Slashdot Mirror
The Specter of Gasoline At $5 a Gallon
Hugh Pickens writes "The NY Times reports that gas prices are already at record highs for the winter months — averaging $4.32 in California and $3.73 a gallon nationally. As summer approaches, demand for gasoline rises, typically pushing prices up around 20 cents a gallon. But gas prices could rise another 50 cents a gallon or more, analysts say, if the diplomatic and economic standoff over Iran's nuclear ambitions escalates into military conflict or there is some other major supply disruption. 'If we get some kind of explosion — like an Israeli attack or some local Iranian revolutionary guard decides to take matters in his own hands and attacks a tanker — than we'd see oil prices push up 20 to 25 percent higher and another 50 cents a gallon at the pump,' says Michael C. Lynch, president of Strategic Energy and Economic Research. A sharp rise in the prices of oil and gas would crimp the nation's budding economic recovery would cause big political problems at home for President Obama, who is already being attacked by Republican presidential candidates over gas prices and his overall energy policies. On the other hand, environmentalists see high gas prices as a helpful step toward the development of alternative energy. Secretary Treasury Steven Chu notably said in 2008 'we have to figure out how to boost the price of gasoline to the levels in Europe' to make Americans trade in their 'love affair with the automobile' for a marriage to mass transit. In the meantime President Obama is in a bind because any success in tightening sanctions on Iran could squeeze global oil supplies, pushing up prices and causing serious economic repercussions at home and abroad."
Gas prices are already approaching € 2 / liter in Western Europe. What are you guys complaining about ? Get a life !
Religous speak to God. Insane are spoken to by God. When all shut up, one can finally hear Shostakovich in peace
The idea of spurring development of clean alternatives such as solar-charged fuel cells and the like is very appealing, but these technologies are simply not up to speed yet and likely won't be for at least several years.
Meanwhile, U.S. firms are busily building infrastructure to extract oil and gas from shale deposits estimated to hold 1.5 trillion barrels, or about 5 times the current Saudi reserves of 300 bbls. There's an additional 60 bbls in the Gulf of Mexico and another 30 in Alaska. Fully exploiting these deposits would cause the U.S. to become an energy exporting giant in about ten years, even as the Middle East oil supplies begin to wane, leading to a dramatic shift in global geopolitical priorities.
Environmentalists like Treasury Sec. Chu obviously won't approve of this trend, but the hard reality is that fossil fuels are not going away soon, thanks to technological advances such as "fracking" (hydraulic fracturing using horizontally injected water).
I really don't think it's a good idea for the Treasurer of the U.S. to advocate high gasoline prices. For gasoline to rise above $5 may make sense from the point of view of encouraging conservation and alternative systems like hybrid electric and plug-in electric cars, but in the short term it would cause tremendous hardship to the people. As transportation costs rise, so does the cost of basic necessities such as food, clothing, and daily commutes. Airlines would suffer as well. The economy will probably sink back into recession, and you can just picture Mr. Obama calling the Secretary into his office: "What were you thinking, Steve? It's election year!"
Personally speaking, as a solar buff, I would love to see a massive conversion to cleaner and more efficient methods of transportation and heating/electricity. It would also be nice to encourage more use of bicycles (and even walking) as an alternative to the almighty automobile in the U.S. From that point of view, high gas prices are great.
But when it comes to jobs in an already shaky economy, it's going to be disastrous, and may in fact change the electoral outcome this November.
it's = "it is"; its = possessive. E.g., it's flapping its wings.
Let's stop the influx of "get over it" comments from Europe by removing the taxes from the price discussion. Then we can all equally complain about the cost of refined petrol instead of how much our governments like to add to the fees.
-Xen
I've already seen some of my Facebook friends grousing about how speculators are gouging them. They have a hard time understanding how much the world has changed in a decade. Most of it is due to static oil supply meeting rapidly rising oil demand, coupled with extremely inelastic demand for gas. Within a few years we have another billion or so people competing with us for the same barrel of oil.
It's actually hard to speculate in oil, simply because there's no place to store enough to make a huge difference. Most "speculators" are sovereign countries, who are wagering that oil left in the ground today would be more expensive tomorrow.
Iran produces about 5% of the world's oil. If Israel and Iran go at it, the price of oil would go through the ceiling. The price of oil is set by the cost of extracting the last barrel of oil, and tapping those deep-sea oil wells and Canadian oil sands for that last barrel of oil is extremely expensive. If it costs $100 to produce that last barrel of Canadian oil, why would Saudi Arabia sell their oil for $20 instead of $100 too? They'd be leaving money on the table. That's why the last barrel sets the price.
