Gas Prices

[User211]

After seeing the US coverage of the Royal Wedding, and the mis-intepretation of British culture by the US media, I wondered if we were doing the same.

So, is this a fair representation of how Americans feel about gas prices, as intepreted by the BBC?

Just curious as to what you guys stateside think, really.

 

[Tj Bassi]

Justin-

The problem with gas prices here in the states is that gasoline should be a relatively inexpensive commodity, given our abundant domestic oil supply and large infrastructure to import/transport what we cannot pump out of the ground ourselves.

The reality is that there is a terrible symbiotic relationship between our elected officials and the oil companies that work to keep fuel prices high. Oil always was, and still is, quite inexpensive to pump and/or transport as crude. The refining process is no more expensive. Yet pump prices for gasoline are again rising to record highs. So are profits.

The same think can be said about many American industries....Airlines for instance. Like the oil companies, they post record profits while claiming their costs are too high to stay in business.

Back in mid-2008 fuel prices soared, and the economy took a beating. Local shopping centers were renting buses to lure customers out of their homes. Theme parks and vacation spots were hurt due to lack of patronage...their normal customers just did not have the budget to allow for fuel prices that had almost doubled. Nobody really knew exactly what was driving the pump prices up; by wintertime they came down just a bit. In the last quarter, oil companies showed big profits. No, make that huge profits. Those of us whose portfolios were spread into energy investments did OK, but that did little to calm nerves after a half-year of record fuel expenses.

In past times, fuel price increases were generally tolerated, but in our current poor economic climate the average family cannot bear that and the recent increasing tax burdens. For many American families, their financial well is running dry and 'handing over' the last of their available money for what should be an inexpensive product is just too tough to accept.

Tj

 

[JordanD]

Yeah the other problem is the "speculators" who are charged with buying the fuel and setting the prices. Like with whole flooding in Mississippi, the price per barrel just went up in anticipation that refiners will be shut down.
I believe that no one is one the same page and it is causing problems. Also the dependence on foreign oil doesn't help. I dont want to start a political battle haha but I dont think we need to drill stateside for our own oil.

 

[Kevin]

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Mr. Chu, who directs the Lawrence Berkeley National Laboratory in California, said in an interview with The Wall Street Journal.


When the US secretary of energy, Dr. Steven Chu, is on record making statements such as this, is anyone really suprised to see high gas prices?

 

[amey01]

It is scary how dependent we actually are on oil. If the world's oil supply was cut off tomorrow, we'd all be dead within a few weeks I'd say. Sure, you couldn't visit your friends with your car, but how would you get to work? How would you buy food? Even if you lived next door to a shopping centre, how would the food get there? Even if you lived next door to a farm, how would supplies like fertiliser and machinery get there? Commerce would stop because nobody could get to work. International trade would stop because there would be no planes or shipping. No imports and no exports. We'd all be sitting at home helpless. Then the electricity would soon go out because we need oil to mine and transport coal / uranium to power stations. Some are even powered by oil directly. Cutting electricity would also cut our water supply. As people started dying, we would have no way to get rid of them. Disease would spread very fast.

Seriously - I'd give us a few weeks tops.......

That should indicate why any country will be concerned about rising petrol prices.

 

[User211]

Justin-

The problem with gas prices here in the states is that gasoline should be a relatively inexpensive commodity, given our abundant domestic oil supply and large infrastructure to import/transport what we cannot pump out of the ground ourselves.

The reality is that there is a terrible symbiotic relationship between our elected officials and the oil companies that work to keep fuel prices high. Oil always was, and still is, quite inexpensive to pump and/or transport as crude. The refining process is no more expensive. Yet pump prices for gasoline are again rising to record highs. So are profits.

The same think can be said about many American industries....Airlines for instance. Like the oil companies, they post record profits while claiming their costs are too high to stay in business.

Back in mid-2008 fuel prices soared, and the economy took a beating. Local shopping centers were renting buses to lure customers out of their homes. Theme parks and vacation spots were hurt due to lack of patronage...their normal customers just did not have the budget to allow for fuel prices that had almost doubled. Nobody really knew exactly what was driving the pump prices up; by wintertime they came down just a bit. In the last quarter, oil companies showed big profits. No, make that huge profits. Those of us whose portfolios were spread into energy investments did OK, but that did little to calm nerves after a half-year of record fuel expenses.

