Petrol pump prices Vs Crude Oil Price

I have not seen the subject matter being discussed.

For a start i'll state the source of my example. Singapore.

I remember mid year when oil is ~$150, pump prices for 92 Unleaded was around $2.20 abouts.

Now that oil is ~40++, pump price is $1.523.

45/150 * 2.2 = $0.66

Price has not even touched SGD $1.00 yet...

Am i calculating it wrongly.

I don't follow oil/gas charts. But, here in the states, in my neighborhood - the high pump price of over $4 has fallen to $1.65. So, much larger percentage of a fall at the pump. Take Car. (Take Care !!)

EDIT: I think I will allow Rabid to explain it in the next post !!!
Good information there sir!

45/150 = .3. Price here reached $4.25/gal. Price is currently $1.49. 4.2*.3=1.26.

The difference is:
http://en.wikipedia.org/wiki/Crack_spread

The "Crack Spread."

Of course gas prices usually lag oil prices by some measure of time, and a lot of industry is hedged at $50/barrel, so you need to take in account other factors as well.

The standard oil barrel is 42 US gallons or 35 UK gallons. A 3-2-1 ratio is used. In other words 2/3rds of a barrel goes to gasoline, 1/3rd goes to heating oil. This means that there are 28 effective gallons of gasoline per barrel of oil (assuming US measures, which we will for the sake of argument).

Price at $150/barrel would equal (150/28=) $5.36/gal
Price at $40/barrel would equal (40/28=) $1.43/gal

Fortunately a lot of refineries had their oil hedged well below $150/bl, so we survived. Negative spreads are unsustainable over the long haul (costs more to produce than you can make back so refiners close down or stop producing a product line). Price also didn't trade above that mark very long, so there wasn't a chance for the contracts to expire en-masse and force a repricing. Still, there was a negative crack spread for a small amount of time. This had ppl worried.

In the midst of a perceived lack of oil and gasoline we could've had refineries shutting down because of expenses. That would've been horrible.

Story:
http://seekingalpha.com/article/1028...-unsustainable

We hit serious price inflexibility at $4/gal, large chunks of the nation stopped buying gas. A lot of people I know quit their job and took one closer to home, or just telecommuted into the office whenever possible. Major demand destruction, hence the nose-dive in price.

As you can see now, the spread is far tighter than it was. Fortunately it's at least positive, so refiners won't be pressured out of business. The question will be... what happens when contracts expire? Will they hedge at $40/barrel or will they worry about reduced demand?

Could be interesting. And we might not be out of the woods yet.