US Gasoline Prices Spur Telework

coondoggie writes "The price of gasoline may finally be changing the way many people commute and communicate. Anecdotal evidence says teleworkers are growing rapidly as a direct result of the cost of driving. The article links a survey indicating that in Q1 2007 the 19 largest US cable and telephone providers (representing about 94% of the market) acquired over 2.9 million net additional high-speed Internet subscribers, to a total of about 56.2 million. That can be attributed in part to more employees taking advantage of telework programs, experts say. Just this week the House Judiciary Committee's antitrust task force opened the first of a series of hearings on the oil industry. Its chairman noted that gasoline prices have soared well above $3 a gallon and asked, 'How did we get into this mess?'"

Comments

Re:Congress!

[Dachannien]

That's ANWR, not "ANOIR".

The big problem this summer is refining capacity. We've already seen the spike in oil prices into the $60/bbl range caused by increased Chinese demand for oil, and that hasn't really budged a whole lot since last year. Oil inventories have been good since then. The reason prices are so high right now is because of gasoline supply concerns, i.e., post-refining, and while I'm in favor of expanding drilling operations into both the eastern Gulf of Mexico and ANWR to offset worldwide demand increases (and thereby obtain price relief from increases over the last couple of years), this year's gasoline increases have nothing to do with that.

There were already a number of scheduled refinery maintenance shutdowns, and then BP had a major refinery go down for "unscheduled maintenance". Personally, I'm a bit suspicious of any unscheduled refinery maintenance. One of Enron's tactics to manipulate the electricity market was to create artificial shortages by calling up power plants and asking them to shut down temporarily. Hopefully, that's what Congressional hearings will be looking into. If there are no shenanigans going on at that level, then really there's nothing punitive they can do about it. What you're seeing is simple supply and demand combined with smart moves by speculators who bought gasoline low and are now selling it high. In fact, I wouldn't be surprised if some gasoline retailers are buying a small portion of their supply at higher-than-retail just to keep their gas stations in stock.

Refiners are stuck with expanding current operations, which is generally limited to technology updates and expanding into whatever surrounding land they have available. Unfortunately, it's late enough in the game now that refiners are going to resist the urge to build new large-scale refining capacity even if they could get a license to, because ethanol is starting to gear up, and by the time the refiners could actually get a new plant built (including the years upon years of environmental impact studies), the demand for gasoline will already be dropping in favor of alternative fuels (probably increased ethanol-gasoline blends, but that's still less gasoline being needed).

Re:How?

[HUADPE]

Grade school as it may seem, this IS "supply and demand." Demand-pull inflation to be precise. Demand for petroleum products has increased (see SUVs and China...mostly China). Price has gone up so rapidly because the short term elasticity is so low. People need to get to work, and in the car they have now. In the short term, people won't respond to a $.05 change in gas prices. Prices have spiked because we hit the wall of refining capacity and the supply curve got steep. Prices needed to go up to push demand down.