Oil Companies Suffer Drop
in Oil Margins, updated July 2006
July 15, 2006
In October of 2004, the relationship between raw oil costs and retail gas prices shifted significantly.
This page is a followup analysis.
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- The drop in margin percentages (oil cost / gas price) occuring immediately prior to the elections of November 2004 remains a unique phenomena.
- In 2005, oil producers demonstrated a capability to advance gas prices significantly in the face of rising costs, coincident with market opportunities presented via the effects of Hurricane Katrina, in marked contrast to the behavior of October 2004
Chart 2 below is updated to illustrate oil refiner/distributor pricing behaviors as associated with presidential political periods will into Bush's second term. When changes in the cost of oil are considered (see chart 3), the sudden drop in margins of October 2004 can not be explained (the only other drop of such magnitude occurs after Katrina, and is cost driven).
Chart 3 below illustrates the close relationship, both in direction and amount, between oil costs and gas prices.
Three new observations:
- 1) Had the close cost/price tie not been broken in the fall of 2004, Americans would have been paying a numbing $2.75 per gallon, rather than the $1.82 actually charged at the pump in the weeks prior to elections.
- 2) Oil refiners demonstrated a clear willingness to raises prices significantly in the face of surging costs during the aftermath of Hurricane Katrina (August 29 2005).
- 3) Actual dollars earned for operations (Gas revenue less oil cost) remains remarkably uniform. Adjusting for inflation, it is nearly flat, and within its normal limits may illustrate a coordinated factor in national energy policy.
See the original October 2004 analysis...
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Portland, Oregon