In past times, fuel price increases were generally tolerated, but in our current poor economic climate the average family cannot bear that and the recent increasing tax burdens. For many American families, their financial well is running dry and 'handing over' the last of their available money for what should be an inexpensive product is just too tough to accept.

Tj

Apart from the big profits bit, this scenario is difficult for Europeans to relate to, especially considering the relative pricing between the US and the UK, for instance. We're paying way more than twice the amount, and I doubt our disposable incomes amount to anywhere near that multiple.

Since nobody seems to be refuting the BBC's report, one can only assume it is a reasonably accurate portrail. Interesting.

I'm not sure Adam's thoughts are spot on, but I have to agree the effect would be massive. We are just so dependent on the stuff. Far more so than most consider as we do tend to take it all for granted.

 

[Hocky]

You're paying double due to taxation, so comparison is not really relevant...

 

[User211]

I reckon that is nonsense. Of course it is relevant.

Anyway, the US must have things that incur disproportionate "penalties". What are they?

 

[Len44]

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Mr. Chu, who directs the Lawrence Berkeley National Laboratory in California, said in an interview with The Wall Street Journal.


When the US secretary of energy, Dr. Steven Chu, is on record making statements such as this, is anyone really suprised to see high gas prices?

I thought Paul Alivisatos was the Director of the Lawrence Berkeley National Laboratory in California...

Dr. Chu is agressively pursuing a transition to alternate forms of energy in order to reduce our dependence on imported oil. I believe his remark quoted above, if provided in context, would have related to this objective.

 

[Rich]

Justin,

I think the article is fairly spot-on. Americans view cheap gas as a right and are very selfish and jealous of that perceived right. I think this quote from the article sums it up nicely:

"Anger is probably more tied up with a wider sense of decline and also a loss of privilege. Cheap gas has been one of the prerogatives of the American Empire so people have become accustomed to it in a way which is somehow associated with our ability to wield our will around the world."

Despite years and years of people prodding that we need to reduce our dependance on foreign oil, and on petroleum in general, Americans still do nothing to shorten the amount of time they spend driving, put little money into alternative means of public transportation, and continue to spend lots of money buying huge gas guzzling automobiles.

Another telling quote is this:

"And worryingly for the faltering economic recovery - and the president - they said they were being forced to cut back on other spending to pay for gas."

Notice it doesn't say they were being forced to cut back on driving their automobiles or finding alternate means of transportation. They don't even consider that as an option. They will cut back on other expenditures to maintain their addictive need to drive their automobiles as much, as far, and as often as they desire. God forbid you should take a bus or a train or a bike to work.

The article is also correct that Americans generally don't have a clue or care what goes on in the rest of the world.

"Americans are not aware of what the rest of the world pays for gas. We are a very big, inward-looking domestic market. "

In general, we tend to be very self-centered, selfish, and uneducated about the rest of the world. And, unbelievably, stubbornly proud of those facts. And yes, there are a lot of people over here angry that we have spent trillions of dollars propping up puppet regimes in the middle east, and invading, destroying and then rebuilding Iraq, but we don't have an endless supply of cheap gas to show for it.

As for the relevance of English taxes on petrol usage, the oil consumption by the U.S. is 694 barrels per person per day, while consumption in the U.K. is 291! Source Hmmm, let's see. Your taxes make your price double ours, and your use is slightly less than half ours. This really isn't rocket science. Maybe Dr. Chu is on to something here.

Also, for those of you following Palin's mantra of drill, baby, drill, you are simply fooling yourselves. The price of oil is set on the commodities markets by speculators, not by country of origin. Oil drilled in the U.S. sells for the same prices in the market as oil drilled in Saudi Arabia, and the benefactors of that price are not we the people, but the oil companies that did the drilling. And the measly amount we can add even with increased drilling is not enough to affect supply in an appreciable amount. So drilling more here isn't going to drop the price one iota. The only thing that is going to make gas cheaper is using less of it. Because the only thing that drops price in a free market is significantly added supply or significantly decreased demand.