And if a country expects a barrel of oil to shoot up $50 in the event of war, it makes sense to either charge more for pumping it today, or leave it in the ground until the price goes up naturally.
To put this in Slashdot terms, supposed you had a complete set of Babylon 5 collector plates that were worth $100 today, and you expected them to be worth $1000 next year from now, would you sell them now or wait? The smart thing to do is either wait until next year, or require the buyer to pay you a premium today above the $100 asking price. Expectations affect the price. And if you wait until next year, you have reduced the global supply of collector plates on sale, so the price goes up a bit to compensate. Supply and demand also affect the price.
If you're really worried about speculators, buy a Prius, Leaf, or Volt. Last time I checked, no one's been able to form a cartel on sunshine and wind. And if you drive a big SUV, stop whining about how speculators, government, Democrats, or "The Man" is screwing you, and take a long, hard look at how you are screwing yourself.
I hope you all recognise that the prices of gas are being moved up by inflation, not by any increase in demand (demand in US is lower than 5 years ago), not by any decrease in supply (supply is greater now, with the demand being lower, and shale oil came online, there is more output).
It has nothing to do with any speculation on oil prices - speculators only discover the price that the economy sets for the underlying asset in whatever currency that is being speculated in. There are always 2 sides in every speculative action - some bet that prices go up and some bet that prices go down, you don't see politicians come out and blame speculators for LOWER prices, politicians like to take credit for lowering prices themselves, but speculators are always blamed by the politicians for higher prices.
In totalitarian nations (like former USSR), speculators were actually sent to prison, if not worse, all while government was printing billions of worthless paper and fixing prices, which always creates black markets and causes prices in the devalued currency to spike.
USA will not see lower prices as long as the Fed keeps printing, and the Fed will keep printing to prevent interest rates from spiking during T-bill and bond auctions, Feds promise to keep interest rates down for years, and this is done by buying up the Treasury debt with fake money.
I had a funny thread going on here, the guy can't understand basic inflation and that his house price is falling in terms of real money and in terms of his purchasing power, he expects the value of his house to go up, believe it or not.
Real values of the houses cannot and should not go up, the Fed is trying to preserve the nominal values, so money supply is inflated, real prices are falling, while nominal prices are staying up pumped by inflation that the Fed creates. This will cause all nominal prices to go up, but real prices are falling because of under-consumption, but not because people are saving. USA is using less energy than before (even less electricity), this is inconsistent with any recovery, it's not a recovery, people cannot afford to spend. But they can't afford to spend because they are not producing anything themselves, and they are not producing anything, because manufacturing left the country and manufacturing left because money is not good, inflation is killing savings and investment and taxes are historic high.
They'll tell you that taxes are very low based on % of GDP, but that's nonsense, GDP has been falling for 2 decades as real inflation is 11-15%, and so the deflater that is applied to the GDP is fake. USA is in a real depression, not a recovery, not a recession even. This is all done with fake money. The banks' earnings are fake, they are moving Fed's money and Treasury debt around, that's all they do. You can't have real investment credit because there are no savings, savers are being wiped out or pushed out of the country, all while the politicians are using every tool in their arsenal to gain popular vote, it's called class warfare and it's being used against you to destroy your economy.
You can't handle the truth.
I was going to say - if I only payed $5.00 a gallon I'd throw a party. Right around $8.50 (give or take based on the exchange rate) a gallon is what I consider normal.
I assume you realize that your high gas prices are the result of high taxation and not natural market forces. You live in a democracy, right? Maybe you should do something about your own high gas prices rather than criticizing those of us that do. Unless, of course, you like paying more, then good for you. Stop berating those of us who like to pay less.
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
You choose where you live. The percentage of Americans living in remote areas is tiny. I live in Oregon, one of the least populous places in the US (and possibly the civilized worlds - where else do you have densities of 1 person per square mile????) But the vast majority of our population lives in Willamette Valley. So you could point to Joe in Wheeler County having to drive 150 miles to see the doctor, but the fact is that even in Oregon the majority of Joes live where they could potentially walk to their doctor's office.
We chose to live where we are within 2 miles of most of our daily trips. Our kids can walk to school until they graduate high school. We go to the local rec center rather than drive across town.
