The Official Gas Price Discussion Thread
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The Official Gas Price Discussion Thread
Hope its not a repost...
http://editorial.autos.msn.com/artic...&topart=luxury
http://editorial.autos.msn.com/artic...&topart=luxury
Gas Prices Demystified
Why you're paying so much, and why you could soon be paying less.
By Doug Newcomb
Filling up at the pump has become such a pain in the pocketbook that for the first time ever, gasoline consumption in the U.S. has stopped increasing. But even though America's consumption has been virtually flat for the past five years, prices in that same period have nearly doubled, with crude oil recently hitting record highs.
While commodity prices typically decline along with demand, gas has defied these market fundamentals. But the forces behind ever-escalating prices at the pump aren't a mystery once you look at the big picture — and the good news is relief may be just down the road.
The Crude Truth
The price of crude oil accounts for up to 70 percent of what drivers ultimately pay for gas at the pump, according to the U.S. Energy Information Administration. So with crude prices recently cresting at over $110 per barrel, you don't have to be an economist to calculate why gas prices have also hit record levels.
Like any commodity, crude oil prices are governed by the laws of supply and demand, but they are also affected by market speculation. While oil industry analysts disagree on which of these two forces exerts a greater influence on oil prices, the "fundamentals" of supply and demand present an unambiguous picture of why gas prices keep on rising even though we haven't been buying as much.
On the supply side, the Organization of Petroleum Export Countries (OPEC), which controls around 40 percent of worldwide crude oil production, exerts significant influence on supply by setting strict production limits for its members.
But Bob Tippee, editor of the petroleum industry trade magazine Oil & Gas Journal, notes that OPEC has limited ability to increase supply and therefore decrease prices. "The only way OPEC could bring prices down is to increase production," he says, "but it doesn't have much room to do that. They are pretty much at practical capacity limits now. "
With an already tight oil supply, unpredictable elements such as political unrest and weather also adversely affect production and ultimately gas prices. Turmoil in the oil-rich Persian Gulf invariably pushes oil prices higher, for example, as do natural disasters such as Hurricane Katrina, which battered the epicenter of U.S. oil production along the Gulf Coast in 2005.
And while U.S. demand has leveled off, the world's oil appetite has grown substantially. "Over the last several years, global demand has increased much faster than supply," notes Douglas MacIntyre, a senior oil analyst with the Energy Information Administration.
"In 2003, total international oil consumption was 79.6 million barrels, and that jumped to 85.7 in 2007. What we've seen and expect to continue," MacIntyre adds, "is that growth in demand — particularly in China, India and the Middle East — will be much faster than in the U.S."
Irrational Exuberance
Tom Kloza, chief analyst of the Oil Price Information Service, says the recent run-up in oil prices is due more to speculation in the commodities market than to supply shortages and the growing economies and populations in Asia. "The EIA has been steadfast in saying that it's all about supply and demand, but I disagree," Kloza contends.
"It's not the demand from average Joes, but demand from hedge funds, banks, commodities pools and so forth that's responsible for taking crude oil from $70 to $110 a barrel. There are a lot of huge funds that are invested in commodities, and one of their favorites is crude oil.
"I estimate that there's about $25 billion in oil futures — and that's $25 billion speculating on a higher price right now than a lower price," Kloza adds. "I think you'll find a lot of people in the oil industry will agree, and they're not going to complain if Wall Street is carrying the water for them. They've been the beneficiaries of that irrational exuberance."
Like many who follow the oil industry, Kloza believes that the price of crude oil is "overheated" and due for a correction.
"I compare it to the housing market a few years ago," he says. "It's been lifted by the sentiment that the oil market is a place where you can't lose money and values will move up higher and higher every year. But I think we'll see less of a bubble burst and more of a letting the pressure out like we've seen in the housing market. It could be a template for what we'll see in oil."
The EIA's MacIntyre agrees and says crude oil prices will be softened by new production streams. But he predicts prices will rise before they lower, mainly due to seasonal demand this spring, when pump prices traditionally shoot up as predictably as May flowers.
"Along with many other analysts, we've been expecting crude oil prices to decline for many months, and they keep going up," he says. "In March they were down considerably, but the expectation is not just that the price will slow demand a bit more, but that a lot of non-OPEC production that has been delayed will catch up to us later this year and next year. And as the market starts proceeding with that production, prices will start dropping."
"From what I hear, oil companies are investing based on $55 to $75 a barrel oil," says Tippee. "Historically, that's still pretty valuable oil. But I think that's what we'll see and gas prices will come down. But the big question is when."
