| #1 Smart fellow he is, the airlines and large users do much the same. The oil companies do precisely the opposite. The crude oil they have already purchased and have in storage may bring a gasoline price of lets say $ 2.00 per gallon. When crude prices rise, they raise the value of oil in storage to meet the new price and gasoline production prices follow along, regardless of production costs of the old oil. This elevates crude purchased at a March price to that of crude purchased at a higher rate in May. As the price of crude eventually declines, gasoline prices gradually follow, not immediately mind you, but gradually, even if only a few days. Big oil companies make a premium over regular profits as crude goes up, and they make it again as crude goes down, by advancing and delaying prices at the pump. Dealers play the same game. This explains their extraordinary profit percentages over actual crude oil cost increase percentages. Welcome to the oil business. |