Gas prices falling...

In the last couple of weeks, gas around here (Iowa) has dropped 10%,
back down into the $2.70 per gallon range. (This is mogas, obviously
-- the only stuff I'll burn in my plane, if I have a choice.)

I actually paid $2.67 per gallon last night.

With all the problems related to the Alaska pipeline, this is exactly
the OPPOSITE action everyone predicted. I'm not complaining, mind
you, but I *am* confused -- why is the price of gas dropping so fast
right now?.
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"

Jay Honeck wrote:

In the last couple of weeks, gas around here (Iowa) has dropped 10%,
back down into the $2.70 per gallon range. (This is mogas, obviously
-- the only stuff I'll burn in my plane, if I have a choice.)

I actually paid $2.67 per gallon last night.

With all the problems related to the Alaska pipeline, this is exactly
the OPPOSITE action everyone predicted. I'm not complaining, mind
you, but I *am* confused -- why is the price of gas dropping so fast
right now?.
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"



I do not believe anyone knows. I think oil futures are pure speculation
and so is gas prices. I heard on the news this morning that oil is up a
dollar and some, because a new tropical storm is forming and it just
MIGHT go into the Gulf. Kind of like the stock market, all on emotion.

--

Regards, Ross
C-172F 180HP
KSWI

Kind of like the stock market, all on emotion.

I agree. In theory, if you get "caught" owning a futures contract when it
closes, you can be forced to take delivery of the actual product. You can
also be forced to deliver the actual product. If futures traders were forced
to own facilities to accommodate delivery of the underlying product, or
forced to own the product before selling a futures contract, there would be
a LOT less speculation.

Jim

Jim Burns wrote:
Kind of like the stock market, all on emotion.

I agree. In theory, if you get "caught" owning a futures contract when it
closes, you can be forced to take delivery of the actual product. You can
also be forced to deliver the actual product.

That is not true. Here is an example of what a future is:

Suppose you and I were neighbors. You pay me $3 if I agree to
pay you the price posted at the local gas station for regular at 9
AM tomorrow.

A future is nothing more than a bet on the future price in the
spot market.

If futures traders were forced
to own facilities to accommodate delivery of the underlying product, or
forced to own the product before selling a futures contract, there would be
a LOT less speculation.

Jim

That's an option, not a futures contract.

wrote in message
ups.com...

Jim Burns wrote:
Kind of like the stock market, all on emotion.

I agree. In theory, if you get "caught" owning a futures contract when
it
closes, you can be forced to take delivery of the actual product. You
can
also be forced to deliver the actual product.

That is not true. Here is an example of what a future is:

Suppose you and I were neighbors. You pay me $3 if I agree to
pay you the price posted at the local gas station for regular at 9
AM tomorrow.

A future is nothing more than a bet on the future price in the
spot market.

If futures traders were forced
to own facilities to accommodate delivery of the underlying product, or
forced to own the product before selling a futures contract, there would
be
a LOT less speculation.

Jim

Sorry, back up.... I misread your answer...

You're correct... but say I pay you $3 per gallon for a September contract
that climbs to $4 before it settles and goes off the board. I now own $3
gas but the market is $4 and you owe me either the gas or the price of the
contract on the contract due date. I may want the gas and you will have the
obligation to deliver it to the contract location.

My point is that if neither of us have the facilities to handle the fuel,
neither of us should be in the fuel business.
Jim

"Jim Burns" wrote in message
...
That's an option, not a futures contract.

wrote in message
ups.com...

Jim Burns wrote:
Kind of like the stock market, all on emotion.

I agree. In theory, if you get "caught" owning a futures contract
when
it
closes, you can be forced to take delivery of the actual product. You
can
also be forced to deliver the actual product.

That is not true. Here is an example of what a future is:

Suppose you and I were neighbors. You pay me $3 if I agree to
pay you the price posted at the local gas station for regular at 9
AM tomorrow.

A future is nothing more than a bet on the future price in the
spot market.

If futures traders were forced
to own facilities to accommodate delivery of the underlying product,
or
forced to own the product before selling a futures contract, there
would
be
a LOT less speculation.

Jim

Jay Honeck wrote:
I'm not complaining, mind
you, but I *am* confused -- why is the price of gas dropping so fast
right now?.