 

[Hocky]

The only thing that is going to make gas cheaper is using less of it. Because the only thing that drops price in a free market is significantly added supply or significantly decreased demand.

I don't think that this is a fair assumption - gasoline/oil does not follow the laws of supply and demand. It is quite inelastic in that it is absolutely required in large quantities for daily life. Aside from that, any cut back that we make, China will make up for. Of course moving toward another solution is necessary and inevitable, we're not going to see fuel prices drop proportionately to the cutbacks. The only thing that popped the oil bubble before was global economic recession.

 

[SleepingBear]

Just curious now when you already talk about gas prices, I can understand that the prices is different in different places in the US but what do you guys pay for a litre gas?

 

[Rich]

I don't think that this is a fair assumption - gasoline/oil does not follow the laws of supply and demand.

Absolutely, they do follow the laws of supply and demand. Any commodity traded on a free market follows the laws of supply and demand, although the short-term price will be influenced by speculation.

It is quite inelastic in that it is absolutely required in large quantities for daily life.

This is not a requirement. It is a choice. We choose to depend on oil for our daily energy needs, rather than acting in ways that conserve it and developing alternative means of energy to power our daily lives. This has nothing to do with whether oil as a free market commodity follows the laws of supply/demand.

Aside from that, any cut back that we make, China will make up for.

Provide some proof for that statement. We are the largest consumer of oil in the world by far and use twice as much oil per year as the next largest consumer (China), who uses twice as much as the next largest consumer [source]. Just look at the chart in my link and see how disproportionate our usage is to the rest of the world. If we made huge cuts in the amount of oil we consume, China would be unlikely to make them up anytime soon. This demand drop would have a huge impact on prices.

Of course moving toward another solution is necessary and inevitable, we're not going to see fuel prices drop proportionately to the cutbacks. The only thing that popped the oil bubble before was global economic recession.

This statement pretty well makes my points for me and contradicts your earlier statement that oil doesn't follow the supply/demand laws. If all it took was less oil consumption due to a recession to pop the oil bubble and reduce prices, then it seems pretty intuitive that if the largest consumer of oil in the world (who consumes twice as much as the next largest consumer) were to radically drop their consumption, prices would drop appreciably.

 

[Kevin]

Statistics don't mean very much when you don't due a fair analysis behind the figures. 100% of people who drink water will end up dieing. Should we all quit our consumption of H2O?

We use more than twice the amount of oil per person in the US than in the UK. I couldn't get the link to work but I will take your word for it. But the UK's population is much more dense than we have here in the US. We have like 5 times as many people, however, we have two states, Alaska and Texas, that are larger in size than the UK. So they have far less leg room. They are going to live in more crowded conditions by necessisty. Thus it makes since that they don't commute nearly as many miles or have the overall transportation expenses that we have here. It makes since as to why mass transportation is easier to pull off. What's the differences in agriculture practices? How much grain produced per person etc. Farming uses up a good bit of fuel. Tilling the ground, planting the crops, fertilizing the crops, harvesting the crops, transporting the harvested produce and so on. It's also partly due to our larger oil useage that the UK doesn't speak German! Canada uses as much oil per person as in the US, how dare the bunch of greedy tundra dwellers.

We use twice as much oil as China. Ok. However, you failed to mention that they burn twice as much coal. Didn't they also just finish building a dam, Three Gorges, that will perhaps end up being a huge ecological disaster? Of course, it will save them from burning more oil. Obama was going to bankrupt any new coal burning plants- his words.

We are going to need to wean ourselves off of fossil fuels by necessity, they are limited in supply. However, we can do so in a way that doesn't tank our economy and send even more jobs to China. We produce more, commute further, and have more wealth per person than the average country. I for one, feel no need to apoligize for this. No more than I would apoligize for using energy consuming, expensive and great sounding Martin Logans vs my neighbor who uses cheap loudspeakers!

