Much Ado About Gas Prices

markmcb writes "It seems that a week cannot pass without finding big news about gas prices. They're up, they're down ... but why do we care so much? OmniNerd posted an article that aims to put gas prices in perspective. The author takes a look at other commodities and their price variances and applies some simple math in order to make the claim that best-gas-price-hunting is an effort that could be better used on other products. From the article, 'Why the disproportionate emphasis on gas prices in our culture, then? Although some cite a failure of politicians or media populists to account for inflation and purchasing power changes, I think it is simply because gas prices are in your face.'" IMO, the other side to the price of gas is that, especially in developed countries, it has a pervasive effect throughout all layers of the economy — food prices (because of the trucking), schools (busing), etc., etc.

Comments

To really put things in perspective..

[avij]

The average price for a gallon of gas in that article was about $2.90, give or take a few cents.

Here in Finland a litre of 95 octane gas costs about 1.263e (1.295 for 98 octane and 1.008 for diesel).

1.263e / litre = 4.7809751e / gallon = $6.04697 / gallon

And you are complaining that gas prices are high? Well, at least these prices are a good incentive for me to use public transport..

Re:To really put things in perspective..

[jrumney]

It's just different ways of measuring octane. US 91 octane is the same as 95 octane in Europe. Europe uses the Research Octane Number (RON), US uses an average of RON and Motor Octane Number ie: (RON + MON) / 2

Re:To really put things in perspective..

[hab136]

Yes, the huge shopping malls located far away, and the lack of public transport is just the result of having really cheap gas for a couple of decades.

Once the american society adapts to the fact that driving 1 mile might cost 1 dollar, then the malls will be smaller and closer, and the cars will be more efficient.

After WW2, the federal government gave out subsidized/guaranteed mortgages (GI Bill) to tons of veterans and their families, but basically forced you into the suburbs (if you were white; if you were black, you could only get a mortgage in the city). The current suburbia is the result of this and other government policies. Cheap gas certainly helped, but was not the motivator.

Ah, here's a reference: "the five years after V-J Day, eight million returning vets made use of the bill's educational provisions, while the bill's loan guarantees brought home ownership within the reach of five million vets, resulting in the explosive development of suburbia. Humes is alert to the G.I. Bill's failures as well. For example, black vets were shunted into vocational training rather than college and were systematically redlined away from the new suburbs."

By the way, if european cars get better mileage, why not buy a european car??

They're not legal in the US. They would pass the required safety/emissions tests, but have to go through the paperwork first.

There are specialty dealers that will import non-US cars for you, doing all the paperwork, but it's so expensive that it's not worth it unless the car is >$100k or so.

Hogwash

[gr8_phk]

the claim that best-gas-price-hunting is an effort that could be better used on other products

I'm not a gas-price-shopper, but I know several people who are. It actually takes zero time to do since you're driving past all the big price signs on the way to and from work every day. To say the effort could be better used somewhere else is silly. Sure, people should make an effort for other products, but that would require... effort!

It's That Tenths of a Cent Thing

[moehoward]

The same ridiculous politicians who whine about gas prices are the same ones who allow it to be priced in tenths of a cent. I just find that rather humorous. Maybe because it is also the same politicians who are crying to get the penny taken out of currency circulation.

Anyway, all the space on those gas station billboards being take up by "9/10s" could be put to much better use advertising cigarettes.

To sort of answer the question, though, rising gasoline prices act like a tax in the economy, not inflation. Inflation is defined as an increase in available cash in the economy, usually as the result of the govermnet putting more of it there to cover rising prices. Gas is a rare economic beast because it is involved in the price of EVERYTHING you pay for due to transportation costs. And also it is non-elastic in a major way.

