lurkette

I've been reading the headlines and the political cartoons about gas prices in the U.S., and I'm of two equally uneducated minds about it:

1. Americans are spoiled rotten and haven't paid the true cost of petroleum-based fuels for decades. Our government heavily subsidizes oil prices and we've had artificially low prices. Granted, the changes in gas prices aren't due to any decrease in government subsidization but are due (as far as I know) to decreased production and the weaker dollar, but still: quitcher bitching!

2. Higher gas prices have a regressive impact - the increased cost of consumption (and the correlated increased cost of consumer goods) is going to fall heavier on lower-income people because it represents a larger percentage of their income. There's no real reason for the gas prices to be higher except that the producers and refiners are setting prices higher and making huge profits.

Discuss. Bring on the science, the economics, explain to me why gas prices are a good or a bad thing. Inquiring minds want to know!

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warrrreagl

I see no logic in invading an oil-rich country without reaping any benefits. Was the U.S. down-and-dirty enough to invade a foreign nation but too lofty to grab the resources?

I don't get it. As long as we're apparently oblivious as to what the rest of the world thinks of us, then go ahead and grab the damn oil.

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Redlemon

I (putting on my tinfoil hat) believe that the current run-up in petroleum prices is due to someone pulling an Enron-style deception. Remember when California was "out of power"? They weren't. Someone is gaming the petroleum system, and I have no idea who it is.

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liquidlight

I'm with Redlemon, according to the latest Forbes 500 the Oil companies are posting record profits with unheard of revenues. Price per barrel is up to record highs as well, but the correlation to end gallon price versus the increase in barrel price is inconsistant.

We're all being played because we have no alternative to standard gasoline. Without paying what they're making us pay we're all stranded and there's nothing that we can do about it, no matter how much it pisses us off.

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Redlemon

Factoid for you: the oil refiners are the only people in that pipeline that are making money (oh, and maybe the extractors as well). The distribution system, meaning the bulk petroleum terminals and the gas stations, are being squeezed as well, because it is harder for them to pass along the $ increases as the prices go up. They make their money when the prices drop, because they can get away with a delay on dropping the prices that they charge.

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Janey

As a net oil exporting nation, I find it very disturbing that we are paying 90 cents to a dollar a litre for gas at the pump.

I vote with Redlemon that the refiners are the ones benefiting.

dougiefresh

The obvious bottom line is that government isn't going to provide grants for those who want to explore a legitimate replacement for oil. Too much oil money going into everybody's pockets, dems and repubs. We're at the point where this is clearly a national security and economic problem that needs to be addressed. Of course, this country has always been run by big business, so whats going to change?

MSD

We have cheap gas. Other parts of the world are seeing what comes to $6/gal and more after exchange rates, and we're whining about $2. As soon as someone comes out with a decent diesel-electric hybrid vehicle, I'm going to go into debt to invest in bioiesel manufacturing, and make it back in half a year when people start buying what I can make for a few cents a gallon and sell for half of what commercial gas costs.

I don't remember who it was, but I think Enron's name came up. They were "exporting" power to Nevada then "importing" it back into the state to defeat price caps. It's really disgusting that they would do that. Regardless of legality, it's extraordinarily unethical.

BigBen

/Ben puts on his Economics Professor hat...

There are many competing theories about the price of a base commodity and its effect on the overall health of an economy. Macro-economists with fame such as Lucas, Barrow et al have postulated that when base goods increase in price, the living wage naturally increases to offset any changes in utility.

/Ben takes off Economics hat, puts on the reality helmet

Well, from someone who has sat through a lecture that pegged the price of gold, oil, bulldozers and BigMacs (I am 100% serious) together to explain that PPP (Purchasing Power Parity) is constant in the long-run, let me tell the reader of this post that it is hard to decide why Economists should not be rounded up and put into re-education camps.

When an economist tells you "don't worry, it all works out in the long-run" I hereby give you permission to kick him/her in the junk.

