Gas Prices

Where is the price of gasoline/oil headed?  Three years ago we saw a big spike and people drove less, bought hybrids and expected gasoline prices only would be higher.  I remember buying gas Christmas '08 in NJ for $2/gal. Yes, the global recession caused it.  
My take is lots of volatility for the time being.  I think prices will come down again.  I tell my "green" friends who say  high gas prices are inevitable, trade commodities if you're so sure and make your millions. A banking crises in China next week  (for example) could cause oil to drop to $60 again.

Because they can....they will go higher. This is nature of oil.

Oil, is truly " The Prize ". It is such a necessity, that the oil companies/countries and speculators can pretty much do what they want.

The world knows energy is running out and demand is soaring, so like life jackets on the Titanic, the price will soar.

I'm not sure the old schools of thought still apply. That being," high gas prices will cause America to economically slow down and thus lower gas prices." I say this because the rest of the world is or has developed enough to consume enough oil to keep prices high. If this is not ironclad now, it soon will be.

Our debt alone is enough to crush us and soon will. This will cause the dollar to fall dramatically and be replaced as the world currency, a huge developement. This alone is enough to keep gas prices high, probably very high, regardless of other economic factors.

IMO, people just don't get the scope of our debt. Even if the Republicans get their way and trim 500 billion a year ( never happen ) from the annual deficit, that still leaves about a trillion+ per year shortage. So, in a few years (3?) we'll owe 20 trillion. Completely, absolutely and utterly unsustainable.

Can the class say " C R A S H ? ".

Furthermore, most of our funds, SSI, highway,etc, on and on, are nearly insolvent. Healthcare for the nation and public employee retirement funds each have the power to break us. Fed, State and local govs, most face huge and rapidly growing debt. The compilation of all of this will hit like an A-bomb.

We CANNOT grow our way out of this disaster. The Policticos like to say we can and will, but it is just not possible. No frickin way Jose.

Europe and other countries have already started to trim debt and rearrange their societies. They should emerge from this sooner than us. Russia already went through it's crash and re-emerged. China has more cash than it does Li's. South America and India are in a better position than us. These countries will continue to grow and consume more oil.

The icing on the cake is we, the USA,  have a much different society than we did in the 1930s. Today's America is infinitely more dependent on Uncle Sam. When that safety net no longer exists, millions upon millions will be with little support. These people will not be like the hobos of 1930s. These people have a sense of entitlement that will lead them to violence.

For the most part, the 1930s were peaceful. Today, even during good times, we have a violent society. When the crap hits the fan it will get worse. Funds for police and prisons will be very low so crime will prevail.

Given all this, IMO, gas will remain expensive now and be very expensive in the near future when America collapes. I know this sounds awfull and I'm not a pessimist. It's just that all these things are proven/known to be very, very real, astronomically huge and growing fast. There is no debating that.

I really don't think people get it....... " It couldn't happen to America. "

In the short- and mid-term prices will go up and they may also go down.  Speculation more than fundamentals (supply and demand) will continue to drive price movements and volatility will continue.  Long-term however, prices will have to trend higher.  With some luck, technology may pull us out of our dead dinosaur dependency, but not likely much before my son is my age (40 more years).  We've got 40 years of oil in the ground, but the process of deciding who gets it may get uglier.

The above graph depicts Exxon/Mobil's PROFIT history going back to 1970 ... I think this says it all.

In any "normal" business, profits GENERALLY follow a consistent path in line with expenses. Exceptions would include the introduction of a new product or entry into a new market, which might lead to a "blip" on the profit curve. There's usually a specific target profit margin, and that's what is followed. With the exception of the "energy crisis" of the late 1970's, even for Exxon/Mobil, this was the case for almost 30 years as shown in the graph.

The difference in the energy industry is that they have us all by the ______. The same is true for the medical and drug industries as well. Energy and health care are two things we realistically CAN'T avoid in the 21st century, unless of course we've decided to leave all our creature comforts behind, and go live in a cave until we die of some curable illness.

For almost every other aspect of our lives, we have alternatives. If beer prices suddenly skyrocketed beyond belief, would people continue to drink it? Look at cigarettes ... as prices have skyrocketed, I know several people who have quit not because they want to stop smoking to improve their health, but because they simply can't afford it, or are just unwilling to pay the price. The point is, we have alternatives or freedom of choice for most things, but not for energy and health care.