Verbose Article That Misses the Point

[organgtool]

I give the author credit for doing his research and coming up with the math, but I think he completely misses the point. He asks "Why the disproportionate emphasis on gas prices in our culture, then?" Maybe because:

• Gas prices at one point had nearly quadrupled in my area in a four year period
• The long-term oil supply is diminishing
• Developing countries are using more oil
• Americans have been buying larger vehicles that consume more fuel
• Oil has uses other than powering our vehicles, such as heat and manufacturing

All of the items I listed are driving up the price of oil and the only situation that seems to be improving a little is that some Americans are buying vehicles that get better gas mileage.

Here's the reason for the penny-pinching

[Se7enLC]

The article basically says that if you put effort into comparing prices of every other purchase, you could save a lot more money. Here are some of the reasons why people shop for good gas prices and not other things:

1). Everyone needs gas. A lot of it. Sure we all need red peppers, but not $50 a week in red peppers. The more money something costs and the more frequently we buy it, the more inclined we are to want to save money on it. And the more value. If you save $1 every time you buy 3 red peppers, is that really going to add up? You'd have to be a red-pepper fiend...

2). Convenience. If Shaws, Stop n Shop and Market basket all posted the price of the items I typically buy on GIANT SIGNS I CAN READ FROM THE ROAD, I'd be much more likely to pick one store over another for that product. As it stands, by the time I get out of my car, get into the store, get a cart and go up and down the aisles to find what I need to buy, there's no way I'm going to go to another store to save 10 cents, or even a dollar. If I'd known before going in, I might have, though. I personally spend more money on gas than groceries, so it still makes sense.

3). Free Money!. Cashback bonus cards give you money. It's free. Why wouldn't you want free money?

very sensible

[purplelocust]

This is consistent with what I observe- people spend too much time worrying about getting the lowest gas price, when there are many other fronts on which it would make much more sense to optimize. There are people who cross the George Washington bridge from New York to New Jersey to get gas at a lower price, when the cost of the bridge toll ($5) is typically well more than the savings (30 gallons of gas at $.15/gallon cheaper = $4.50, for example, and it is practically never a 15 cent difference or more)

Some years ago, I remember a widely quoted congressman who was arguing against raising the US postage rate from $.25 to $.30 (they ended up raising it to $.29.) My belief was that it would be sensible to have $.30 postage, with $.25/additional ounce, to make the computations easy, and that it was ridiculous to have a $.29 postage rate with a $.23 marginal rate beyond the first ounce (how many people know their multiples of 23 and want to add them to 29?) The argument was the congressman made, which apparently resonated well, was that "people will drive halfway across town to save a penny on a gallon of gas (it was the late 80s or so) so we should do the same with postage." This pointed out several things vividly to a young me:

1. people/congresspeople do not understand the difference in discrete and continuous commodities (stamps and gas)
2. an argument doesn't have to make much sense for it to resonate with many people

Pump Fraud

[Savage-Rabbit]

This article is just a very vigorous proof that you're an idiot if you spend any time at all searching for the cheapest gas. We all know that some gas stations don't follow the unspoken price rule where you don't undercut your competitors and they won't undercut you. Some people must feel very smart finding those gas stations. How much gas they waste getting to them might be interesting to compute also. Oh well, as long as it makes you feel good inside.

Strong words...... but there is a grain of truth in them. Price fixing is not the only scam. Apparently some gasstation owners advertise lower prices on gasoline than average and then short change bargain hunters at the pump. The customer thinks he is paying a bargain price for a gallon of gas but in reality the pump only spews out a portion of a gallon and with fuel level indicators in cars being as inaccurate as they are most people don't notice they are getting ripped off. The only thing these guys have to watch out for while they rake in the money is the odd customer who has come to fill their Jerrycans and 'Dept. of weights and measures' inspectors.

Obvious: 1) commodity, 2) good information

[dpbsmith]

I believe it is the law (i.e. state law, but similar in most states) that gas stations post prices.

We have an unusual situation here in that we have a commodity product--despite advertising efforts to the contrary, few motorists truly believe that it matters whether they buy Shell or Exxon--whose price is very easily compared.