We are at 94.9 cents a litre here, but hey, the taxes levied at the pump allowed our government to introduce their "spend-like-you-are-on-a-fucking-coke-high" without much opposition because it is balanced. How can politicians possibly take credit for a windfall in tax revenue like that, as if they had something to do with it? Vote for BigBen, ladies and gentlemen, and I promise to do everything you want without raising taxes. All I need is to tax a base good until the levies account for more than the total cost of that good, and put taxes upon taxes so that a real increase of the base price of 1 cent will result in a bull-whip effect of about 15 cents.

No, I don't think you yanks are paying too little for gasoline, but I do think that your tax structure on gasoline is drastically different. As soon as your governments realize that there is tax dollars to be grabbed for at the pump, you guys are fucked.

As far as net importer/exporter thing is concerned, the world price will drive most of the price at the pump (multiplied several times for tax) simply because oil transports so well, is relatively stable (you can store it) and EVERYBODY USES IT. Think about it... when was the last time you used gold? How about Molybdenum? Well, the truck that shipped the gold to the store used OIL. The shit just keeps flowing.

If OPEC was to break up and they competed with each other instead of collude, premium would be at about 15 cents a gallon. Why does the world not cry foul at this oligopoly (Many buyers, very few suppliers)?

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ratbastid

Whoever it is, you can bet they have a good friend in the White House.

jorgelito

Um...or walk, bike, take a bus.....move closer to work, work closer to home.

Fact is, Americans don't like solutions, they like whining. Let's get off our collective "fat asses" and do something about it. Stop driving to the gym then take the elevator up just to run on a treadmill and walk on a stairclimber for a couple of hours.

I must be the only guy in LA who doesn't drive. Period. I walk and take the bus EVERYWHERE (yes it does suck) but that's how I lost 30lbs in one month (5+ miles a day walking). I have to be strategic with my grocery shopping (limit to what I can carry) cause the store is a mile away, but I still manage to do it.

Gas is still cheaper (adjusted for inflation) than it's ever been. It's only $2.67 here in LA (on my corner at least). Could you imagine paying $6.00 a gallon in Europe? We're lucky here. And Canadians, what's the matter with you? $C.99 per litre is NOT that much, I'm sure you'll live or get by.

Personally, I don't think anyone really cares about who's benefitting (i.e. - Enron or Halliburton). My proof is that issues like this are brought up all the time and mostly ignored. Apathy is what drives up the price.

People will whine and bitch about the price but when it comes time for action, nothing will happen. The truth is, we'll still pay at the pump, drive even more, buy our suv's, vote certain elements into office, fail to see the connection between Saudi's, Bushes, Cheney's etc, refuse to make adjustments and refuse to change or effect change. That's the American way.

You don't like it? Boycott it!

But truth is, no one will. We're too passive, weak minded; we assume our Prez will take care of things. That's the real terrorism.

Even though I don't drive, I still pay the cost in the end. Delivery, shipping, petroleum products (i.e. - plastic based) costs all go up. It's not just gasoline.

By the way, drilling in Alaska will not solve our "current problem". It's time to hold our leaders accountable; whatever happened to out alternative energy policy and not this ridiculous notion of hydrogen either (my opinion)?

Thank you

TM875

Technically, OPEC is a cartel - a specialized form of oligopoly. But that's just getting technical.

Now, as for the economics-based assumptions (because, after all, I'm an economist - BA from Elizabethtown College, MBA from Wharton), I'll keep it simple. I had the oppurtunity to meet with Dr. Massood Samii of the University of Southern New Hampshire last week. Dr. Samii was the former chief economist for OPEC.

As it stands right now, the price of oil will continue to go up. Most likely, it will peak around $80 or so per barrel (USD). Gas prices, then, will probably end up at about $5 or so a gallon. Now, this is going to happen over the course of several years (my prediction is around 2008-09 or so). By then, technology will have adapted in order to produce low-oil consuming machinery and cars.