Several reasons. The end of the summer travel season has arrived,
people have probably cut back on driving to some extent because of
higher prices and so demand is down. No hurricanes thus far have
also put a damper of the rabid paranoia in the futures market.

Just remember that the price of oil (and thus, gasoline) is set
by the global markets and oil futures contracts as well as the spot
market. When world geopolitical situations are unstable up goes
the price of oil since its supply lines can so easily be distrupted.

Hey Jay,
Hope you've had your coffee...

Two weeks ago, the very day of the London terror threat announcement,
September Unleaded gas futures dropped 18 cents per gallon so I jumped and
bought 2 semi loads. I paid $2.789 which includes all of the fed and state
taxes. Yesterday, the futures dropped 5-6 cents to close 14 cents lower
than the close the day 2 weeks ago... So I figure, time to buy again! I had
room for one more semi load. I had to pay $2.762. Current NYMEX Sept
futures are $1.845 per gallon, the difference is basis, freight, and tax.

While the futures dropped 14 cents during the past two weeks, basis has
gotten very expensive and terminal prices only dropped 2.7 cents.

I get a newsletter on the fuel markets twice a week.... here are some
comments taken from that.

The Alaska pipeline problem was a news event waiting for something more
spectacular to happen. It's a nothing deal. The volume that the pipeline
contributes to America's usage is rather small and it only goes to
refineries on the left coast. Mexico and Venezuela stepped up to the plate
and filled in any shortage. The big news was that the terror threat poked a
hole in the fuel bubble by questioning how much fuel the airlines would be
using. With refined product inventories high, draws on crude inventories
low, refinery utilization very high, driving season coming to an end, Mexico
stepping in to fill crude shortages in the west... the Alaska pipeline
problem simply couldn't hold the markets up.

In all actuality the prices currently seen dropping at the pumps are the
trickle down reaction to the lower terminal prices that have been dropping
for the past 2 weeks, initiated by the London terrorist scare and builds in
inventory levels.

Last week both refined and crude inventories were at the highest levels in
several months and higher than this time last year. There is still good
summer driving demand, although it's starting to wane and prices will also.
This is typical for this time of the year. Look for lower prices at the
pumps during the following weeks.

Jim

("Jim Burns" wrote)
Two weeks ago, the very day of the London terror threat announcement,
September Unleaded gas futures dropped 18 cents per gallon so I jumped and
bought 2 semi loads. I paid $2.789 which includes all of the fed and
state
taxes. Yesterday, the futures dropped 5-6 cents to close 14 cents lower
than the close the day 2 weeks ago... So I figure, time to buy again! I
had
room for one more semi load. I had to pay $2.762. Current NYMEX Sept
futures are $1.845 per gallon, the difference is basis, freight, and tax.

While the futures dropped 14 cents during the past two weeks, basis has
gotten very expensive and terminal prices only dropped 2.7 cents.


So, how does this all shake out for you?

How many gallons is a "semi" load?

"Room for one more semi load" means what, on your end - a physical or a
fiscal cap?

Curious.

What % of fuel use is:

Airline fuel?
Auto?
Trucks?
Other?
Heating oil?
Power plants?
Strategic reserves?

Thanks.


Montblack

Current thoughts are to keep your tanks full, filling when you have room,
cost averaging downward.

I was forced to buy a few loads this summer at the highest prices. As
prices drifted down, I kept waiting, letting our tanks get pretty empty.

We have storage for 35,000 gallons. A semi load is 8500 gallons, but I can
split the load between products depending on the truck. You can do the
math, but the load I got yesterday cost just over $23k. When we're busy we
use a load of diesel fuel every 2-3 weeks, but gasoline is much slower,
about a load per month spit between 89NL and 89+lead.

One more load was a physical cap. Our gas tanks are full, diesel 3/4.

Our LP tank is 30,000 gallons and a semi load of LP is about 9500 gallons.
Main use of LP is for drying corn, drying potatoes after washing, and
heating buildings. Thankfully we didn't plant much corn, so I don't have to
worry about filling that tank every 7-10 days during harvest.

You've got a great question about the % of each type of fuel consumed. I
hope somebody finds that answer it would be very interesting.
Jim