One of the odd features of life in the last few decades is that it is now apparently relatively cheap for companies to launch new products and product variations, and the result is that it is fairly hard to compare prices because it is fairly hard to find exactly _the same_ product in two different stores. The stores that promise to match other stores' advertised price on "the same" product are on fairly safe ground. Two supermarkets may both carry Jif peanut butter, but store A may carry Jif Peanut Butter and Honey but not Simply Jif while store B may carry Simply Jif but not Jif Peanut Butter and Honey. If they both carry the same product, they may not carry it in the same size; store A may carry Jif Crunchy Peanut Butter in the 18 oz and 40 oz size, while store B may carry only the 28 oz size, and so forth.

My state requires unit prices to be posted on shelf labels, and even here the waters are muddied because it is very common to find that adjacent products on the shelf are unit-priced using _different units_ (fluid ounces vs. gallons, etc.)

Generally speaking, it appears as if companies fight commoditization tooth and nail by doing everything they can to withhold real information from consumers and sell "the sizzle" instead. Whether the proliferation of huge numbers of product variations is a deliberate strategy to avoid price comparison I don't know, but it has that effect and I'm sure that corporations find it to be beneficial.

Gasoline prices are one arena where information is available--as a result of government regulation, I believe--and you have something approaching a free market.

Even here, of course, deception is possible. The Boston Globe recently reported that a number of gas stations have taken to calling 89-octane gasoline "regular" and 87-octane gasoline "economy" in hopes that inattentive consumers will inadvertently purchase a more expensive grade of gasoline than they meant to.

(I say "something approaching" because, at least where I live, the number of brands of gasoline has dropped dramatically in the last twenty years, the number of independent stations relative to company-owned stations has dropped, and the percentage price difference between the cheapest and most expensive gasoline in the stations I drive by regularly has narrowed very considerably).

Gas Guzzlers

[Doc Ruby]

Oil still costs about $12:bbl to extract from the ground, and deliver to the refinery as it did in 2001. It still costs the same to refine it to gas and deliver it to your pump. But oil costs about $75 now, not $25. That means that we're not looking at just a tripling of price in 5 years, but rather almost five times the profit. While the rest of the country's economy, except for these energy corporations and banks, is stagnant or shrinking.

When the biggest corporations are having the best years of their lives at the expense of the people having some of their worst years, we should be hearing about it. We should be hearing about it even more. Speaking of hearings, when Congress has hearings on the subject, they should put these oil corporation tycoons under oath, but they don't. The CEO of Exxon/Mobil who was given the photo op for lying to the Senate was then given a $400 million bonus when he retired.

Oh yeah, people talk about that, especially when they get laid off. In a decent country, people would be talking about how those abuses led to the American oil/gas cartel getting broken up and reined in.

Re:Exxon Mobile

[AaronDunlap]

I remember when Exxon Mobile reported the largest profits ever received by a company in a single quarter. While they were raking in that dough, they were telling me that hurricane Katrina and the war had left them with no oil at all. They warned me gas prices were going to go up. Then why the hell did they make record profits?

It's because oil companies like Exxon make investments decades out... Over the past couple decades, the assumption was oil priced around $26-$32/barrel.

At twice that price, it's no mystery that revenues are much higher than anticipated.

The recent run up in prices & the severe price volatility are an anticipated result of demand meeting supply. There are no marginal oil supplies left over.

Suffice to say the short-term price changes disolve when viewed on a longer timeline. Adding $20 per barrel/per year is the real story here. And for all that, gas is still cheaper than milk... or water... or beer.

Take my word for it... this is nothing. Our planet extracts more oil today, than ever before in human history... 80+ million barrels per day! With no new "super-giant" oil discoveries on the horizon, and red-hot demand for oil around the planet... well...

We live in interesting times...

Re:Eh hem, size matters.

[GreyPoopon]

Add to this the fact that our society is pretty damn car-centric, and you have something that is really on the minds of everyone.

