As we always suspected
I love this CNN story. At last, everyone (almost) is being honest about one of the worst kept secrets in the modern day economy. The system is, perhaps, a bit fixed.
Oil rises $5 a barrel in two days and gas skyrockets. When the futures went white hot, and the retail price climbed to $1.30/litre at Avenue Road and Davenport, Oil retailing flaks actually said (I’m paraphrasing) “we are replacing inventory at the new spot price, so we need to pass that along to consumers just as quickly”.
Drop $5? Couple of cents a litre is passed along. Why? According to the piece, “it will just take a few weeks for the cheaper product to work its way into the system.”
An equally vexing question (as a shareholder) is why the gas at the Petro-Canada station at the corner of Jarvis and Adelaide in Toronto regularly drops 10 cents after 8pm and then goes up in time for the morning drive. Are the inventories swirling around after dark? Does the NY commodity spot market swing on small volumes after the markets have closed on the eastern seaboard?
Even the U.S. Government’s own web site makes it clear:
The Crude spot price has dropped US$7.92 to $51.91 in a year, while the price of a gallon of gas has dropped US$0.02 to $2.306 in the same time frame. But something called the “World Crude Price” has dropped to US$54.63 from US$55.12 over 12 months. Not quite the same, impressive price disconnect. No wonder its so impossible to dissect the topic.