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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.
Perhaps the size of the price sign is what matters. Gas prices are shown in large high contrast fonts on every street corner. The price sticker on a bottle of shampoo is less noticeable or sometimes not noticeable at all. You just pick it up and put it in your cart.
In mathmatical terms, figuring that the price sign at a gas station is about 6 feet by 4 feet, and the price sticker on a shelf for a bottle of shampoo is 2 inches by 1 inch, the gas station sign is about 1,728 times larger and thus more emphasis is placed on the price of gas.
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..
Follow your Euro bills at EBT
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.
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?
What I would like to read an article about what the hell happened with the congressional hearing that was supposed to investigate Exxon Mobile? And we're subsidizing gasoline companies through preferential tax codes? Am I the only person wondering what is going on here?
My work here is dung.
The other main reason for the focus on gas prices: the short-term demand is not affected substantially by changes in price. Thus, these changes must simply be absorbed until technology or capital investments can catch up with the changes. Price volitility further compounds the problem because of the high capital costs of changing behaviors to converse gas, meaning those investments are unlikely to be made unless the price variations are percevied as indicitive of lenger term trends.
The point that wasn't put forward so well in the article is that the Gas price can change everything.
Your shopping for example will go up in price as it costs more to transport it. Your electricity/gas at home can go up in price too.
Gas prices is one of those easily understood metrics that happens to affect everything we do (in developed countries).
--Rob
Towards the Singularity.
Because pointing out a 40% jump in gas prices is startling to people who are bad at math and don't track their expenses very well?
Maybe if they made headlines like "gas prices jump enough to force you to cut back on 1 Starbucks grande per week to break even!" people would understand the implications a little better?
The reason we care so much is that many of us spend more on gas than any other commodity. We consider it as essential as food. And its price varies wildly from season to season. I spend roughly $300 US each month on gas currently, and when it was higher you bet your ass I cared that I was spending an extra $50 a month.
Expect gas prices to continue to decline up to the November elections. Oil companies will forgo the profits short-term in order to give oil-friendly Republicans a better shot at the polls.
After the election, look for a price spike, probably blamed on increased heating demand and Middle East instability.
And no, you can't have my tinfoil hat.
As Americans, we are spoiled!
We are accustomed to cheap gas and all its by-products (heating oil, propane, electricity, etc.) for some time now. So much so, that we take it for granted. On top of that we extend ourselves to the max, getting credit cards and running up debt like crazy. So, when all of sudden this cheap energy source doubles in price and now stresses everyones budget, we scream foul. That is why gas prices are so closely watched and such a hot topic. We can afford the spike. Other countries have dealt with high energy prices by promoting mass transit, build more efficient cars, etc. But we just can't relate.
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.
"If you want to improve, be content to be thought foolish and stupid." - Epictetus
Gas prices are driven because of the spot market on oil, and the way it's basically a "futures market".
American consumers don't have to deal with the extreme volatility that is involved with such a rampantly speculative market on a day to day basis, EXCEPT when it comes to gas prices. This makes them a lot more visible than other speculative swings.
I'm a fiscal conservative, it's a pity we don't have a political party anymore
It's not so bad, prices are set to decline and stay 'lower' for a while... like until November.
Nothing like an election year to get incumbents to make hot ticket issues temporarily disappear. Also, expect a sharp rise in fuel costs come December due to a "heating oil usage spike" and "conversion to winter fuels" coupled with the "winter travel season" and rise in demand from "winter recreation vehicles". You likely won't see "lack of political pressure" as a reason for higher prices though.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
I can't believe people aren't figuring this out.
It's election season, dumbasses, they're lowering prices to help out their buddies in Washington.
how much gas did he waste by driving around to different stores to do this article? It's rather simple: 1. Combine trips to stores. 2. Use the bus/public transit for work commutes. 3. Use something like pittsburghgasprices.com (my area) to find the cheapest gas within a 5 miles radius. Check frequently. 4. Don't drive your car like you stole it. See a red light far up ahead? Coast into it. I have two vehicles, use the bus to commute to work, and consolidate my trips as much as possible. I fill up each vehicle every month and 1/2. Gas prices stopped bothering me once I got these habits down.
http://www.CelloFourteGroupie.net
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.
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?
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:
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.
Only to idiots, are orders laws.
-- Henning von Tresckow
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).
"How to Do Nothing," kids activities, back in print!
Why the disproportionate emphasis on gas prices in our culture, then?
The American psyche is centered on the idea (illusory or not) of freedom. And we have attached to that idea the symbol of the automobile. We have, as a culture, over the last 50 years or so, begun defining people by the car they drive. Men in minivans are whipped. Women in SUVs are lesbians. Everyone in a sports car is either wealthy or glamorous (depending on their state of obesity) or both. Big comfortable cars are called "luxury" cars (and have luxury prices). The prius is the end all be all of environmental conservatism now. But we have the car fixed in our collective psyche as a must have of american culture, and necessity of any life (and in cities with rotten public transport systems, it is). That necessity status that cars have is what makes gas prices so ubiquitous in our world. Higher gas prices are big oil attacking our freedoms, limiting our range and mobility, and status. Lower gas prices widen these things.
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.
--
make install -not war
Companies set prices by margins. You pay X for your supply, mark it up Y% margin, and profit Z when you sell it. It doesn't take a genius to figure out that when the price of X goes through the roof, Y% stays the same (which it did in the oil business, margin was around 10% which is actually lower than many industries), then Z goes up as well.
People who complain about this are either ignorant or anti-capitalist. Just be honest about which one it is.
Would you pay the taxes to subsidize the petroleum indestry, so they only have to charge you $3/gallon at the pump?