Too true. For many of us driving is mostly non-discretionary, which means it's very difficult to cut back in order to save money. It's like food. In order to get to work, we have to drive. It's not like clothing, where you can stretch out the current wardrobe a little longer before you have to replace it. Some people (particularly my colleagues in Europe) will argue that we should take public transportation. But in most of the US, public transportation is not really an option. In my case, my job makes my schedule unreliable, so I can't carpool with others. The distance from home to work is 35 miles and takes the better part of an hour to drive. I did some research and found a way to get there via public transportation, but that would take about 2.5 hours with multiple bus changes and a total price higher than what it costs to drive. I just can't imagine paying more to spend 5 hours commuting each day. Some suggest that I move closer to work, but with the housing boom over the last few years I can't afford more than a crackerjack box anywhere near where I work. I don't drive any more than I have to, but it still costs me in the neighborhood of $40/week. My wife has a similar situation but without quite as much driving. We have reduced the fuel budget about as much as is possible. But regardless, our budget is definitely feeling the $150 extra per month we have to pay.

Re:Eh hem, size matters.

[phulegart]

Yes, it often happens in the political discussions when a moderator disagrees with you as opposed to when you are actually a troll, redundant, or off-topic, and would rather see your post have a zero so fewer people can see it, instead of intelligently debating with you.

In other words, exactly how your post should have been modded? I mean, considering it is of topic and should be seen by as few people as possible... especially considering how your post is a response to someone's SIG, and not even their post.

However, On the topic...

Comparing gas prices to other commodities seems to be a little odd. Let's say Mr. Smith has a car with a 15 gallon tank. In the Heyday of only a dollar a gallon, that was a nice tidy, simple $15 dollar fillup. Today, at $3.30 a gallon, that's $49.50. Ok, that's only an increase of $34.50. But back in creaky old 1998, when you could still get Gasoline for under a buck a gallon... EVERYTHING else did not also cost 3 times less than it does now. We don't make 3 times as much money now as we did in 1998.

Of course, how many times you have to fill your tank every week depends on a huge number of factors, so that answer is going to vary greatly from person to person. But now, paying that additional $30+ per fill up really adds up. At a modest once a week fillup, that's more than $120 per month additional. Twice a week, $240. Three times a week, $360. For all the people who were just scraping by... those people who did not make oodles of extra cash per month, higher gas prices mean less money for other things, like food.

Gasoline ranks pretty high in the priority list too. YOu need to pay your Rent, so you can keep an address and a job. You have to pay your utilities so your alarm clock can continue to get you up on time for that job. And then there is Gasoline. You need to make sure you can get some, so you can continue to get to work, as well as go get groceries, as well as try to find a cheaper apartment to live in, etc...

That 3x modifier also applies to home heating oil too. Except it was a much sharper rise in a much shorter period of time. What used to cost a homeowner $800 to heat the home for just the winter, now costs more than $2400 for that same, short, 3 month span. And in the worst month, January, when that same Homeowner would be looking at two 200 gallon tank fillups (once at the beginning of the month, and once near the end of the month) what used to be $400, is now $1200. Ask any homeowner. Coming up with an additional $800 in January is never easy. The worst part about home heating oil as well, is that this price of just around $3 per gallon, is the off season price. That's the price if you PRE_PAY for your fuel ahead of time. If you have to call and pay for that Oil delivery in the winter time, as opposed to planning for it, it will cost you even MORE.

Who the hell can afford to have to make the equivalent of ANOTHER house payment every year? Who can afford to have their car insurance double (or even triple) in price per year? Because that is what paying these prices for Gasoline, Diesel, and Heating Oil are doing. Only filling that 15 gallon tank in the car one a week? You are paying $1440 more a year now than in 1998. Twice a week? $2880 more. Did your wages triple as well since 1998? Did you even get the equivalent of $3000 in raises between then and now? Do you pay triple in rent (or in mortgage payments) now, as opposed to less than a decade ago?