 

[Rich]

Statistics don't mean very much when you don't due a fair analysis behind the figures.

Don't you know it. Judging by your earlier comment that Chu's statement (referring to the need to raise the gas taxes in this country to use economic forces to encourage people to consume less oil) is somehow responsible for our current high fuel prices (even though those taxes have not been instituted).

I think I did a pretty fair analysis, and nothing you have said really calls it into question. You say density is the reason we use twice as much oil per person as the UK. Because their population is denser, they use less oil than us. But if you actually managed to find and examine the facts before commenting, you would see that the number one user of oil per capita, way ahead of us, is Singapore. You want to talk about density? It doesn't get much more dense than that. They are the third densest population in the world. So apparently your density argument is a complete red herring.

We use twice as much oil as China. Ok. However, you failed to mention that they burn twice as much coal.

Actually, no. They burn about 20% more coal than we do. Source

If you are going to engage in a debate, at least try to get some honest-to-god real facts (and preferably link or cite to your source for them) in order to support your arguments. Otherwise, when you just throw inaccurate stuff out there because it sounds good, it is hard to take you seriously.

We produce more, commute further, and have more wealth per person than the average country. I for one, feel no need to apoligize for this.

Spoken like a true American! Because we are the best in the world, and we deserve it, we should be able to consume as much oil as we want and not apologize for it. But we will jump up and down complaining about it when the price starts going up. *sigh*

 

[Hocky]

Absolutely, they do follow the laws of supply and demand. Any commodity traded on a free market follows the laws of supply and demand, although the short-term price will be influenced by speculation.

The long term price has followed speculation in the last what... decade? That is not based on supply and demand.

This is not a requirement. It is a choice. We choose to depend on oil for our daily energy needs, rather than acting in ways that conserve it and developing alternative means of energy to power our daily lives. This has nothing to do with whether oil as a free market commodity follows the laws of supply/demand.

This is not a requirement? Give me a break. You shut off oil today and the 90% of the population of world dies. Like it or not, it IS an absolute necessity for today's life. Does it have to be? Maybe not, but today it is.

Provide some proof for that statement. We are the largest consumer of oil in the world by far and use twice as much oil per year as the next largest consumer (China), who uses twice as much as the next largest consumer [source]. Just look at the chart in my link and see how disproportionate our usage is to the rest of the world. If we made huge cuts in the amount of oil we consume, China would be unlikely to make them up anytime soon. This demand drop would have a huge impact on prices.

You can lean on that chart all you want, but today China is the world's largest auto market. They are going to increase oil consumption drastically every year for a long time. India won't be far behind.

This statement pretty well makes my points for me and contradicts your earlier statement that oil doesn't follow the supply/demand laws. If all it took was less oil consumption due to a recession to pop the oil bubble and reduce prices, then it seems pretty intuitive that if the largest consumer of oil in the world (who consumes twice as much as the next largest consumer) were to radically drop their consumption, prices would drop appreciably.

No, it doesn't contradict anything. Reduction in usage didn't burst the bubble, the stock market did. Those same speculators driving the price up took a bath on everything and had to pull money from anywhere that could. Sell sell sell means bubble crash.

Crude oil consumption may have reduced a small amount of the past couple of years, but it will not being making any drops that are serious enough to legitimately affect pricing for a long, long time.

edit: And for the record, I don't care what they charge for gasoline until it increases exponentially. lol

 

[Rich]

The long term price has followed speculation in the last what... decade? That is not based on supply and demand.

Perhaps, but I'm not convinced of that. The war in Iraq and the overall instability in that region over the last decade have given the speculators some ability to push the oil markets higher for a longer period of time than they normally would be able. Understand that markets don't work after the fact. They attempt to predict. So they actually work on predicted supply/demand curves and if they get too far off, the correct themselves ultimately. Perhaps, when tensions ease in the middle east, we will see a burst of the oil price bubble. But I wouldn't bet on it, because it seems that demand continues to rise over time and unless there are huge increases in supply, the price will remain whatever the market will bear.

This is not a requirement? Give me a break. You shut off oil today and the 90% of the population of world dies. Like it or not, it IS an absolute necessity for today's life. Does it have to be? Maybe not, but today it is.