TFA: According to the Energy Information Administration, the average cost of gas in the U.S. that year was $1.85 per gallon of regular grade4 and the average gas mileage of a new, light-duty vehicle was 21 mpg
Okay, forget the rest of the damn article. Amercia, your problem is right there: MPG.
Whilst American cars struggle to reach 25MPG, the average MPG of a European car is over 40MPG (source).
How can the country that has MIT have such crappy MPG? I mean, aren't you chaps utterly ashamed of your engineers? Forget saving money, just bring it down to technical prowess. Why aren't American engineering nerds hanging their head in shame?
I have a 4x4 SUV that does better than 25MPG, not just on the motorway and country lanes, but on crowded higgledy-piggledy British towns. And it's a stupid 4x4 that I only really need in the winter! My mother's sporty saloon car does 45MPG. My wife's Volvo (read: APC with upholstery) does 35MPG. What the hell are you Yanks driving to need that much fuel per mile? Do you just grab a fire truck and bolt a couch to it, or what?
(Even given 1 Imperial gallon = 1.2 US Gallons, your MPG still sucks, Amercia)
Andrew Oakley - www.aoakley.com
Diesel angines actually have a much flatter torque curve than gas engines. The reason they have always had more gears is because their RPM range is more limited.
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.
The only incompatibily is natural rubber fuel hoses (phased out 20 years ago for economic, not green reasons), which biodiesel tends to eat away.
In hot climates, B100 is pretty much a drop-in replacement, with one catch: it'll eat away built up corrosion from years of petrodiesel, causing your fuel filter to clog up initially.
Straight vegetable oil (SVO) works as a fuel, but needs to be at high temperature to have the necessary viscosity, and engines need to be modified with heaters. We fix that by transesterifying it with methanol and turning it into biodiesel. This still doesn't have the cold weather ease of use of petrodiesel, though.
The only major issue with pure biodiesel is that its gel point is in the neighborhood of 25-30F, resulting in fuel lines that clog. For people who will be operating in subfreezing weather for significant amounts of time, various additives are available, including basic petrodiesel (this is why B20 is so much more prevalent in the US than B100). For subfreezing weather over an entire season, an electric heater system is highly recommended - there are already products available tailored to extreme low temperature petrodiesel use.
People in Soviet Russia, however, appear to be afflicted with amusing juxtapositions of the aforementioned situation
It's pretty clear that the oil companies are plotting to help their good friend Deborah Pryce (and the Republicans generally) in Ohio, but I don't quite follow how they arrange that.
This is the left's version of intelligent design. Gas prices can't possibly be a result of decentralized market forces, there has to be a secret cabal determining what to charge in order to help Republicans win elections. Gas prices fall every single year at the end of summer. They've fallen especially rapidly this year because many events feared by speculators (such as hurricanes and war with Iran) failed to materialize.
How to solve most of our problems: 1.Lots of nuclear plants. 2.Cure aging.
This is referred to as "zone pricing." It is a prime example of how oil companies are gouging
Good grief. I suppose it's also "gouging" when a house in San Jose costs more than an identical house in Peoria. The same people who claim gouging when gas stations have different prices would be screaming "collusion!" if the prices were always identical.
How to solve most of our problems: 1.Lots of nuclear plants. 2.Cure aging.
Gas prices have gone nowhere but up since Bush took office.
I always hate to interrupt a good Bush-bashing session with facts, but take a look. Gas prices fell quite a bit during the 80s, stayed relatively constant for a while (but note the sharp increase toward the end of the Clinton administration), fell during the first few years of the Bush administration (even after 9/11, which should have been a prime gouging opportunity), and only rose significantly after the Iraq war and last year's hurricanes. Also note that prices peaked right before the 2004 election, which is inconvenient for the "Big Oil manipulates prices so Republicans win" theory.
The President does not control gas prices. Or much of the economy at all, for that matter.
How to solve most of our problems: 1.Lots of nuclear plants. 2.Cure aging.
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.
Work accounts for 50% of my gas usage. My car gets 31mpg on average(requires premium gas however) and is a car I enjoy very much, so i don't feel the need to change cars.
Whats the next suggestion, stop doing things on the weekend?
Bottom line is that gas prices matter, and I do my best to keep costs down. Hence the 31mpg car, buying gas from the cheaper stations, and using a cash back credit card(5% on gas purchases) and paying it off before any fees or interest are applied.
I think its funny that people can very easily say "oh move closer to work", "get a job closer to where you live" or "just buy a more fuel efficient car" as though any of those things actually translate to overall savings. Buying a new car would cost me more than I'd save. New house, holy crap even more. New job, ain't any jobs as good as the one I have now near home. Ultimately the people who suggest this kind of tripe either can't do the rudimentary math or are talking trash from the parents basement on a computer bought by their parents dollars.
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
Cars with 14 secs 0-60 don't sell in the US.
u el_co.html there)
It's more about what people buy than what can be engineered.
And don't get too excited about your SUV. Your SUV getting 25mpg (Imperial) is only 21.2mpg US.
So you're only the same as the US average you crap on. Well, if the average really were 21mpg. Which apparently it is (see updated link http://www.greencarcongress.com/2004/11/average_f
I do think Americans should value mpg more. But we don't require it in this country, so people don't.
When I needed an AWD car (so I wouldn't have to chain up in Tahoe), I could have bought an SUV cheap. I would have gotten 30% worse mpg, but even at $2.50 a gallon, I'll never get back the extra $15K I spent to avoid that. I can afford to spend more to get better mpg, but I can't expect all Americans to do it. They aren't in the financial position I am.
http://lkml.org/lkml/2005/8/20/95