Getting Ripped Off on the Price of Gasoline (Again)!



For those that follow my blog you know that I explained back on December 5, 2014 how the real price of gasoline is determined, by the RBOB futures market.

The price of gasoline is supported by the price of oil. The US is swimming in oil, we have a major oil storage problem. On Wednesday each week the U.S. Energy Information Administration releases the weekly crude oil inventories. This week the forecast was for 4 million barrels in storage, instead we actually had 10.3 million barrels. We have a crude oil glut and just can’t seem to turn it off.

Based on just a little bit of math it’s real easy to see that the refiners are making a ton of money on the spread between the price of oil vs. the price of gas (RBOB). Here are the numbers:

December 5, 2014    WTI Oil   $65.89      RBOB Gas $1.78

March 6, 2015           WTI Oil   $49.84      RBOB Gas $1.88

In the last 90 days oil has dropped 24%, yet the price of gasoline has gone up.  

The Gascalc site has an interesting tool that calculates the price of gasoline based upon the price of oil. It says that if oil is at $50/barrel, gas should be $1.64/gallon at the pump. The price at the pump can be  $.50 – $.80 higher than RBOB due to shipping costs, gas station profits and all the taxes.

Here are the excuses (reasons) why gas is so high:

  1. About 7,000 members of the United Steelworks are on strike at various US refineries.
  2. Refineries usually shut down in the spring to switch to summer gasoline blends, however it usually takes place a little later than this.
  3. A secret government conspiracy. (I just made this up)

The real reason that gasoline is so expensive is that the refiners have slowed down production, creating an artificially tighter supply of gasoline and are therefore making huge margins on what they are producing.




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