Wait for the Fall
Just don't expect to see any dramatic price drops until well after the summer driving season, MacIntyre warns. "We expect gas prices to increase and peak nationally somewhere around $3.50 a gallon," he says. But consumers could see some relief by the end of 2008 and into 2009 as new production comes online.
"A couple of things are going to work in the favor of a more temperate price of gasoline down the road," adds Kloza. "Ethanol is going to displace a lot of the demand for gasoline because it's going to take 10 percent of gasoline out of the formula and replace it nearly everywhere east of the Mississippi this year. The second thing is prices won't be up a spectacular amount from previous years; it may be up a percentage point or so. But this is not the start of the $4- to $5[-dollar-a gallon] apocalypse for gasoline."
Why you're paying so much, and why you could soon be paying less.
By Doug Newcomb
Filling up at the pump has become such a pain in the pocketbook that for the first time ever, gasoline consumption in the U.S. has stopped increasing. But even though America's consumption has been virtually flat for the past five years, prices in that same period have nearly doubled, with crude oil recently hitting record highs.
While commodity prices typically decline along with demand, gas has defied these market fundamentals. But the forces behind ever-escalating prices at the pump aren't a mystery once you look at the big picture — and the good news is relief may be just down the road.
The Crude Truth
The price of crude oil accounts for up to 70 percent of what drivers ultimately pay for gas at the pump, according to the U.S. Energy Information Administration. So with crude prices recently cresting at over $110 per barrel, you don't have to be an economist to calculate why gas prices have also hit record levels.
Like any commodity, crude oil prices are governed by the laws of supply and demand, but they are also affected by market speculation. While oil industry analysts disagree on which of these two forces exerts a greater influence on oil prices, the "fundamentals" of supply and demand present an unambiguous picture of why gas prices keep on rising even though we haven't been buying as much.
On the supply side, the Organization of Petroleum Export Countries (OPEC), which controls around 40 percent of worldwide crude oil production, exerts significant influence on supply by setting strict production limits for its members.
But Bob Tippee, editor of the petroleum industry trade magazine Oil & Gas Journal, notes that OPEC has limited ability to increase supply and therefore decrease prices. "The only way OPEC could bring prices down is to increase production," he says, "but it doesn't have much room to do that. They are pretty much at practical capacity limits now. "
With an already tight oil supply, unpredictable elements such as political unrest and weather also adversely affect production and ultimately gas prices. Turmoil in the oil-rich Persian Gulf invariably pushes oil prices higher, for example, as do natural disasters such as Hurricane Katrina, which battered the epicenter of U.S. oil production along the Gulf Coast in 2005.
And while U.S. demand has leveled off, the world's oil appetite has grown substantially. "Over the last several years, global demand has increased much faster than supply," notes Douglas MacIntyre, a senior oil analyst with the Energy Information Administration.
"In 2003, total international oil consumption was 79.6 million barrels, and that jumped to 85.7 in 2007. What we've seen and expect to continue," MacIntyre adds, "is that growth in demand — particularly in China, India and the Middle East — will be much faster than in the U.S."
Irrational Exuberance
Tom Kloza, chief analyst of the Oil Price Information Service, says the recent run-up in oil prices is due more to speculation in the commodities market than to supply shortages and the growing economies and populations in Asia. "The EIA has been steadfast in saying that it's all about supply and demand, but I disagree," Kloza contends.
"It's not the demand from average Joes, but demand from hedge funds, banks, commodities pools and so forth that's responsible for taking crude oil from $70 to $110 a barrel. There are a lot of huge funds that are invested in commodities, and one of their favorites is crude oil.
"I estimate that there's about $25 billion in oil futures — and that's $25 billion speculating on a higher price right now than a lower price," Kloza adds. "I think you'll find a lot of people in the oil industry will agree, and they're not going to complain if Wall Street is carrying the water for them. They've been the beneficiaries of that irrational exuberance."
Like many who follow the oil industry, Kloza believes that the price of crude oil is "overheated" and due for a correction.
"I compare it to the housing market a few years ago," he says. "It's been lifted by the sentiment that the oil market is a place where you can't lose money and values will move up higher and higher every year. But I think we'll see less of a bubble burst and more of a letting the pressure out like we've seen in the housing market. It could be a template for what we'll see in oil."
The EIA's MacIntyre agrees and says crude oil prices will be softened by new production streams. But he predicts prices will rise before they lower, mainly due to seasonal demand this spring, when pump prices traditionally shoot up as predictably as May flowers.
