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."
we already top that in the UK:(
who where what when now?
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.
One problem is the disingenuous "all of the above" stuff you hear them spouting in the media. Wind and solar are not anywhere near being able to reduce our dependence on foreign oil. Rather than massively investing in building out wind and solar we should be spending all that money researching ways to make it viable instead of a gimmick designed to enrich campaign donors and their startups' poor business plans.
It's the same with ethanol - it's not viable as an energy source, but it's quite profitable as a political source.
Yet another point of dishonestly is even using the phrase "reduce our dependence on *foreign* oil" when really they mean any oil. This is not bad in itself, but it's also weasel wording to imply they'd like to leverage more domestic oil sources when really, they want nothing of the sort.
We're never going to get anywhere on energy policy until we make honest efforts and have honest discussion.
1) stop the massive systemic subsidies to petro-firms (including tax breaks and hidden subsidies like free/cheap land use fees, etc.)
2) apply a DIRECT user-tax to vehicles, based on their mileage at registration (ie you buy your annual tabs, report your mileage, pay a tax). This would be based on road maintenance costs.
3) tax gas like any other sale.
I drive 100 miles a day, I don't mind paying a user tax on those miles, because I'm using the shared resource of roads. But it's bullshit that they can apply a gas tax (ostensibly for highway maintenance) and then steal that money for other purposes in government, then come back saying the tax isn't high enough.
With a tax code that (depending on who you talk to) is 50k pages and 5 million words long, we really need to stop social engineering in our tax code. It's a crazy idea, but maybe taxes could just be about, oh, covering the cost of government, and not about incentives or disincentives decided by some dude in an office somewhere.
I know, crazy ideas.
-Styopa
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
What's really mind-blowing is the GOP candidates (except Paul) attacking Obama for both
1) not being tough enough with Iran
2) and for high gas prices (!)
In what universe do they live in where they don't realize pressuring an oil-producing country is going to raise oil prices (and hence gas prices, it doesn't fall from the sky)?
I'm not a lawyer, but I play one on the Internet. Blog
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.
Largest GDP per capita? More like 7th (nominal) or 15th (ppp) depending on how you count.
What is it with you having to believe you're the best in everything?
You are a liar, http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita shows the US at around 10 or lower. But then, you quote Reagan, I suspect facts and figures just enrage you.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
That is a valid point but it seems a little vacuous to basically say "we live in a big country therefore we must live quite far from work". Living 75 miles from your doctor and complaining about the round trip of 150 miles is a bit lame.
You will understand my lack of sympathy when I explain that I live 6 miles from a city centre (the UKs second city) and I whine when my trip takes more than 30 minutes. It's all relative I suppose. ;-)
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.
Ah, the old "we're the richest therefore we're entitled to waste the most" argument. And it's not even true.
Australia is a similarly big country, with a much greater amount of vast empty wasteland and having to travel 100miles plus to a doctor (flying doctors normally cover an area around the size of the UK each).
http://www.fuelwatch.wa.gov.au/fuelwatch/pages/home.jspx
The prices are AU$ per litre. Multiply by 3.8 (ish) to get US Gallons. Hint: Diesel's gonna cost ya over 5 AU$ which is more than 5 US$.
If the US price were really hit that bad by petrol prices, you'd have rural petrol subsidies and/or inner-city petrol taxes to compensate.
The US may finally have to live in the real world regarding petrol prices and why European engines are "small" and yet can still do 70mph with a family of kids in the back and towing a caravan without even struggling.
The effect of the European tax regime has been to encourage efficient vehicles, and both European and Japanese manufacturers benefit. It also pads the effect of fuel cost, since taxes can be adjusted to slow the rate of increase and so reduce economic dislocation.
When the great American jurist Oliver Wendell Holmes remarked that taxes were what he paid for civilisation, he was in effect pointing out that all taxes whatever are social engineering. Small Government Republicans always claim that they want to reduce taxes, but somehow it turns out that as soon as the economy has a bit of slack representatives will vote for pork barrel (your bridge in Alaska in exchange for my bioethanol subsidy). Personally I think it is better if people without an axe to grind work out how to use taxes in a socially beneficial way and politicians only get to vote on it.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
None of those metrics include patriotism or American spirit! Goddamn commie statistics...
