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

Eh hem, size matters.

[suso]

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.

Re:Eh hem, size matters.

[suso]

Another problem is that it's a big deal because the media makes it a big deal.

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. I remember hearing someone that I know say "I guess buying a diesel car is the way to go". No doubt he simply thought that because the price of gas on diesel cars was advertised as a few cents cheaper per gallon at the time. Now, its the opposite. And I don't know this for sure, but aren't diesel cars more expensive? If that's the case then you'd be losing money overall.

Re:Eh hem, size matters.

[Benwick]

Yes, and most people use about 14 gallons of shampoo for every three hundred miles they walk.

Re:Eh hem, size matters.

[GundamFan]

The trick with small block diesel engines is that they get a much better MPG rating on average so even if diesel fuel is more exspensive than gas per gallon you still come out ahead, plus most new diesel cars (VW Auto Group TDIs anyway) are being built to run on bio-diesel without any conversion.

Re:Eh hem, size matters.

[Alioth]

Thermodynamically less efficient? I beg to differ. Diesels have always been more thermodynamically efficient than petrol (gasoline) engines - even more so now with the most recent engines with refinements like common rail fuel injection.

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..

[grasshoppa]

Wish we *had* public transport to use.

Re:To really put things in perspective..

[GigsVT]

Would you pay $6/gallon for gas to support the taxes required for all those socialist services?

Re:To really put things in perspective..

[Don853]

I would gladly pay $6/gallon if it would get all the jackasses driving Yukons with one passenger off the road. The public transit would be nice, but it would require everyone to not live on 3/4 acre in a development 35 miles from the center of the city for it to be even plausable.

Re:To really put things in perspective..

[LaughingCoder]

I'll see your price-per-gallon math and raise you some proportional-area math.

The US is 3,537,438 square miles (land). Finland's is 305,470 (land). So, the US driver must cover 11.58 times as much area. Now that works out to a proportionate gas price of $6.04 / 11.58, or $0.52 per gallon.

Re:To really put things in perspective..

[lucabrasi999]

European cars get better mileage and it is easier to live without a car there than it is in the US, where every store is a 20 minute drive away and there is only the barest shell of viable public transport.

In most Western Countries, you can choose where you live. I could have chosen to live within the City Limits, where the store is within walking distance (and public transportation is actually quite good). Instead, I chose to build a house in the suburbs. It is MY OWN DAMN FAULT that I now have to pay $50 a week to fill up my Ford Escape. And, my wife and I chose to purchase a fuel-efficient Mazda 3, because her new job had a very long commute.

If you feel that the stores are too far away, then either move to a new house (closer to the stores you shop at), or buy a more fuel-efficient car.

Re:To really put things in perspective..

[szembek]

You speak as though 3/4 of an acre is a large lot. It's a decent sized yard at best. 1 acre is the smallest lot I'll even consider when looking at houses. It's a luxury of living in the large nation that we do. We don't have to be crowded into small spaces in dirty cities. We can choose to live in comfort and have some space for kids to enjoy, and to build shit on.

Re:To really put things in perspective..

[egburr]

I've tried taking the bus. It turns my 25 minute drive into a 70 minute bus ride. I still have to drive 2 miles to reach the bus stop, mainly because I have to cross a 6-lane road that has no pedestrian conveniences such as a crosswalk at the nearest intersections (walking to the nearest crosswalk would make the trip a 4 mmile walk). I have two choies of bus routes, and both are about equivalent in inconvenience, only a few minutes difference in travel time.

I hate driving in traffic. I would love to take the bus. However, I just can't do it with the current options. One major reason is that I have to pick up one of my children from after school care by 6:00pm. To do that, I would have to take the 4:25 bus from work, which is a little difficult when I get off at 5:00. Of course, I could start work earlier, which means I would have to catch the first bus of the day at 6:00, which is a little difficult since my son's school bus doesn't arrive until 7:25 and the school won't allow children to be dropped off until 8:00. I could enroll him in the before school care, too, but that doesn't start until 7:00, which still is insufficient for catching the 6:00 bus.