Of course, the killer is that although gas prices have tripled, we still have 6 states in the US that do not have ANY minimum wage regulations. http://www.dol.gov/esa/minwage/america.htm Arizona, Louisana, Mississippi, Alabama, Tennessee, and South Carolina. Back in 1998, you could and DID find jobs that paid $4 or $5 an hour (not some backwoods ranch hiring stall muckers... I'm talking about mainstream jobs in major cities like Phoenix

Re:Eh hem, size matters.

[Anonymous Coward]

Suso> "And the media makes it a big deal because the status quo for intellegence is not very high. Average Joe customer simply sees things on the surface and doesn't do any deep thinking"

Isn't this a generalization and a sweeping falsehood? Replace "average Joe" with any ethnic group and you are a racist. So who exactly is this "average Joe"? Could you be more specific?

Once again the slashdot elitist attitude rears it's ugly head.

Your SUV is ruining my air.
If you voted for Bush you are uninformed or an idiot.
We must do something about global warming even if it isn't caused by us, just in case.
Bush is the worst terrorist on the face of the planet.
Bush is in Iraq to keep oil prices low for Americans.
Bush is in Iraq becuase of his interest in oil and the money he makes.
Bush is in Iraq because he is paid by weapons manufacturers.
Bush is in Iraq beacuse his daddy failed there.
Christians and Muslims are the same because the Christians had the Crusades around 1100 A.D.

I don't believe any of the above, but I do think it is ironic that the Pope implies that the Muslim religion is violent and out of outrage over such a falsehood the muslims blow up a bunch of churches. LMAO. Way to prove a point.

Transit

[Mark_MF-WN]

The answer should be obvious: tax gas to cover the cost of roads and their management, privatize transit, and let the transit company control the land surrounding bus stops and rail stations. This gives the transit company motivation to build lots of access points in convenient areas, develop the land in those areas to provide amenities to commuters as well as a healthy revenue stream. You turn transit from an inconvenient burden on the public into a tax-paying, job-creating, economy-building way of getting around cheaply.

Re:Dirty Cities?!

[Anonymous Coward]

You're aware, are you not, that people living in metropolitan areas ... [T]he odds of being the victim of a violent crime or a property crime are also much lower.

Bullshit. I'd like to see your references. I have lived in many big cities and the closest one that I have seen to having crime rates that are even close to being the same for the metro area and suburbs is Seattle. The worst that I've seen is Charleston, SC.

But even the Seattle metro area has auto theft rates that are about 5 times higher than its suburbs. Of the 20 or so murders we've had in this area this year, 15 have been in the metro area. The suburbs of Seattle outnumber the metro area 6 to 1. And Seattle is a safe city. Don't make me mention Philladelphia.

Chicken and Egg

[simpl3x]

Which came first, a country who gutted it's public transportation system, or long commuting times when using public transportation?

I ditched my car two years ago, with the intention of moving back into the city, and relying upon public transportation. Two thing I have noticed are: when I do drive -- borrow a car -- traffic seems to be getting much, much worse. And secondly, public transportation slows everything down. It takes a hell of a lot longer to live my old life!

Your experiences match with mine, and I have really tried to make accomodations to ensure that I can get things done, But damn, do I miss driving sometimes. I have been considering a "car rental" program to supplement this need. It is very hard in todays society to function without a car, though we have only ourselves to blame. Europe functions much differently on a personal scale.

I donot however miss the car costs, or frankly sitting in traffic. Damn that is stressful.

Re:Eh hem, size matters.

[sgt_doom]

Well the deep thinking of this "average Joe" has yielded the likely supposition that gas prices will stay level or continue to drop the closer we get (in America) to the November elections.

1 giga$/penny-year

[dotmax]

This is going to disappear in the flood of responses but... Earlier this year i calculated a back-of-envolope value... a 1 penny/gallon increase in gas price for a year is _about_ $1 Billion dollars per year unavailable for US consumer spending. It's actually a little higher, but close enough. FYI. .max