Up until now, there has not been a need to create such low-consumption equipment. There simply hasn't been enough money in it. Now that oil prices are going to skyrocket - guess what? Yep, there's gold in them thar hills.

Um, excuse me? Look at the numbers there, guy. Even if 50% of all Americans stop driving cars, the oil industry faces nothing but a slight blip on their radar screen. All OPEC needs to do is cut their supply level down another notch, and boom, prices are up again.

OPEC's capacity for producing oil has not changed since the 1970's. World demand, however, has skyrocketed. So what are we going to do?

There's a few options. The most likely one is that we do nothing. In reality, there's nothing to do except live with it. Bottom line gas prices in Europe are the same as the US, their nations just tax the hell out of it. Anyway, the most reasonable solution is to just take the oil prices like men and go out and research more fuel-efficient devices.

Second, and less attractive, option would be to use US oil. Problem is, right now turning US oil into gasoline would be far more expensive than using OPEC controlled oil. We don't have the right type of crude to make gasoline cheaply.

Third would be to break up OPEC baby-Bell style. The only problem is...well, who the hell are we to tell an international corporation how to run their freakin' business?!?! We can't go out, all big-bully style, and tell them to break up or else. That, jorgelito, is terrorism.

So, what are we going to do? Truth is, we've got only one real option - research. Once good, powerful, non-gasoline (or low gasoline) engines are made, we'll be on our way home (personally, I refuse to drive a car with less than 220hp/250lbft torque). That will decrease demand for oil, which will thus decrease price (on the aggregate). OPEC can only lower their supply so far before they go bankrupt.

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eribrav

I agree that we''re in a stew of our own making. Americans have steadfastly refused to reduce energy consumption, even in ways that should be relatively painless. We use 2500 pound steel vehicles to transport our 170 pound bodies 1-2 miles at a time rather than walk or bicycle. The fleet average gas mileage has been declining for years in the U.S. Who do you know that's lowered the thermostat in their house even a degree in the winter to try to save energy?

On the flip side, while we demand ever more oil and derivatives, we refuse to acknowledge that we either have to produce more ourselves or continue to fund despotic, terrorist backing regimes that routinely ignore human rights like Iran and Saudi Arabia. We won't even consider drilling for more oil. Hell we have tremendous local opposition to building a wind farm nearby. Do I think we should drill ANWAR? No. But we are going to have to accept that if we can't modulate our energy use.

I'm very disappointed our President has done nothing to improve this situation. The day after we invaded Iraq he should have enacted a new 50 cent a gallon tax on gas. We would call it the Patriot tax, and all the revenues would go to a Manhattan Project, only this time directed at achieving energy independence within 10 years. Imagine funding talented people at companies and universities all over this great country to do that kind of work. I know that goal is reachable.

jorgelito

Nice response TM875!

Quick reply from me:

1. If demand is reduced (i.e. - through our arbitrary 50% boycott example), shouldn't prices then come down. I'm not quite sure I understood your 1st part but I assumed that was the driving cost factor in oil prices. I do understand what you're saying about OPEC's role but I believe they mentioned a price of $28 per barrel as their comfort zone. I think there's alot of instability anyways in their cartel and non-OPEC countries like Russia, Mexico? are significant enough to alter the equation (not sure, this is a quick reply). That is why I believe the demand end is just as critical. Demand, supply, etc all factor in on the price. We, as consumers, "control" the demand part.

2. We live with it. Prices aren't that bad are they? Again, prices are at an all time low (adjusted for inflation). So, as consumers we change or modify our behavior.

US oil, again, maybe short term (as in eventually we WILL run out of oil). Additionally, new drilling will not show immediate results for awhile. Plus, I think the problem is more REFINING. I think someone else also mentioned refining as an issue.