"Along with many other analysts, we've been expecting crude oil prices to decline for many months, and they keep going up," he says. "In March they were down considerably, but the expectation is not just that the price will slow demand a bit more, but that a lot of non-OPEC production that has been delayed will catch up to us later this year and next year. And as the market starts proceeding with that production, prices will start dropping."
"From what I hear, oil companies are investing based on $55 to $75 a barrel oil," says Tippee. "Historically, that's still pretty valuable oil. But I think that's what we'll see and gas prices will come down. But the big question is when."
Wait for the Fall
Just don't expect to see any dramatic price drops until well after the summer driving season, MacIntyre warns. "We expect gas prices to increase and peak nationally somewhere around $3.50 a gallon," he says. But consumers could see some relief by the end of 2008 and into 2009 as new production comes online.
"A couple of things are going to work in the favor of a more temperate price of gasoline down the road," adds Kloza. "Ethanol is going to displace a lot of the demand for gasoline because it's going to take 10 percent of gasoline out of the formula and replace it nearly everywhere east of the Mississippi this year. The second thing is prices won't be up a spectacular amount from previous years; it may be up a percentage point or so. But this is not the start of the $4- to $5[-dollar-a gallon] apocalypse for gasoline."
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RDXSpaguy7 (06-23-2022)
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I was just gettin used to paying $3.29 a gallon for premium... paid $3.67 today
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
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They might drop 25 or 30 cents but its here to stay. Enjoy the ride.
#6
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Originally Posted by LuvMyTSX
I highly doubt they will go down.
Run a 3 year (or greater) price chart and see the ups and downs:
http://www.gasbuddy.com/gb_retail_price_chart.aspx
I think we might see $4.00 this summer, but it'll come back to $3.00 after awhile...
#7
Originally Posted by TSX Wisc Badger
I was just gettin used to paying $3.29 a gallon for premium... paid $3.67 today
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
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Originally Posted by TSX Wisc Badger
I was just gettin used to paying $3.29 a gallon for premium... paid $3.67 today
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
#10
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Originally Posted by CorvettePoor
Uhhhh...You couldn't buy a gallon of gas for 89 cents 10 years ago...Maybe 30 years ago.
Just over the Indiana/Illinois boarder (IN side). I used to drive out to visit my dad and fill up for .89 cents at the Speedway just over the boarder. I got my license in Jan of '98 so it was probably that spring/summer.
#11
i'll believe the gas drop when it happens.
if not the travel and resort areas are screwed. tourism has been slow the last couple years i think this will finish em off.
if not the travel and resort areas are screwed. tourism has been slow the last couple years i think this will finish em off.
#12
Needs more Lemon Pledge
:crickets:
#13
Team Owner
I read about a year ago that the laws of supply and demand point to oil prices of around $60-$65/barrel and that anything over that is due to outside factors such as speculation, financial hedging, political unrest, etc. This article seems to be saying the same thing. The loss of the US dollars buying power has a lot to do with our prices at the pump as well.
#14
Needs more Lemon Pledge
Truthfully, the speculation in the commodities market has ALLOT to do with what you pay at the pump, and the oil companies have no reason to stop the speculators, since it allows the oil companies to make the huge profits....
I am not a fan of gov't regulation, but in some circumstances, i think there is a need for a dose of intervention...
#15
Drifting
Originally Posted by TSX Wisc Badger
I was just gettin used to paying $3.29 a gallon for premium... paid $3.67 today
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
I hate this crap, when I started driving 10 yrs ago, you could get a gallon of unleaded for $.89 cents
Last edited by zguy95135; 04-16-2008 at 06:32 PM.
#18
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Originally Posted by CorvettePoor
Uhhhh...You couldn't buy a gallon of gas for 89 cents 10 years ago...Maybe 30 years ago.
#19
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$3.83 for regular today...and that was finding one the "cheaper" pumps
#20
The prices are not going to be going down, with China and India sucking it up at a faster rate than us, it's going to keep going up. The US has an 2-3% decrease of use from last year.
Here's to outsourcing American jobs to those Countries. :hiphip:
Here's to outsourcing American jobs to those Countries. :hiphip:
#21
fap fap fap
Originally Posted by CorvettePoor
Uhhhh...You couldn't buy a gallon of gas for 89 cents 10 years ago...Maybe 30 years ago.
10-11 yrs ago it was 99 cents/gallon here.
