2.71 – 2.99 – 3.59
Those numbers represent the price of gas in a 24 hour period here in Atlanta. Yesterday I filled up at $2.71, it was $2.99 by lunch, and this morning (6:15) it was $3.59. We’ve had a mini-panic here in Georgia due to the 2 large pipelines that service Atlanta being out due to Katrina, and some stations are running out of gas. I watched one station this morning with lines to get fuel- before the sun has come up.
Something ain’t right. I did some reading on this yesterday, and from a post on Smirking Chimp, this situation is explained a bit:
…The majority of gas stations are owned by organizations that own several stations. When they buy wholesale fuel, they sell futures or use options to avoid holding a long position (in the form of the physical product) in the market. Look at www.nymex.com to see the future prices.
When the price goes up in the open market, it immediately shows up at the pump!
Oil companies are making record profits by using options to protect themselves.
for example:
Gas station A buys a truck load of gas at $1.35. They buy a put option for $0.10. If the price gets cheaper, they are able to offset the loss from selling cheaper gas at the pump with the profit from the put. If prices go higher, then they lose what they paid for the put, but make profits on the physical gas. So, since gas has sky rocketed, they are lost on the put (no more than they pay for it), but making more on the long position.
The profits are high due to hedging before the market took off. If the market stays high, then the profit margin will shrink as they will then be starting at a higher price.
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So basically, we’re getting Enroned. A glance at Atlantagasprices.com shows a range of almost a dollar in the price of gas- and these prices seem to be updated only up to last night. This weekend is gonna be a rollercoaster. I imagine a lot of Labor Day trips have been postponed or dropped.
It doesn’t help that Atlanta is legend for over-reacting to any out of ordinary occurence- a hint of snow in the North Georgia mountains causes a run on bread in Dunwoody, for example. Yesterday afternoon the rumor took hold that our Gov. Perdue was going to order gas stations closed at 5 PM for 3 days due to shortages, which of course led to people attempting to top off their tanks which then led to shortages. Nice.
In times such as these, when the normal pattern of life is disrupted, you can see in starker contrast the differences between people. In a time when a nation should rise to help each other, we see looting, price gouging and political gamesmanship being played on both sides. I tell ya, if I was trapped in my attic in New Orleans right now, and I learned that rescue operations had been halted so that the police could focus on restoring civil order and stopping the looting, I’d shoot the first person I saw with a TV set in a shopping cart. Such people are animals, and below contempt. So are “free market” jackals that spike the price of gas for the same reason a dog licks himself- because he can.