For decades, liberals have been trying to push this country toward greater conservation of fuel (through mpg standards, etc.) and toward development of alternative fuels and alternative means of transportation. These efforts have been routinely thwarted by conservatives. Just recently, the newly elected ultra-conservative governor of Florida rejected federal funds for a new high speed rail transport line in that state. This is what I mean by saying its a choice. If we had started seriously trying to wean ourselves off of oil thirty years ago, we would be in a very different place today. If we don't start trying harder to do so today, we are going to be in a much worse place thirty years from now. But still, people turn a blind eye toward the need to seriously force ourselves to change the way we go about dealing with these issues. They get all bent out of shape when we want to spend money on developing alternative fuels or other means of mass transportation, or put greater taxes or other limits on the use of gasoline, etc.

You can lean on that chart all you want, but today China is the world's largest auto market. They are going to increase oil consumption drastically every year for a long time. India won't be far behind.

And your point is? Again, you are providing no facts or evidence to back up your proposition that any oil consumption we reduce will automatically be made up by China.

No, it doesn't contradict anything. Reduction in usage didn't burst the bubble, the stock market did. Those same speculators driving the price up took a bath on everything and had to pull money from anywhere that could. Sell sell sell means bubble crash.

And you know this because . . . ? According to this article, oil prices plunged when demand was forecasted to slump due to the recession. That sounds like supply/demand affecting price, not "oh, I'm losing money in stocks so I am going to sell my oil holdings too." Again, try to provide some actual facts to support your argument instead of just throwing out stuff that sounds good.

Crude oil consumption may have reduced a small amount of the past couple of years, but it will not being making any drops that are serious enough to legitimately affect pricing for a long, long time.

Certainly not if we don't make any effort to reduce it. Turn a blind eye to our role in the price, but then complain about the price. That seems to be our way of thinking.

 

[Hocky]

For decades, liberals have been trying to push this country toward greater conservation of fuel (through mpg standards, etc.) and toward development of alternative fuels and alternative means of transportation. These efforts have been routinely thwarted by conservatives. Just recently, the newly elected ultra-conservative governor of Florida rejected federal funds for a new high speed rail transport line in that state. This is what I mean by saying its a choice. If we had started seriously trying to wean ourselves off of oil thirty years ago, we would be in a very different place today. If we don't start trying harder to do so today, we are going to be in a much worse place thirty years from now. But still, people turn a blind eye toward the need to seriously force ourselves to change the way we go about dealing with these issues. They get all bent out of shape when we want to spend money on developing alternative fuels or other means of mass transportation, or put greater taxes or other limits on the use of gasoline, etc.

That is fair and valid. We need alternatives. Money needs to be spent there. Unfortunately, those alternatives are still a long, long way out.

And your point is? Again, you are providing no facts or evidence to back up your proposition that any oil consumption we reduce will automatically be made up by China.

Just because I didn't google it for you doesn't mean it is not true.

http://www.indexmundi.com/energy.aspx?country=cn&product=oil&graph=consumption

China consumption delta from 2008 to 2009: +500,000 bpd. USA consumption delta from 2008 to 2009: -700,000bpd. It didn't make up for our reduction entirely, but it came damn close. If you add India into the mix (like mentioned early), it did surpass the difference. As other economies grow, the USA's oil consumption habits will become less and less meaningful to the world market. If we could cut 50% tomorrow would it make a huge difference? For sure. But we can't. We probably can't cut 50% in the next 50 years.

And you know this because . . . ? According to this article, oil prices plunged when demand was forecasted to slump due to the recession. That sounds like supply/demand affecting price, not "oh, I'm losing money in stocks so I am going to sell my oil holdings too." Again, try to provide some actual facts to support your argument instead of just throwing out stuff that sounds good.

Call it what you want, but do you really think -1% drop in global oil consumption from 08 to 09 would warrant a -75% drop in oil prices? Come on now. Oil went from what, $125 per barrel to like $40? That is not demand that is affecting those numbers. Not even if oil demand dropped 30%. That is investor panic and nothing more.