"When information is power, privacy is freedom" - Jah-Wren Ryel
Are the high gas prices because Obama decided not to give more subsidies to gas companies? Is it because Obama has somehow magically started a secret war in Iran that nobody knows about but Republican candidates? Or is Obama literally 51% or more of the oil speculators?
I'm all for making your opponent look bad, but I have a hard time seeing how Obama is to blame for current gas prices. Feel free to enlighten me.
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.
How often do you need to drive from Dundee, Scotland to Poole, England?
646 km seems to be about as far as one can drive in the UK --- that's just 400 miles --- not a terribly long trip by U.S. standards and for me, located in a town which takes advantage of its central location as an argument for businesses to locate here, or do business w/ businesses here, won't get one to more than a small portion of the U.S. (and part of Canada --- New York, Pennsylvania, New Jersey, Delaware, Virginia, West Virginia, Connecticut, Massachusetts, Rhode Island and most of Ohio, Vermont, and parts of Kentucky and North Carolina --- there are 50 states, and that's not even the original 13 colonies (but includes parts of territories and subsequent additions).
I've hopped in a car and made a solo trip of 900 miles one way in one 18 hour haul (had to finish a shift working, then appear at a conference and there wasn't a convenient airline connection) --- even that wasn't half-way across the country.
When I was stationed in Texas we'd get students in from Europe and the Middle East and they'd have purchased 30-day Greyhound bus passes thinking that they'd be able to see the U.S. on the weekends --- had to explain the reality that if they hopped on a bus Friday at 5:00 p.m., they'd reach the boundaries of Texas just in time to have to turn around to return for class Monday morning (that same 400 mile radius doesn't quite cover all of Texas (but does most of Oklahoma, almost half of New Mexico and small bits of Arkansas and Louisiana (and a portion of Mexico)).
William
Sphinx of black quartz, judge my vow.
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
Well, our 4% of the population has the largest GDP per capita than anyone else in the world. In other words, yeah, we use the most energy, but we also produce the most stuff with that oil.
How can you be so proud of wasting natural resources ?
It took nature millions of years to create them, and we'll finish them in less than 200 years.
Using the GDP as an excuse just shows your arrogance: me, myself and I before the rest of the world ! I have money, so I can piss on the rest of the world.
The real problem is how we'll be able to maintain our current level of life.
1) Either we let the resources deplete, and we'll be forced to find new energy methods.
2) Either we try to reduce our consumption, but China is coming and will probably beat US GDP in 5-6 years.
In either cases, the resources are limited, so the price will continue to increase, and once there are no more resources, the change will be hard to handle. A lot of large companies will disappear and we'll need to rethink our way of life.
Personally, I don't think that the government should hide the real cost of gas, by subsiding it.
At a given price, new alternatives will become cheaper than using oil, so let's just wait.
Is it any wonder why mass transit is mostly a big fail in the US? In Europe, we pay for it with taxes. You need to get over the idea that you have to drive your big SUV everywhere and use taxes to build the infrastructure to support a working mass transit system.
Gas is only going to get more expensive, at what point do you get off the gas-addiction wagon?
Disclaimer: As an American living abroad, let me say my view of the US has radically changed in just over 10 years. We were raised in the US that we were the best country in the world at practically everything. Let me tell you, most of it was dead wrong. Yes, there are some really good things about the US but on the whole, I have to say I'm happier, less overworked and enjoying life more in Europe. I would not move back the the US permanently at this point, it would be a downgrade in practically every category.