The problem is that most Americans want to live in the exurbs in large homes outside of the cities, and then bitch and moan about "killer commutes" and high price of gas. Give up that fancy home 30 miles outside of town, and buy an older home in the City center where things are within walking distance.
The writing's been on the wall for years. If your car gets 35mpg and you live within 15 miles of your job, an increase of $2 a gallon hits you with a whopping $5.80 increase per week -- what's that, a big mac? A latte and a half?
And if you *haven't* got a fuel-efficient car and tried to live where you work or close to transit, given how long we've known that gas prices fluctuate in response to world events, well, you've done it to yourself. Shut up.
Free market, y'all. You asked for it, you got it, and you demanded a house with a lawn and an SUV anyway, and now you've got the nerve to cry about gasoline prices? I believe the french refer to this sort of thing as 'yo problem'.
god is just pretend.
Washington, DC is the size (in area) of London with the "Mass Transit" system of a city one-tenth the size. (And that would be denigrating all the European transit systems for cities that size.) So, Trans. Secretary X, I will happily give you my car when, and only when you arrange "Mass Transportation' in America, but not until then. In the meantime, it would be a good start to take all the current "Mass Transit Planners" out and shoot them. They haven't done "SQUAT" in the last 30 years.
If everyone world wide consumed like the US does - gas would be a lot more expensive in the U.S.
And you don't have to like it - or care how it looks - I'm just telling it like it is. Feel free to revel in the position of wasteful jerk that's proud of his excess and complains at every inconvenience.
It's hard to believe that's how Micronians are made. Why don't we see it right now by having you both kiss one another?
I wouldn't necessarily call what the Obama admin is doing on energy fascism. I would call it central planning though. High prices? They want this. His own energy secretary has long had a crusade to artificially jack up fuel prices in order to get Americans out of cars. Things are proceeding as hoped for:
“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” - Steven Chu, 2008
What was it that Obama's former Chief of Staff Rahm Emmanuel said? Ah yes. "Never waste a crisis". And if you have to make one... do it.
Life is hard, and the world is cruel
You are probably right about the reason for the higher price - though if Europe consumed at the same rate as the US - then prices would be quite a bit higher for everyone. So is isn't as simple as - "You chose higher prices."
Secondly - it's a democracy - though right now the EU and US are making lots of noise about it being less of one. (Hungary) But more importantly, for simplicity, let's say it's a democracy just like the USA. Why do you think the people who feel the pain of high gas prices are in favor of them? Any American should know that democracy does not equal 'regular people' getting a fair hearing or equitable level of influence in government. In my case specifically it doesn't really matter at all as I'm an ex-pat and I can't vote here.
But I'm not berating you for liking to pay less. I'm berating people who complain about the fact that they live some of the most priviliged lives on earth and still feel wronged. You just need to step out of the little bubble, see it from the outside for a bit, and it becomes painfully clear. (And rather embarassing)
It's hard to believe that's how Micronians are made. Why don't we see it right now by having you both kiss one another?
I do 500 miles in a standard working week, doing one journey a day to/from a bog-standard 9-5 job at a single site.
Where do I live? London.
Where do I work? London.
How much would it cost on public transport? More than my (expensive UK) petrol costs, mainly because of a very efficient engine, in a 15-year-old car. That's not counting my extra lost-time travelling, though.
How much more hassle is it to rely on the Tubes, Buses, etc. instead of a car in London? Add about 2-3 hours onto my working day on a PERFECT day with no stoppages or delays (which I've never witnessed on the London Underground) and where I catch everything just as it leaves the station. Some days, it's actually technically impossible to do that journey by public transport because of all the outages.
Direct, my place of work is half-as-many miles from me, involving THE worst roads in London and hours of queues every morning. A 7 mile detour onto the orbital motorway around London saves me over an hour every day and stops me crawling at 20mph along miles of main "A" road.
I do *not* live on the very outskirts. If you do, you can drive much more than me (about 30% more I'd estimate). Going North/South is even worse because of the direction of most traffic through London at that time of the day (and you can burn more petrol than a 100 mile a day in a single journey just queuing through everyday queues).
Now multiply that up by people who *can't* afford to live near London and/or commute in from Oxford, etc. and it soon gets just-as-crazy.
The American disease is thinking you're worse off than everyone else and making a bigger fuss than everyone else. The English disease is *knowing* you're not worse off than others, but moaning like you are anyway.