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Originally Posted by zguy95135
I'd be happy, even joyful if premium was $3.67. I filled up yesterday at $4.11 a gallon, and that was cheap
i just filled up at that price too.. the cheaper shell station that was at $4.05 was shut down, maybe ran out of gas?
#23
Safety Car
Originally Posted by CorvettePoor
Uhhhh...You couldn't buy a gallon of gas for 89 cents 10 years ago...Maybe 30 years ago.
#29
Pro
Just throwing this out there for another perspective on current gas prices.
http://www.cato.org/pub_display.php?pub_id=6440
Gasoline Prices in Perspective
by Jerry Taylor and Peter Van Doren
This article appeared in Investor's Business Daily, May 17, 2006.
America appears to be in a state of wild-eyed panic about the rising price of gasoline. Talk radio hosts and T.V. populists apparently think that mass riots are imminent and that whole cities will burn unless politicians do something to save America from the long, dark economic night that is descending upon us.
In truth, gasoline prices today are taking less of a bite from our pocketbooks than has been the norm since World War II.
Jerry Taylor and Peter Van Doren are senior fellows. Peter Van Doren is also editor of Regulation magazine.
For instance, let's look at 1955, a year most of us associate with big cars, big engines, and cheap fuel – automotive glory days, as it were. Gasoline sold for 29 cents per gallon. But one dollar in 1955 was worth more than one dollar today. If we were using today's dollars, gasoline would have cost $1.76 per gallon in 1955.
Gasoline now costs around $3.00, so we are worse off than in 1955, right? No. Because we were poorer in 1955 than we are today, $1.76 then had a bigger impact on the pocketbook (that is, it represented a larger fraction of income) than $1.76 today. If we adjust gasoline prices not only for inflation but also changes in disposable per capita income (defined as income minus taxes), gasoline today would have to cost $5.17 per gallon to have the same impact as 29 cents in 1955.
Let's pick another year we associate with low gasoline prices – 1972, the year before the Arab oil embargo. Gasoline was selling at 36 cents per gallon. Adjusted for inflation, however, the price was actually $1.36 in today's currency. Adjust again for changes in disposable per capita income and the price would have to be $2.66 per gallon to have equivalent impact today.
Were we better off then when we rolled into the filling station in 1972 than we are today? No, because our cars get 60 to 70 percent better mileage today than in 1972 (22.4 miles per gallon versus 13.5 miles per gallon). That more than offsets the 10.5 percent increase in gas prices adjusted for change in inflation and income from then to now.
Now let's look at 1981, the year Ronald Reagan took office. Gasoline sold for $1.38 that year, the equivalent of $2.74 in today's currency. Adjusting for the change in disposable per capita income, prices would have to be $4.30 today to have an equivalent impact.
There are probably three reasons that gasoline prices appear so high to us today. First, many don't fully appreciate the long run effect that inflation has on prices. Second, many don't appreciate how much our incomes have increased relative to prices. Finally, we still remember 1998 very well, the year in which we encountered the lowest gasoline prices since 1949. Gasoline in 1998 sold for $1.03 per gallon, the equivalent of $1.21 in today's currency. Adjusting for growth in per capita income yields a price of $1.35 per gallon in today's terms. Today's price is more than double that and people resent the increase over the last several years, in part, because they think that 1998 prices were normal. But they were not.
Now let's put the recent price increase in terms of real outlays. The average household is spending $136 more on gasoline every month than it was in 1998 and $114 per month more than it were spending in 2002. But, believe it or not, real (inflation-adjusted) disposable income per household has increased even faster than have pump prices; by $800 a month since 1998 and $279 a month since 2002.
Accordingly, Americans are still, on average, economically ahead of the game.
No one likes high gasoline prices. But they are not as bad as most people think. Keep that in mind the next time some politician or media populist starts handing out the pitchforks.
http://www.cato.org/pub_display.php?pub_id=6440
Gasoline Prices in Perspective
by Jerry Taylor and Peter Van Doren
This article appeared in Investor's Business Daily, May 17, 2006.
America appears to be in a state of wild-eyed panic about the rising price of gasoline. Talk radio hosts and T.V. populists apparently think that mass riots are imminent and that whole cities will burn unless politicians do something to save America from the long, dark economic night that is descending upon us.
In truth, gasoline prices today are taking less of a bite from our pocketbooks than has been the norm since World War II.
Jerry Taylor and Peter Van Doren are senior fellows. Peter Van Doren is also editor of Regulation magazine.