3. I'll skip the OPEC part for now but I do want to discuss (again, quick reply).

4. Now we're getting somewhere - this is what I'm really interested in. Research, alternatives. I also agree with your contention that it will decrease DEMAND for oil, thus decrease price etc (which is what I was saying in th 1st point). I intrepret you point here as making my point in the first part.

Ace_O_Spades

I've been trying to convince my parents to invest in Ballard (a Vancouver based hydrogen fuel cell research and development company)

I swear, if Ballard comes out with the first viable hydrogen engine, and the shares increase 100 fold, I'm going to point and laugh, then be extremely disappointed because I won't have fantastically rich parents.

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Willravel

BioDiesel! Domestically produced, cleaner than fossil fuels (non toxic), cheaper, carbon neutral (almost no emmisions), greatly reduced engine wear, better driving experience. If you have a decent diesel car/truck/etc., it's a good solution.
Unless you live in California, becuase they're illeal. I hate automotive legislation in my state!!!

ratbastid

"Her tax plan has loopholes big enough to drive my Hummer through!" --Your Governator

Might just be me, but just the fact that the man drives a Hummer should be enough to lose a bunch of votes.

The other big plus to Biodiesel: your exhaust smells like french fries!

spindles

A few points:
1. Anyone that has to own a 220hp "car" to get them from A to B is going to wait a lot longer for an energy efficient car. There are already petrol/electric hybrids available (in Australia the Toyota Prius link and the Honda Civic link are here). I read somewhere there is a waiting period of 5 or 6 months to get one of these, so the market is certainly there, though the money you save is not the issue - the extra price of the car would mean you break even in about 8 years time
2. We'll know that irreplaceable fossil fuels are at the right price when we spend more on petrol than we do on coke (the soft drink not the drug) or bottled water. I'm amazed at the short sightedness of people, who think that there is a magic oil tap somewhere that is going to run forever.
3. Australian energy companies are starting to move into areas like wind generation for electricity and hydro electric schemes, which will help to lessen our reliance on (in the main) coal fired power stations - you can, as a consumer, pay a premium to use this kind of power. Hopefully it won't be long before we produce most of our electricity this way - oil is not our only scarce resource!
4. Around half of what we pay at the pump is tax - I'm not concerned with this, except that the government gets to choose how that money is spent, and they choose not to spend it on road improvements or researching new methods of driving cars. In fact we get taxed twice - piles of govt duties and tariffs, then a GST on top of that.
5. I am amazed at the capitalists (and face it - most Americans are capitalists, and I guess I am too!) complaining that someone is making money off oil. It is a commodity - someone found it (and probably spent a lot of money proving it was there) - why shouldn't they reap the benefits?

BTW - I work from home, so no commuting for me. When I was working in an office, I took the train. My wife and I walk a lot (the nearest major shops are only 1/2 an hour away). When we do drive, it is a four cylinder car, which we chose because it fits our needs - it may not be the fastest, or most powerful, but it gets me where I want to go in comfort. Fuel economy of the car was a major selling point for us.

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ARTelevision

I don't have a problem with the price of gas. I pay what things cost. I figure the miracle of contemporary vehicular transportation is an expensive thing. It allows amazing things to be accomplished. This is where we are and I'm alright with it, given the large geopolitical and economic realities of the global market we exist within.

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F-18_Driver

No matter WHICH party is occupying it.

TM875

I'm actually pretty impressed with the recent hybrid technology. The engines that Lexus and Ford are making seem to almost be good enough to purchase. The new Lexus hyrbrid-SUV (I forget the name) has a decent kick to the engine and still gets about 30ish MPG.

What I want in a car, though, is what Ford's developing for its future Crown Vic P71 Police Interceptor. As far as I know, it's a semi-gasoline semi-hyrdogen/electric hybrid with enough power to chase down even the fastest highway speeders, plus pretty awesome gas mileage (we're talking maybe 25-35mpg here).