I looked into putting a solar system at my house, the problem is, the return on the investment, even after all the tax incentives, is close to 20 years!!! I can't help but wonder why (or who is keeping) the costs to install an energy system that utilizes a FREE and RENEWABLE fuel source is so expensive.

Until there are some viable energy alternatives, we're at their mercy, unless of course Uncle Sam starts to use the "R" word, which will never happen. As an ESSENTIAL commodity, traders and speculators can continue to manipulate the markets getting rich along the way, while the rest of us pay the price.

Snowballs, you have me depressed, but not surprised.  I've been thinking the same thing, that we'll see revolution in this country at some point and apparently, I'm not the only person who thinks that will happen.  Unfortunately, I'm guessing the revolutionaries will look at us skiers as "the man". :(

 The 30's were very pleasant..

1930s are regarded as an era of widespread lawlessness and violence. The great "midwestern" crime wave lasted but for a brief time during the early part of the decade and captured the imagination of the public like little else could. Between "Baby Face" Nelson, "Pretty Boy" Floyd, and "Creepy" Karpis on the one hand, and the ruthlessness of urban criminal gangs and the frequent revelations of police and political corruption on the other, the 1930s have earned a reputation for lawlessness that tends to obscure other more significant developments in the history of law and order.

I'm one of those people who think we have China by the balls not the other way around..

ie: you owe the bank 100k they have you by the short hairs, you owe the bank 100million you have them by the short hairs...

Wow, from gas to Armageddon and the end of our society as we know it.

My take? Considering that the end of oil as we know it is projected to happen during my lifetime, I am surprised that oil prices are not higher. OPEC is pretty smart about what they are doing. They know if they charge what a finite natural resource really should go for right now, they would destroy the global economy and also their own profits in a short-long term. They are in it for the long haul so we still have cheap gas. Not pre-2000s cheap, but cheap relative to what its worth might be if pockets were deep enough.

I think a lot of it is mental. People see $3 for gas or $4 for gas and they freak out. Personally, I am more concerned with how increased gas prices have the impact of inflating most of the products and services we buy as the increased expense negatively effect businesses that compensate with increased prices. A $1 increase at the pump means I pay an extra $12 to fill up. Big deal. People complain about that $1 increase per gallon while buying their daily $3 cup of Joe. People are crazy, it is all mental.

Gas prices really got you down? Almost every major car company is putting a 40 MPG car onto the road this summer that is NOT a hybrid or a diesel. Plenty of used vehicles out there that get 35 MPG. Does a gas increase squeeze folks right on the edge? Absolutely. For the rest of us, it is all mental. And if you are commuting long distance without an economy car, you deserve the pain you get at the pump.

Why are all major car companies putting out 40 MPG cars right now? Because gas prices are going up and folks are concerned about MPG all of a sudden (and will continue to be as prices continue to rise). Increased prices at the pump drive innovation and availability of gasoline efficiency. Increasing gas prices, IMO, are a great thing in many ways.

riverc0il wrote

......

Agreed. The cost of gasoline is a tiny percentage of the cost of burning fossil fuels. As humans we postpone payment of bills to the last possible minute. All kinds of costs are being deferred. What will ultimately be the cost of the BP spill? If every oil company had a real plan in place to handle a deepwater blowout like the one that happened in the Gulf last summer, gas would cost more.  And if gas was still .29 cents, cars would still have fins. I lived through the gas shortages in the 70s - that pain changed cars forever, for the better.

The only way to motivate people to change is to hit them in the wallet.  Personally I'd rather pay $8 a gallon now and use the money to develop alternatives, than to keep it at $4, send it all to OPEC, and wait for the price to rise on it's own.

If we can put a man on the moon (1969!) or send a bomb down a chimney from thousands of feet in the air, we can figure out alternatives.  IMO developing alternatives to OPEC oil should be considered part of national security.  We all have things in our own budgets - like insurance -  that add cost now, to reduce cost later. If only we could do it as a society.

One issue with electric cars is battery life/safety of lithium batteries. A one penny tax per gallon on gas could generate money for a HUGE prize. (Jeff - how many gallons do we burn in a year?) The prize could be awarded to the inventor who perfected the battery.

I like to having this kind of stuff in the OT in the off season. I realize this discussion could be considered political by some, but to me, to this point, it's economics. Thanks for posting MT.

i agree with Harv and Riv too

like Riv said, they're plenty of 40mpg options out there now and almost all of them under 20k

Harvey44 wrote

 (Jeff - how many gallons do we burn in a year?)

