[Mgs] new question

[David Breneman]

--- Malcolm Jeffcock <msjeffcock at eastlink.ca> wrote:

> it looks like [oil] was about $58US in January and is now $74US.

> On January 21/07 gas in NS was $0.91/litre now its  $1.06.5.
> almost a 20% increase 

> the Canadian dollar has increased in US dollar value by 15% in that
> time. That being the case and since we buy oil in US dollars how
> come gas/diesel/heating oil have all gone up as though we were
> still buying with loonies that are worth their January value vs.
> the US dollar??? 

The difference between $58 and $74 is greater than the
difference between $0.91 and $1.07, so that accounts
for a lot of your missing 15%.  There are also a lot of
influences within a market which can effect the cost of
production.  Are special blends required in different
jurisdictions at different times of the year?  Are
refineries being taken offline for maintenance?  Also,
remember that gas prices are a trailing indicator of
oil prices, and they go up faster than they go down because
oil companies need to hedge against the increases - they
have to sell their gas for more right away so they can
continue to buy the more expensive oil.  However, when
the price of oil is declining, the companies try to take
profits to compensate for the money they lost when
prices rose.  There is also pressure from shareholders
to pay dividends based on the belief that higher gas
prices equate directly to higher profits, something that
only obtains when the oil price crests.  So there are lots
of things that influence the price of gas besides just
the price of oil and monetary exchange rates.


David Breneman         david_breneman at yahoo.com


       
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