 

[Kevin]

Don't you know it. Judging by your earlier comment that Chu's statement (referring to the need to raise the gas taxes in this country to use economic forces to encourage people to consume less oil) is somehow responsible for our current high fuel prices (even though those taxes have not been instituted).

I didn't say his statement was responsible for the high fuel prices. I asked if anyone was suprised they were high given his view. The president is also on record for wanting high prices, he just didn't want them to climb so fast that they would impact his poll numbers. Exactly what have they done to show an interest in getting the prices lower? Except investigating potential fraud in the prices, as has been done to no avail in the past.

I think I did a pretty fair analysis, and nothing you have said really calls it into question. You say density is the reason we use twice as much oil per person as the UK. Because their population is denser, they use less oil than us. But if you actually managed to find and examine the facts before commenting, you would see that the number one user of oil per capita, way ahead of us, is Singapore. You want to talk about density? It doesn't get much more dense than that. They are the third densest population in the world. So apparently your density argument is a complete red herring.

Once again, you are putting words in my mouth. The article discussed the difference in commuting and transportation habits, and I suggested the density of the two nations as being a factor in this. I think it is, and of course this would be 'one' factor in differing oil consumption. I also mentioned differing agriculture, production and wealth as being other factors for energy consumption. By your using Singapore as an example of higher oil consumption per person, you are making my case. You can't just say the US is greedy and thus we use more oil.

Actually, no. They burn about 20% more coal than we do. Source

If you are going to engage in a debate, at least try to get some honest-to-god real facts (and preferably link or cite to your source for them) in order to support your arguments. Otherwise, when you just throw inaccurate stuff out there because it sounds good, it is hard to take you seriously.

I used stats from energy.eu as well as an article by upi and canada free press and others that supported those stats as my basis. I'll need to go back and regoogle them later to post the links, but perhaps with China, as in so many other things, it's hard to get an accurate reading on what they are doing. However, I don't think it is in question that they are using more coal and plan on using much more.

Spoken like a true American! Because we are the best in the world, and we deserve it, we should be able to consume as much oil as we want and not apologize for it. But we will jump up and down complaining about it when the price starts going up. *sigh*

Absolutely!! You seem to enjoy the good life here in America as well Rich. Don't you have some ML's? I seem to recall a Jaguar you're fixing up. Weren't you at an Embassy Suites in Nashville recently? Was there no Super 8 nearby? No reason to make apologies for living good as long as it is rightly earned. By the way, I have only been discussing our oil consumption and why the prices might be higher given the views of the current administration. I don't think you will find a complaint by me over the prices. Not to say I'm particulary happy about it, but it is what it is.

 

[Rich]

Just because I didn't google it for you doesn't mean it is not true.

I understand, but it is a lot easier to evaluate the veracity and relevance of your statements when you provide a link to the underlying source of information. Thanks for doing so.

As other economies grow, the USA's oil consumption habits will become less and less meaningful to the world market. If we could cut 50% tomorrow would it make a huge difference? For sure. But we can't. We probably can't cut 50% in the next 50 years.

Ultimately, I suppose you are right on this one. But I think that is all the more argument for us to work harder to phase out our dependence on it sooner.

Call it what you want, but do you really think -1% drop in global oil consumption from 08 to 09 would warrant a -75% drop in oil prices? Come on now. Oil went from what, $125 per barrel to like $40? That is not demand that is affecting those numbers. Not even if oil demand dropped 30%. That is investor panic and nothing more.

As I said earlier, speculation affects prices in the short term. Oil had run up in an unsustainable bubble to $140 due to supply fears, and then when investors feared demand was dropping off, it plummeted to $40. But within a year, it was back up to $80. And then rose from there on more supply fears. Ultimately, in the long term I think the price always returns to the mean, which is determined by actual supply/demand numbers. Speculators do screw with the dynamics a bit, though. I will give you that. This is because it is a commodity, rather than an actual product. Investors are trying to make money buying or selling it and to do so they have to predict what the supply/demand will look like down the road. So the actual price fluctuates quite a bit due to the market dynamics.