Mass transit is better suited to the higher population densities of European cities, much of the USA is too spread out.
While true, it is important to remember that the lower population densities and sprawling suburbs of the USA are an intentional creation of the auto industry, not just an accidental development or a law of nature.
I agree. Voters and governments in Europe have made the choice to tax themselves up the wazoo on fuel. It's more tolerable there given their denser population, better public transit and "leaner" lifestyles.
And do you think this is a coincidence?
If prices had been higher in the US, perhaps the urban sprawl would be less since people would not be as willing to throw money out the tailpipe. If there were higher densities "suburbs", then mass transit would be more practical and cost effective. If higher density developments were the norm, then it would be easier to roll out things like high speed Internet (a la Korean and Japan). Lower density housing also corresponds to higher rates of obesity (cf. multiple studies).
So the choice to tax gas may be painful in one way, but it has (IMHO) ended up benefiting European citizens in many others. And now that oil prices are set to rise due to pure market forces (supply/demand), the Europeans are also in a better absorb the shock of it compared to the sprawling 'burbs of the US.
You reap what you sow.
In my city, the population density of the central city was higher 60 years ago than it is now, even though the population of the metropolitan area is now 10x what it was back then. One of the reasons for that is that companies associated with the auto industry purchased the (privately owned) streetcar system and scrapped it.
Now why would they want to do something like that?
I will not be forced to live in a walk-in closet in a controlled compact city, to be taxed and poisoned to death.
No one is forcing you to live anywhere. What you are whining about is that you can't afford a giant (and yes, 2500 square feet and above is giant) house in the middle of the city, and instead want to be able to afford driving from the suburbs to work in a space and gas wasting oil burner.
What I find untenable is that you're asking others to subsidize your life style. And make no mistake, cheap gas, suburban sprawl and roads to everywhere, including the suburbs, requires money that comes from everyone else.
People who "focus their lives in the urban centres" (centers in the USA, btw) are, by and large, some of the most spiritually and emotionally empty, uninformed sheep I have ever met in my life.
So to top it off, you are insulting the people who are paying for your ability to live in the suburbs. Nice.
Those who can, do. Those who can't, sue.
I guess you don't realize that oil companies typical profit percentage is in the 6-7% range do you? The reason why they make so much money for their shareholders (who happen to be most people with retirement accounts), is that they sell so damn much of what they produce.
Now, if you want to talk about not paying taxes (which the oil companies did), lets talk companies like General Electric (whose CEO is the POTUS econ advisor) who paid $0 taxes in 2010. Or lets talk about Warren Buffets company (Berkshire Hathaway) which owes almost 1B$ in back taxes.
Or is it excessive profits you don't like? Well why don't we hit Apple on the excessive profit margins? Their PM is close to 30% now, 4-5x that of a company like Chevron or Exxon.
Finally, under what law can the IRS tell Apple what to do with their money? Or are we now living in a country where the federal government is the sole final arbiter on corporate decisions?
The only difference between europe and the US is that europe never dismantled their transit systems. Most countries were struggling to rebuild after the destruction of WW2 and they needed to repair and maintain their infrastructure.
How do you think people got around US cities before the 1950's?
Every US city and most towns had extensive privately financed and operated mass transit systems before the massive government subsidies to free roads and parking were instituted. Gas taxes only pay for a portion of federal interstates, not the majority of roads, parking and asphalt required to support the car infrastructure.
Once a free government funded socialized road system was ready in the 1950's the auto industry bought up most of the private transit operations (street cars) and replaced them with buses while reducing service.
Many of the costs of driving are also subsidized by product prices and tax breaks. Building codes require minimum numbers of parking spaces. These private parking spaces are paid for by the prices you pay for products. Parking lots pay lower property taxes and employers can deduct the cost of parking provided from their income.
This year congress cut the mass transit tax deduction to $125/mo while increasing the parking tax deduction to $240/mo. In 2010, these were both $230.
Is this in the public interest?
If we could return the true cost of driving to drivers, mass transit would be profitable once again.
My city (pop: 365,000) Will not even put in sidewalks.
It is a 30 mile hike to the nearest Bus or train terminal.
In the last city counsel meeting where it was discussed, the decision was made to maintain the status quo. because Buses, sidewalks, and trains bring in "The undesirable lower class people"
So, I am not sure that the "Auto industry" has a lot to do with it!