Posted by john in la on October 25, 2008 at 19:42:59 from (72.150.34.26):
In Reply to: O/T Gas and diesel posted by andy in IL on October 25, 2008 at 18:03:23:
Andy; You could write a book on why gas and/or diesel prices do not relate to each other or the price of oil. Each product is bought and sold separately so each has its own price. First the price of oil on the open market sets a standard price because oil refiners will not sell at a loss. So if oil goes up gas and diesel must go up. Then you have the margin between what a refiner pays for oil and what he sells the gas or diesel for. This is called the crack price or crack spread. Then there is loading rack tank quotas that play into the price because a oil company need to move a set amount of product a month or it affects its quota allotment in tanks it may store in but do not own. Then there is station markup that can change by not what they pay for the gas or diesel but rather on what the guy across the street is selling it for.
Diesel has always been a higher markup for stations because of less competition. You can notice this if you have a corner with 2 truck stops and 2 gas stations. All 4 stations will have about the same price on gas because they are all in competition with each other. BUT the truck stops can be higher on their diesel price because their business is not from pickups like the gas station is but rather large trucks that can not fuel at the smaller stations even if they wanted to.
Right now with falling oil prices the crack spread on diesel has room to grow large but political pressure especially since it is a election year is driving the crack spread on gas lower.
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