For instance, let's look at 1955, a year most of us associate with big cars, big engines, and cheap fuel – automotive glory days, as it were. Gasoline sold for 29 cents per gallon. But one dollar in 1955 was worth more than one dollar today. If we were using today's dollars, gasoline would have cost $1.76 per gallon in 1955.
Gasoline now costs around $3.00, so we are worse off than in 1955, right? No. Because we were poorer in 1955 than we are today, $1.76 then had a bigger impact on the pocketbook (that is, it represented a larger fraction of income) than $1.76 today. If we adjust gasoline prices not only for inflation but also changes in disposable per capita income (defined as income minus taxes), gasoline today would have to cost $5.17 per gallon to have the same impact as 29 cents in 1955.
Let's pick another year we associate with low gasoline prices – 1972, the year before the Arab oil embargo. Gasoline was selling at 36 cents per gallon. Adjusted for inflation, however, the price was actually $1.36 in today's currency. Adjust again for changes in disposable per capita income and the price would have to be $2.66 per gallon to have equivalent impact today.
Were we better off then when we rolled into the filling station in 1972 than we are today? No, because our cars get 60 to 70 percent better mileage today than in 1972 (22.4 miles per gallon versus 13.5 miles per gallon). That more than offsets the 10.5 percent increase in gas prices adjusted for change in inflation and income from then to now.
Now let's look at 1981, the year Ronald Reagan took office. Gasoline sold for $1.38 that year, the equivalent of $2.74 in today's currency. Adjusting for the change in disposable per capita income, prices would have to be $4.30 today to have an equivalent impact.
There are probably three reasons that gasoline prices appear so high to us today. First, many don't fully appreciate the long run effect that inflation has on prices. Second, many don't appreciate how much our incomes have increased relative to prices. Finally, we still remember 1998 very well, the year in which we encountered the lowest gasoline prices since 1949. Gasoline in 1998 sold for $1.03 per gallon, the equivalent of $1.21 in today's currency. Adjusting for growth in per capita income yields a price of $1.35 per gallon in today's terms. Today's price is more than double that and people resent the increase over the last several years, in part, because they think that 1998 prices were normal. But they were not.
Now let's put the recent price increase in terms of real outlays. The average household is spending $136 more on gasoline every month than it was in 1998 and $114 per month more than it were spending in 2002. But, believe it or not, real (inflation-adjusted) disposable income per household has increased even faster than have pump prices; by $800 a month since 1998 and $279 a month since 2002.
Accordingly, Americans are still, on average, economically ahead of the game.
No one likes high gasoline prices. But they are not as bad as most people think. Keep that in mind the next time some politician or media populist starts handing out the pitchforks.
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if the gas prices would drop people would travel more in return be buying more things raising the economy,
most of all i would be able to afford the little things in life that i cant right now due to gas prices
most of all i would be able to afford the little things in life that i cant right now due to gas prices
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Originally Posted by Mokos23
dang, when clinton was president, gas was really low! we need a democrat back in office asap!!
Everyone seems to think the President can wave a magic wand and make it all better...
#34
Senior Moderator
Originally Posted by vetalik
fuckyoubush
#36
Originally Posted by fsttyms1
He has nothing to do with it. Talk to India and China if you need someone to blame. Talk to the tree hugger's that lobby so hard to prevent us from drilling for our on oil and using nuclear power.
The best thing I can say about the French, they get like 90% of their power from Nuclear Power. Now they're smaller than Texas but we need to get on the stick. We burn way too much natural gas and coal for comfort power.
Also I heard the other day that they have found a pretty good amount of oil under ND and Montana.
http://www.allheadlinenews.com/articles/7010615007
#37
My first Avatar....
Originally Posted by fsttyms1
He has nothing to do with it. Talk to India and China if you need someone to blame. Talk to the tree hugger's that lobby so hard to prevent us from drilling for our on oil and using nuclear power.
BTW - does it still actually cost around 6 bucks to pump a barrel out of the sand, package it, and ship it?
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Originally Posted by Yakuza70
I just paid over $55.00 to fill up at $4.15 a gallon for premium. Of course, in the near future we'll be reading all about the record breaking profits by the oil companies.
It's a big industry with big volumes. As a percentage of revenue the oil companies pale in comparison to banks and pharmaceuticals. Exxon-Mobil operates at approximately 9% profit.
By comparison, Citigroup is around 16%, Marlboro is around 22%, and Merck is around 25%.
For instance, in 2004 Exxon Mobil earned more money -- $25.33 billion -- than any other company on the Fortune 500 list of largest corporations. But by another measure of profitability, gross profit margin, it ranked No. 127.