That's where hybrid technology will really go to. The Toyota Prius, while nice in concept, is fairly impractical for most users (plus it looks like ass). Americans need hauling space for stuff. Tiny little Econo-boxes aren't going to work. I think that the trend in hybrid engines will be to make larger cars more efficient while still being able to have the power to tow/carry large loads and fly on the highway. I'd say 35mpg is about the industry target for said vehicles.

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Fire

I am not so concerned with the passenger car situation as with the economic impact of high fuel prices on shipping- simply put, since the 1950's brought our current highway system, most of everything in the U.S. moves on semi trailers on long stretches of road- just about everything you buy, eat, read, etc, is now considderably higher to ship from point A to point B- and while, obviously, we should have done something other than building that huge concrete web across the lower 48, it is now the way that it all works, and while my friend that bought a Hybrid a few years ago while complaining about the shortsightedness of the highway system now gets great mileage (forgive the pun) out of it, there seems to be now plan whatever in the works to FIX the problem- and I for one do not look foreward to paying the higher price for the nescessities of life......

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spindles

Why? what exactly are most Americans hauling around in their giant SUVs?

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Hanabal

i just did a drive across country roads a while ago, and measured my distance and kept tabs on fuel consuption.

My average run of the mill sedan got close to 29mpg(rough translation to american units from metric). I think hybrids should be able to reach 50 pretty soon.

but seriously, I did not know that US fuel is not taxed like we are. Surely the govt could see the benefit and tax you just a little and spend that on developing other fuel sources.

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stevie667

I agree on lurkettes point about you yankies being spoiled rotten with petrol prices.

Over here in lil' ol' England, petrol costs 80p a litre, thats $1.5 A LITRE. Quit ya whining.

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jwoody

A good way to personally track petrol prices is to buy by-the-litre (or gallon, for you imperialists).

For example, whenever I buy fuel I always get 30 litres. I know that at my local petrol station this costs £26.68. If I'm buying elsewhere, or if my local puts their prices up I notice the difference immediately.

If you go along and buy, say, £20 worth or just fill the tank you very rarely notice how much fuel you actually bought. You wouldn't take that attitude with any other product, so why should you be so flippant with your fuel purchase?

Phage

A lot of people don't seem to realize that anything the 'government pays for' really comes out of the pockets of taxpayers. Citizens cannot be spoiled by having their government pay for something instead of them; the cost comes back in the end.

Sure, those with more money are probably better off. Of course this is the very idea of capitalism, that if you can accumulate a proportionally large amount of wealth then you and your offspring can reap the benefits. A statement like the one above cannot claim that there is something wrong with the system unless you also see something wrong with the statement "Wealthier people have more purchasing power".

tecoyah

The President of the United States in an Oil Man.


End of Story

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Janey

yes we will get by, but not with out much gnashing of the teeth every time we pay for our over taxed gas purchase.

$99/litre = $3.75/ gal.

that would make Americans steam

Janey

mostly because of budget. I know that I only have $20 per week to spend on gas. So I put in $20 every sunday night. Regardless of the number of litres it purchases, that's all that I can budget for.

jwoody

In that case stop the pump at a nice round figure and check the price. If Canadian petrol stations are anything like English ones you'll notice that prices vary drastically from place to place.

The human brain has a remarkable ability to remember figures when they have a £ ($) sign in front of them.

Janey

oh yes, they do vary. I drove in to work this morning, and in rapid succession ( along a 10 km route) Prices were (for regular):

79.9/litre at Canadian tire
82.9/litre at PetroCan
85.9/litre at VPlus
92.9/litre at Esso

last night, on the way home, none of those stations had prices below 94.9/litre.

I always notice the fluctuations, and see that they change hourly.

Cynthetiq

I don't drive day to day since I have access to good public transportation.

When I do drive I do cringe when I have to put over $20 just to fill up the Neon. I thought about the cost of operating my vehicle, but most of the people driving SUVs didn't.