I'm a Murican. Gas is now about $4.00 in my area, the northeast. This summer I went to Germany, where gas is $10.00 per gallon, both due to cost and the useless dollar. We rented a BMW 320d, which got a verified 49 mpg on diesel, and still ran hard at autobahn speed that would get me jail time in the US. Most cars in Germany are diesel, 2.0 liter with a manual transmission. We even saw the Chrysler minivans outside a school picking up kids, just like here at home. They all had a diesel. I'd love to buy a modern turbodiesel instead of a Hybrid. There aren't any for sale, save VW/Audi, backordered to 2014, or very expensive MB/BMW. You can get 50 mpg...it can be done...they don't sell those cars here.
You're correct that the price rise is artificial. It used to be that while unleaded gasoline and oil were traded as commodities, there were limits on the exchange that prevented the sort of out-of-control prices we're seeing. When those regulations were removed, traders were free to drive up prices, and here we are.
The solution to this isn't necessary drilling more. Any undeveloped lease has a lag time of 10 to 15 years before stable production is reached. The tar sands and shale oils in Canada and the Dakotas are amazingly difficult to produce. You don't simply drill a hole and dance around like an 1870's prospector when the oil comes raining down on your head. To get oil from tar sands you have to strip mine the sand, then heat it to a couple hundred degrees until the tar liquifies. Once liquid, you run the tar though the distillation and cracking process like any other crude oil. The kicker is that tar sand oil is mostly heavy ends and is amazingly high in sulfur.
When you talk about ends in oil, that is a measure of quality and viscosity. Light sweet crude from the wells in the Brent North Sea fields is far easier to refine than West Texas crude because the Brent oils already have a low viscosity, are low in sulfur, and have a naturally occurring percentage of light and medium end products like petrol and diesel. In fact, Brent Light Sweet crude is so light that it can be used as six oil, also called bunker fuel which is the main form of liquid fuel for large ships, right out of the ground. This means that Brent North Sea crude requires fewer steps to distil the product you want and will leave less residue products. Less steps means cheaper refining means higher profits.
Tar Sand and Shale Oil require a massive amount of refining. At room temperature, both products are about as viscous as glass and need to be run through the coking process to even get up to the status of a heavy fraction. From there, additional cracking (adding heat and hydrogen to chemically change the oil) is required to produce medium and light ends which are then distilled to diesel and kerosene which can be distilled or hydrocracked to produce petrol, naphtha, octane, or natural gas.
This is why tar and shale are usually left alone until per barrel prices reach a certain level. They simply aren't profitable to extract and refine without massive investment. You've also got all of the sulfur to deal with, and that stuff recombines to form all sorts of nasty products that tend to be highly corrosive and acidic and require a whole new set of industrial processes to convert in to useful products.
The real kick to the testicles in all of this is that the tar sands oil that Canada produces is already on contract to China. The Keystone XL pipeline that is in the news would connect the tar sand fields of Canada to the refineries at the Port of Houston and the Port of Houston would be shipping all of the refined products to Asia.
Should we have laws that say domestic oil stays domestic? I'm not sure, but I do like the idea. The problem with that is that Canadian oil isn't domestic and they produce more than the US. The other problem is that cheap oil is only going to encourage the kinds of things we should be working to prevent. Namely, I hate being able to see the air I breathe.
What I'd really like to see is all of this drilling technology and know-how be re-purposed for harnessing geothermal energy. Less pollution and it all stays domestic.
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?
Both you and the GP seem to have no idea how the world oil markets really work. The big oil corporations make record profits on volume not on price gouging. The people making the killing are the Wall Street speculators investing in oil futures. They typically bring a stable price to the oil companies who would otherwise would potentially suffer from fluctuations in price. They would rather take the guaranteed amount from the speculators than accept potential risk from market fluctuations.
Likewise building a pipeline doesn't really affect the price of gas in the US. It doesn't even affect supply, it just decreases the transportation cost from getting oil in tar sands from Canada to refineries in the US and makes it so that oil companies don't have to invest in building any new refineries (which consequently, would create a LOT more jobs than building a pipeline). These are all costs that only have a modest affect on the price of oil and even then it just increases the supply on the global market more meaning that China could still double demand in the next 10 years and the price of oil STILL goes up!