eia.gov/dnav/pet/pet_sum_snd_a_epm0f_mbbl_a_cur.htm https://www.eia.gov/dnav/pet/pet_sum_snd_a_epm0f_mbbl_a_cur.... (compare ~39M barrels of gasoline imported versus 3,477M barrels produced domestically). The US is in fact a net exporter of refined petroleum products, which means we (on net) buy crude oil to refine it in the country for other countries to use.
- Brybry 4y ago
  And our big refineries are often not in remote areas either. If you look at the top 5 refineries[1] they're relatively near population centers in the hundreds of thousands to millions of people (ex. Baton Rouge, New Orleans, Houston), and 4 of them are a football field away from residential neighborhoods. [1] https://en.wikipedia.org/wiki/Petroleum_refining_in_the_United_States#:~:text=Largest%20petroleum%20refineries https://en.wikipedia.org/wiki/Petroleum_refining_in_the_Unit...
thatcat 4y ago
The US uses Louisiana and Eastern Texas as the places that bare the burden of environmental contamination from oil refinement since they have fewer restrictions on pollution.
- kasey_junk 4y ago
  There is an oil refinery in Whiting Indiana less than a mile from the Chicago border. It’s the 4th biggest in the nation The largest refinery on the west coast is within Los Angeles county. Oil refineries are ubiquitous in the US.
- MisterBastahrd 4y ago
  The #1 most horrifying thing I ever saw as a child was a tour through Monsanto's factory in Louisiana. It's where the company manufactures Roundup. .75 pounds of the stuff can kill an acre of vegetation. This place had thousands of huge barrels of the chemical. The right hurricane or tornado could send that crap flying everywhere for miles before it could get cleaned up, and the refinery is huddled up against the Mississippi river to boot.
bluGill 4y ago
Refineries have cleaned up. 30 years ago the area 10 miles around stunk. They figured the EPA fines were a cost of business. However they have changed, and have cleaned up so that they never pay fines. The above is about a specific refinery I know of. There are more than 100 in the US with different management.

mathattack 4y ago

Prices of commodities are global if they can be shipped. Gold has only one price. There’s no difference in a Bitcoin price if it’s mined in the US versus abroad.

bluGill 4y ago
Not quite, there is a world price, but shipping and storage means that your local price can be different. In agriculture we call it bias, and elevators post this price on the sign trying to get farmers to sell. It is understood when you bring in a load of corn they pay you the Chicago price minus the bias and the Chicago price is well known (rural radio stations report it every half hour), while the bias can be very different between two companies in the same small town. (In reality most corn is on a contract with prices set months before, but there is always a small percent not on contract) Likewise, oil at the well is worth less than at the refinery, and the difference is about the shipping costs (though I suspect shipping is all contracted out and so you won't find the real difference anywhere) I'm sure gold is the same, but I have less insight into that market.
- deleted 4y ago
  [deleted]
- llampx 4y ago
  By Chicago price do you mean the price of the current futures contract at the CME?
  - bluGill 4y ago
    I think so, but it has been a while since I checked.
- deleted 4y ago
  [deleted]
- lazide 4y ago
  When you actually sell/buy gold, it’s the same. Rather than being one bias price (due to one commodity form - like a bushel of corn ears), it also has the element of product/form and associated spread/premium/discount (depending on the type of transaction, location, local market forces, etc). All buy prices generally will be lower than sell prices (hence spread), no matter what. Everyone needs to get enough of a percentage to make a transaction happen, after all. It’s not a charity. Also for instance with Gold, raw gold dust or random blobs of unattributed melt will always sell at a discount compared to an authenticated coin or bar of the same purity (maybe as much as 10% or more), due to difficulty in figuring out it’s actual purity and ability to sell it on. If someone is operating a mine/refinery, they can negotiate something better if they have a good long term track record, of course. A easily validated coin or bar, for instance, might even be sellable same day to a retail customer, where dust or a random no name bar might require tracking down a wholesale buyer (and get a lower price) and require more time and work to validate - and have more risk for the middleman due to fraud or price slippage. Some coins or bars will also not be in high demand at the moment, and require a larger spread to be worth it for a given buyer. Certain high demand or standardized products will also be able to demand a premium (American eagles, or Canadian maple leafs, or whatever is in vogue now.). Sometimes as high as $75 or $100 above normal spot. Standardized (and tracked/serialized) COMEX bars are used to set the market price, but are huge, and not something that folks can typically get value from by holding in their hand, as they need to always have a documented chain of custody or go through an expensive recertification. So smaller amounts will also have a corresponding larger spread. Same for all commodities. They are standardized, but that sets the baseline. Almost every actual individual product has some normal offset from it for whatever specific difference applies. That difference includes things like quality, transport/delivery costs from its current location, usability/marketability of that specific form, etc. Fascinating eh?