Summary of Weekly Petroleum Data for the Week Ending April 15, 2011

U.S. crude oil refinery inputs averaged 14.1 million barrels per day during the week ending April 15, 87 thousand barrels per day above the previous week’s average. Refineries operated at 82.5 percent of their operable capacity last week. Gasoline production increased last week, averaging about 9.2 million barrels per day. Distillate fuel production increased last week, averaging about 4.2 million barrels per day.

http://ir.eia.gov/wpsr/wpsrsummary.pdf

Another reason to make it(oil) last as long as possible is the fact that these oil producing Middle Eastern countries will become terrorist proving grounds, once they've pumped their last drop!  They have no other industry as far as I know, other than the production of oil and they're people are already oppressed when things are good for their rulers, while they are flush with oil!

After I bought some groceries attoday, the checkout clerk cheerfully informed me that I just saved 10 cents a gallon on gas. I told her thanks for the time machine, it's like buying gas last week!

gebbyfish wrote

Another reason to make it(oil) last as long as possible is the fact that these oil producing Middle Eastern countries will become terrorist proving grounds, once they've pumped their last drop!  They have no other industry as far as I know, other than the production of oil and they're people are already oppressed when things are good for their rulers, while they are flush with oil!

I think terrorist training grounds is a bit extreme. There are a lot of poor countries in which Islam is the majority religion that are not terrorist friendly. But I do think it is a valid concern of what happens to countries that are solely reliable on oil for their economies once oil is gone.

On the flip side, look at a country like India which is a major world power not for natural resources but for a cheap and intelligent low wage work force (i.e. IT outsourcing). There are other things that can drive an economy in low natural resource countries. The big unknown factor is if those countries would adopt such a labor market.

There's a rumor that experts predicts that crude oil prices will fall this summer. They say that while gasoline costs are around $4 per gallon now, a summer wind could portend lower prices, reports High Country Radio. Soon, gas prices will fall, which would appear to make sense in light of the current 15-percent decreased in the cost per barrel of crude oil. Once prices start to fall, some believe it could be a slow, steady slide. You could  imagine how we can save money if this gas prices will decrease. Finally, individuals could be able to fill up their gasoline tanks without needing an installment loan.

Here is fun statistics: petroleum consumption (from http://www.eia.doe.gov) 1000s barrels per day
         
          2006     2007    2008     2009    2010  
--------------------------------------------------
India:  2690     2800    2950    3110    3215
China: 7263     7534    7817    8324    8371
USA:  20687   20680  19497   18771  19148

As China, India and other "developing" countries get richer, demand grows and supply might have hard time to catch up, in the long run I see oil prices going up.

Denis.N wrote

Here is fun statistics: petroleum consumption (from http://www.eia.doe.gov) 1000s barrels per day
         
          2006     2007    2008     2009    2010  
--------------------------------------------------
India:  2690     2800    2950    3110    3215
China: 7263     7534    7817    8324    8371
USA:  20687   20680  19497   18771  19148

As China, India and other "developing" countries get richer, demand grows and supply might have hard time to catch up, in the long run I see oil prices going up.

That's the rub right there. I'ld bet China's numbers are actually higher.

It's a different demand scenario now. One not just driven by the USA. Very, very soon, India's and China's (Brazil,et al)soaring oil consumption will force the price of gas to remain high, probably go very high.

Brazil is 100% energy independent. Between their ethanol productions and their massive off shore oil fields , they are styling..

we need to start using natural gas to power our cars..we have one of the worlds largest reserves of natural gas..

But getting that gas to the surface is the issue...I don't know much about it but Levon Helm and Arlo Guthrie put on a show Friday at Brewery Ommegang against Hydrofracking...would have loved to see that show, anyone go?

Michaeltokyo wrote

My take is lots of volatility for the time being.  I think prices will come down again. I tell my "green" friends who say  high gas prices are inevitable, trade commodities if you're so sure and make your millions.

http://www.marketwatch.com/story/oil-futures-decline-in-electronic-trading-2011-05-15

I filled up with Regular gas today in Malta, NY for $303.9. I thought it was great! Then I found out if I lived in Missouri, I could pay $2.29.9/gal.
When I graduated from high school in 1974, gas cost $2.22 in inflation adjusted dollars ($0.46 in 1974).
After 40 years of cartels, global conflict and disruption, gasoline price has nearly gone back to low tax inflation adjusted levels.