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Rinndalir

Public transportation is absolutely not an option for me, my city's buses don't even go to the part of town where I work, neither is biking, it's 30 minutes across town in traffic. Besides with a 2 year old to take back and forth from daycare it wouldn't be practical anyway. So there's nothing I can do except STFU and pay, wincing every time because I can remember when it was less than $1/gal here.

I'm seeing alot of Priuses on the road here, but the majority of people in the south still drive SUVs or trucks. It's a 1 year waiting list at the dealer to get a Prius here - the problem with that is, why pay $21k+ for a car that gets 50 mpg and can only be serviced by the dealer, when I can get a used Civic coupe with a standard for $5-10k (depending on mileage, year, etc) that gets close to 40mpg and can be worked on by me or anyone else? The hybrids are an awesome idea, getting better every year, but they're just not cost effective yet. Though the consipracy theorist in me says that when they DO get that way, and a majority of people have them, gas prices will just shoot up to accomodate and nothing will actually change.

SUVs though, very few people actually need them, I have a small 80s Nissan truck and a little 99 Kia, and I get by just fine even with a 2 yr old in tow. I have absolutely no need for anything bigger. One good thing about everyone driving huge SUVs is, eventually the oil will start to run out. Not anytime soon, but eventually, and with China becoming a major gas consumer it'll hasten the process. Then there'll be no choice but to look at alternatives. I say let's get everyone across the globe in a Hummer and use that shit up fast as possible. (except me of course, I ain't paying $100 to fill up, no way )

TM875

Well, I don't own a giant SUV, but, currently in the trunk of my car sits: two saxophone cases, golf clubs, tool box, two folding chairs, and some winter-survival stuff that I haven't taken out yet. Back seat is for..hmm...passengers. This is just day-to-day hauling. From time to time, I might get adventerous in the home remodeling department and buy a bookcase or some lumber. Personally, I don't want to pay the extra delivery fee. Better yet, if I happen to go out and buy a 32" TV, do you think I could fit it inside a Prius?

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Grasshopper Green

It actually costs MORE for me to ride the bus to work than it does to drive...not to mention the often 45 minute wait to catch the next bus when I get off of work. So, I guess I'll continue paying for gas. However, I've known for a long time that we've got it good here in the States compared to other parts of the world, so I really can't complain much.

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jorgelito

Haha! This reminds me of the conversations I used to have with my girlfriend:

I would comment on how awesome the Avalanche was or Tacoma and how useful it would be to haul stuff with. I like trucks and stuff. She would then shoot me a look and say, what are you going to haul with the truck? Sadly, she spoke the truth, I really couldn't justify it cause I really don't need to haul stuff. I guess, like all good little boys, I like trucks.

If I buy a 32" TV or what not, I usually get free shipping with it too. The only thing I kept in my car (when I used to have one) was a small Emergency Roadside Kit, and an umbrella. No need to "store" stuff in there - it's just a waste of gas.

merkerguitars

Good too see people believe in biodiesel as much as I did. This summer i'm planning on getting my company off the ground with it. Hell last year I found a way to make it out of old out of date butter for around 35 cents a gallon. And once i do that I'll buy a TDI VW and not have to worry about gas prices ever again. Maybe higher gas prices are what we need to make people to start being more efficient in their ways. The worst are the tin foil hat wearers that dont' believe we have any viable solutions, hell if we started to use mostly biodiesel that would cut down ALOT of our foreign oil consumption.

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jorgelito

You can also get "oil" or grease from fast food restaurant etc. I think there was a thread around here that linked to a web-site that showed you how to make or purchase a bio-diesel converter. Apparently, it's not too difficult, maybe a bit greasey, Ha! (sorry, couldn't resist).

This reminds me of the Simpsons episode where Homer tries to make money from selling grease...hehehee....

Cynthetiq

and if you don't use those items day to day and just haul them around... you get even worse gas mileage.

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