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Comment by nostromo | Hacker News Reader

Well, counter-intuitivley, consumer gas prices aren't falling nearly as much if at all.

Personally I think the DOJ should investigate refineries, as none of the seem particularly eager to compete on price. They're making record profits as the price of crude collapses while the price of gasoline is flat.

http://www.latimes.com/business/la-fi-refinery-profits-recor...

It seems very fishy to me that we have so much crude building up, yet consumers aren't seeing any real benefit from cheaper gas, cheaper shipping, or cheaper domestic flights.

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Refining capacity doesn't increase because of a drop in crude oil prices. If supply of gasoline cannot be increased, prices will not fall even if the raw crude price falls.

The EPA has been hostile to refinery expansion or new refinery construction.

Capacity doesn't increase, but costs do decrease as the cost of raw materials drops.

Now, obviously price is only partly determined by cost.

That's kinda the whole point. There is nothing for refineries to gain by reducing the price of gas because...nobody is going to sell gas at a lower price and take over the market because...the EPA does not allow one to build refineries.

Free markets y'all.

So much this. Price is driven by supply and demand. Not the cost of materials.

But price changes supply, no?

Some oil is $1 a barrel to pump. It will always be worth pumping.

Some oil is $50 a barrel to pump. It is only worth it when oil price is greater than $50 a barrel.

Free markets don't account for negative externalities so they have to be regulated y'all. In any case, gasoline prices do move so there must be some market forces at work, but it's a mystery at least to me. I'd love to read an explanation.

>the EPA does not allow one to build refineries

Two refineries have opened in the US this year:

http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=6

This is more of a lack of competition issue. A lot of gas suppliers have regional contractors that basically have a lock on entire regions and their prices. There is no incentive to reduce price.

Also, since we can not export crude, but can export distillates, we can sell gas to other countries, increasing demand to some extent.

Many refineries were closed by oil companies with the intention to reduce supply and raise prices. Now there is a glut of crude, and they don't have the capacity to take advantage of the low crude cost / high refined product cost. https://books.google.ca/books?id=74brGsoymBoC&pg=PA35&lpg=PA...

Recently they have also been deferring maintenance to keep capacity of their refineries as high as possible and now failures are causing major shutdowns.

Airfare isn't falling because the domestic airlines a) have a triopoly and b) have learned not to compete on marketshare, so capacity isn't increasing as much. The big 3 have become much more disciplined when it comes to revenue management.

Actually airfare prices have fallen recently.

http://www.nbcnews.com/business/travel/airline-fares-record-...

> Airline fares recorded their steepest monthly decline in 20 years, falling 5.6 percent last month, according to the Bureau of Labor Statistics.

There is a refinery problem in Indiana which is why gasoline is staying elevated even thought crude is falling. If anything happens along a refinement chain, there is a disconnect between market prices. The full affect is on the Chicago area, not sure how it is affecting other regional markets.

Prices haven't dropped elsewhere like they should, you know that.

> consumer gas prices aren't falling nearly as much if at all.

Consumer gas is a very small portion of energy use. Just a very visible one.

Consumer gas is an inelastic demand--they've got people by the neck.

People had forty years to figure out, "Shit, what happens if gas gets expensive", and they did the wrong thing. Let'em pay.

It's an interesting question. How many people have made choices that at least somewhat accounted for uncertainty in oil prices? You can't see the retirees who stayed in their suburban home instead of moving to rural Wyoming (I don't mean that there are tens of millions matching that description, I mean there are things that are really hard to measure).

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