So, as much as I hate driving during rush hour (if you can call creeping at 15 mph driving), I still prefer it over riding the bus with the options I currently have.

The city here puts a lot of effort into showing how much effort they are putting into public transportation. They don't seem to put much effort into making it at all convenient for people to use.

Re:To really put things in perspective..

[Crazy Man on Fire]

Would you pay $6/gallon for gas to support the taxes required for all those socialist services?

Don't think for a second that gas is actually cheaper than $6/gallon here. In other countries, they pay the actual cost at the pump. Here in America, we pay part of the cost at the pump and pay the rest in taxes and national debt. Have you been paying attention to the billion dollar tax breaks and incentives that the government gives out to the oil companies? Where do you think that money comes from? That's right, the taxpayers (of today and tomorrow)!

Exxon Mobile

[eldavojohn]

It seems that a week cannot pass without finding big news about gas prices. They're up, they're down ...

They've been in the news because they've only been going up up up until very recently. They were also in the news because idiots were 'predicting' that they would hit $5 a gallon after Operation Iraq Freedom.

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?

Re:Exxon Mobile

[Anonymous Coward]

Beware: Economics follows.

The demand for gasoline is relatively inelastic. If you raise the price, demand does not fall all that much. So, raising the price often means you would make more money. It's a typical monopoly tactic to restrict the supply of something and artifically raise the price against an inelastic demand, and thus gain more revenue. (See also: Windows.)

If anything, the higher profits associated with this price of gas after the hurricane (when supplies are lowered by other forces) should demonstrate that under normal conditions, the industry is actually fairly competitive, and you're paying a relatively fair price for your gasoline. (Well. Aside from taxes.)

Re:Exxon Mobile

[toetagger1]

If you can make 1,000,000 gallons of gas a day, and demand is 1,000,000 of gas at $1.25 each, then you will have sales of $1,250,000.

Now, if demand increases, but you can still only make 1,000,000 of gas a day, you have to adjust your price such that the demand is at 1,000,000 gallons a day again. Today, that price is around $2.85, and the company now has sales of $2,850,000.

If you pay attention, you will notice that even so sales more than doubled, they didn't have to spend or invest any more money to do so.

The reason why this works is because of the lack of investment in new capacity development. The only reason why this is the case is because of the lack of competition. Everyone in the industry knows they make more money by not investing (in order to increase price), than by investing billions to increase capacity at lower prices.

So if you want to have lower oil prices, get writ/weaken OPEC first. Then break up some of the oil industry by seperating crude extraction from refining (break up the vertical monopolies), and then let the free market do its job.

It's not just gas-at-the-pump prices

[autophile]

It's not just mommy and daddy filling up the family sedan. It's everything that depends on petroleum products. Asphalt, for example. Heating oil. Plastics. And, as the summary points out, transportation of *everything*.

Gas prices is one of those easily understood metrics that happens to affect everything we do (in developed countries).

--Rob

Isn't it obvious?

[l4m3z0r]

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.

gas prices as a political weapon

[Anonymous Coward]

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.

It's the one futures market most people encounter.

[Churla]

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.

Re:Hogwash

[gEvil (beta)]

I'm more shocked by the people who bitch about gas prices while chugging away on their third $4.00 cup of Starbucks that morning.

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

Re:mod parent up

[LaughingCoder]

It's election season, dumbasses, they're lowering prices to help out their buddies in Washington.

Nice theory, but what happened in 2004? Remember all those rumors that Bush had a secret arrangement with the Saudis and they were going to lower gas prices around the election to make Bush look good. Well, it never happened. http://www.eia.doe.gov/oil_gas/petroleum/data_publ ications/wrgp/mogas_home_page.html In fact, gas prices peaked in November of 2004, having risen over 20% from March to November of that year.

They didn't really need to change anything

[Squalish]

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.