Comment on my May 27 posting: On Thursday, May 28, prices started to rise at the end of the day to $2.75. Since then, there have been hikes to $2.85 on Tuesday and $2.95 today.
Thursday, June 4, 2009, 6:35PM: I haven’t been very helpful with the price hikes this week, but Bill has! Let’s reflect a bit on the past five weeks. We have gone from $1.99 a gallon in Standale on April 27 to $2.95 a gallon today. Why? First we have numerous reports of mild gasoline shortages in the Midwest. Good job, gasoline industry, in managing this vital part of our economy! Second, the rise in gasoline prices has mirrored rises in the price of a barrel of oil (almost $20 a barrel) and in the Dow (almost 700 points) since April 27. Yes, as I’ve written before, we are dealing with speculators again. The price is being influenced by people who are demanding oil and gas as investments, rather than as fuel. While in the long run, higher prices will inspire new and cleaner fuels, which I support, in the short run, just as we are digging ourselves out of recession caused in part by financial geniuses who bought and sold “default swaps” and other products they couldn’t afford to support, prices spiking to $3 could cause it all to grind to halt again, like it did last summer. Great. Hopefully these artificially high prices in Chicagoland will soon attract cheaper gasoline from other parts of the country.
I agree, speculators are a big part of this run up in gasoline prices. Are our political leaders unable to see that $4 per gallon gas was a major contributor to the economic collapse last year?
Look at it this way-You’re trying to provide for a family, you most likely have a mortgage payment each month and probably a car payment or two. The electric, natural gas and water bills arrive on schedule each month and we all have to eat. Add in high gasoline prices and you have a recipe for economic disaster.
Most people don’t have the luxury to work within walking or biking distance from their homes and unless they live in a large metropolitan area, they most likely do not have access to public transportation.
Therefore, gasoline has become a necessity, not a luxury. There should be some type of price control on the cost to the consumer.
When people have to choose between having gas to be able to drive to work to earn the money they need, and paying other bills, sometimes things like mortgage payments and especially discretionary spending get put by the wayside.
Yes, we need alternative ways to power our vehicles, but, in the meantime, since gasoline is the only viable alternative, we need to keep the price affordable to the average American. Otherwise, as I said before, we will have the same scenario this fall we had last year.
As Winston Churchill once said, “Those who fail to learn from history are doomed to repeat it.”
>So how high will oil and gasoline rise? Sanford C. Bernstein’s McMahon believes crude could reach $80 per barrel by next year. Last time oil hit that target, the price at the pump was about $3. Notoriously bullish energy analysts at Goldman Sachs (remember the $200-a-barrel prediction?) believe oil could hit about $85 per barrel, fueling the price per gallon of gasoline above the $3 mark.<
This is on my MSN homepage today, taken from an article there. So if oil reaches $80 THEN gas should be $3.00. The rest of this with the gas prices around here is just bullsh*t politics as usual. They can raise the price and there is nothing we can do about it period. I’ve gotta research something I saw over the weekend about some guy who had invented a 30 mpg car a looooooooooooooooong time ago (1930’s or 40’s??) and he was just an inventor, didn’t work in the auto industry. I’m tellin ya – the technology has been around for a very long time . . . they’re [the big wig money people] are just not done making money on oil yet.
For those that haven’t heard of it, the Dymaxion Car was a teardrop-shaped (least air resistance), 3-wheeled, rear-wheel (single) steering, 20 foot long, Aluminum bodied auto, designed by Buckminster Fuller in 1933 to achieve maximum output and service with minimum material input. It was about 6 feet tall (kinda like a big van), seated the driver and 10 passengers, weighed less than 1000 lbs., went 120 miles/hr on a 90 horsepower engine, and got between 30-50 MILES TO THE GALLON OF GASOLINE. Fuller referred to it as the “Dymaxion Car”, “Dymaxion Vehicle”, and “Omni-Medium Transport” since it was ultimately intended to go by land, water, or sky. Only three were ever built.
“Those who fail to learn from history are doomed to repeat it.”
It probably would behoove you to read the history of price controls and how they inevitably lead to product shortages & gas lines. You don’t need to go back to the 1970’s, simply look at what happened last fall down south around Atlanta.
As for the high gas prices now, there are pipeline issues contributing to the local (Michigan) gas prices being above average. Nationally, refinery utilization rates have plummeted to the low 80% range. This is substantially lower than it had been over the preceding year. Refiners are currently recouping the losses they sustained when the price of oil skyrocketed and they could not pass along the costs quickly enough to consumers. Several refineries are undergoing upgrades or downtime incidents as well. One of the Valero refineries is down and the timeframe for getting it back online is unknown. Lots can be learned from reading news releases from the companies.
As for solving the problem, the government has encouraged urban/suburban sprawl or at least not taken any steps to reign it in. As mentioned previously, it’s the fact that everyone needs to travel a long way to do anything useful, thus making petroleum fuels a necessity and not a luxury. If the government created the problem, it seems foolhardy to think they can solve it. I only trust the government to compound problems, rename them, and/or push them forward.
The best personal solutions involve:
– make gas a luxury for you and not a necessity
– purchase an efficient vehicle
– don’t speed up a red light then slam on the brakes
– put some of your own money into petroleum-based investments
Some ideas include: ETFs that track commodity prices (DBO, UGA) or buy a few companies that produce oil. Note: investing in refineries is tricky – they are cyclically profitable and it’s easy to get whipsawed when the earnings don’t look good. OIH is an ETF that tracks oil service companies (the ones that pump the oil out of the ground).
I don’t believe oil prices are a conspiracy – rather they are a result of people / companies following the rules and taking advantage of leverage they have over a commodity that has low elasticity (aka people can’t just stop “demanding” the product).