repiret 4y ago

Global oil prices affect our gas prices because global oil prices affect local oil prices (and gas it made from oil). Global oil prices affect local oil prices because oil is a (mostly) fungible [1] commodity and it's (mostly) easy to move around. If oil from Canada became more than a little bit cheaper than oil from Texas, the Texas refineries would buy Canadian oil and have it shipped down. The increased demand for Canadian oil and decreased demand for Texan oil would cause Canadian prices to go up and Texas prices to go down, until the difference between them was very close to the transportation costs. Likewise, if Canadian oil were more than a little more expensive than Texas oil, the Canadian refineries would start buying their oil from Texas, and the prices would equalize that way too. As it turns out, this is the same reason Gold (And silver and platinum and copper and so on) has very close to a single global price, except all of those things are even more fungible and even easier to move around, so there's even less regional variation in their price. [1]: Fungible means that every barrel of oil is commercially equivalent. I say oil is mostly fungible because there's quite a bit of nuance in various grades of oil, but in broad strokes, you can make the same stuff from any grade of oil, it's just harder with some grades than others, which keeps price stability between the various grades - if one grade gets too expensive, the consumers of crude oil will make due with a different grade. Gold is more fungible - 14k gold is 14k gold. Dollar bills are fungible - you don't care which one the cashier gives you as change. Fine art is not at all fungible.

deleted 4y ago
[deleted]
mlindner 4y ago
Except Canadian oil is in fact generally cheaper than Texas oil. There's a price differential there because it's difficult to ship oil out of Canada. Similarly there aren't enough export ports for US oil so US oil prices are lower than global oil prices.
code_biologist 4y ago
Eh, I just read about oil on the internet but my understanding is that oil is not at all fungible. Refineries are constructed and operated with specific grades of crude in mind. Though they can can process other grades with a few years of process tweaks, it comes with an efficiency (ie. profit) hit. Our gulf coast refining capacity is built with heavy sour crude coming from Central and South America in mind, but most of our indigenously extracted oil is light sweet. It's more profitable to just trade for the crude our infrastructure is built for than to refine the wrong crude, but this does expose us to the global market prices. [1] https://www.fsmetals.com/about-us/blog/americas-light-sweet-problem https://www.fsmetals.com/about-us/blog/americas-light-sweet-... [2] https://epic.uchicago.edu/news/why-do-we-import-russian-and-other-foreign-oil-when-we-have-a-lot-of-it-in-the-u-s/ https://epic.uchicago.edu/news/why-do-we-import-russian-and-...

largepeepee 4y ago

Refineries actually use a blend of different grade of oil for various products. And many countries only produce a specific type of oil, which is why we import several types of raw oil even in the US and that affects our local prices.

anovikov 4y ago

It will be wholly dependent on global oil prices even if refining stage had nothing to do with it. Just because oil producers have a choice of selling their oil at home or abroad, and refinery owners have choice of buying their inputs from local or overseas producers, and petrol station chains have a (rather limited and almost not used in practice) choice of buying the gas they sell, from local or overseas refiners too. Markets are global. You can only "disconnect" the prices by banning foreign trade in oil and oil products. But that wouldn't work out because you need both heavy and light crude to produce most refined product, and there's almost no heavy crude produced in US, and you need to sell excess light crude (which is by the way more expensive and rare in the world overall), somewhere. Also, if your goal is reducing gas prices, disconnecting markets by banning foreign trade isn't an answer anyway, even if we ignore light/heavy crude problem. With significantly reduced prices, oil production will fall and eventually, imports will be needed again to provide necessary amounts for the market. America already has by far cheapest gas of the developed countries. Reducing it even further won't make anyone much benefit.

victor22 4y ago
Did an oil mogul write this?

gumby 4y ago

The simplest answer is: if the price in, say, the EU is higher than in the US, there's an incentive for someone pumping oil in Texas to sell it in Europe rather than to a refinery in the US. If the price in the US rises to the same as EU (net of shipping) you might as well just sell it here.

megablast 4y ago

Apart from the obvious?? Would you rather make more money or less money selling the same product?

ggm 4y ago
People often conflate an opportunity loss with a real loss. Almost all conversations about market prices include moments when this mistake enters the room. You didn't make it, but I can almost guarantee somebody would start acting like taking $2 as a price, when you could take $5 means you "lost $3" when what you suffer is an opportunity loss. Long term pricing contracts, futures are about price stability and prediction. Predicating that there is a "better price" out there demands you not consider the long term consequences of seeking it and charging it. Sometimes, It's better for everyone (yourself included) NOT to seek the highest spot rate price for something. "I got $5 but I bankrupted my customer and now I can't get $1" is not in the end, a good move.

yuliyp 4y ago

Note that they said that our gasoline is produced in the US. It does not say that the oil used to make that gasoline was domestic too. Even if the oil was also domestic, global oil prices would still have an effect on domestic oil (and thus gas) prices because that oil could get shipped overseas or stay local.

CalRobert 4y ago

Why would you sell to anyone but the highest bidder?