Paid for by big oil?

[OpaDC]

I just read this and it made my blood boil.
http://articles.moneycentral.msn.com...aspx?GT1=33007
Many of you may not agree with me but I think this is just bull. I'll grant you that our gas is cheaper than almost all of the rest of the world, but we also put tons more mileage on vehicles than they do. I know a lot of you near big cities have good mass transit, (as does Europe and Japan) but most of us don't. Our population per mile is smaller because of the way we have developed. Most shopping is not within walking or biking
distance. Hence we drive. Gas taxes in most of the world are what make their prices higher, taxes that go towards socialized medicine, mass transit, heavy welfare and retirement, etc. That's fine because that's what they choose. While we were expanding and becoming more spread out after WW2 most of Europe was rebuilding and in much higher density than we are. Kind of like living in NYC. Many people there never drive.
I guess what really makes this article and it's logic so bogus is the fact that most people are upset at how fast aqnd how much the prices have risen and the lame excuses they now use to boost oil prices: Hurricane in Gulf (happens every year), low sales/high sales (contradictory), big investor thinks prices will go higher (from yesterdays news), boat fires shot near another boat (oh my, in the Persian gulf? never). I'm afraid to sneeze lest an investor hears it and thinks an epidemic is starting and the world is coming to an end in the next 500 years so they gotta hurry!

Rant over. I feel much better now thank you.

[germdoc]

This is one of the clearest articles I've seen on gas prices:

http://money.cnn.com/2008/05/20/news...ex.htm?cnn=yes

I have heard experts comment that at this moment refining capacity is not an issue. I agree I have problems with the argument that turmoil in the Gulf (or Mexico or Venezuela or Russia) is causing prices to rise. When in the last century was there not turmoil in oil-producing regions?

What I don't think we really understand is the extent to which speculators are driving this. I wish I knew a good way to solve that problem.

On a related note is this quote from today's Tom Friedman column: "If this huge transfer of wealth to the petro-authoritarians continues, power will follow. According to Congressional testimony Wednesday by the energy expert Gal Luft, with oil at $200 a barrel, OPEC could 'potentially buy Bank of America in one month worth of production, Apple computers in a week and General Motors in just three days.'"(http://www.nytimes.com/2008/05/21/op...ml?ref=opinion)

Hard to be an optimist these days, isn't it?

[Hoover]

This all seems to be similar to the gold and silver price runups in the late 70s, to the early 80s. The Hunt brothers tried to corner the silver market, prices shot up from $5 an ounce to nearly $50 an ounce. Speculation is running unchecked. Look what happened to lumber, food, grain prices. If someone can make an argument that something is running scarce, demand for it gets noticed, and hence a runup occurs.

Maybe deregulation of commodities was a bad idea.

[BigguyZ]

Man, I see this getting political....

Anyways, I think people do make too big a deal on the price of gas. Compared to many many other things, it's still cheap. Buy a gallon of Acetone, and compare prices. Milk is more $ than gas too... I remember when a gal of milk was less than $2...

I think in the first article, the cost of ownership statistic is a very insteresting point.

Frankly, I think we have been hamstringed by environmentalists into not producing any oil ourselves. Why don't we do more oceanic drilling? What can't we go into the 4% of ANWAR and get our oil from there?

Even if we go electric for all of our individual cars, we will still need oil for deisel and/or the production of synthetic materials. So regardless of our driving habits, we need to invest in alternative sources for our oil needs.

[jziegler]

What I don't think we really understand is the extent to which speculators are driving this. I wish I knew a good way to solve that problem.

I have a solution to that problem, but it would never get implemented. I think that if you want to trade a commodity, you need to have the ability to receive a shipment of what you have bought. No holding tanks? Then you can't trade oil. No grain silos? No corn for you. Allow trading for the people who will actually be using the stuff so that there is competition for those that actually need a product, but get the speculators entirely out of the picture. Now, I'm sure someone will strike this down as a terrible idea. And it might be, but I think that it might just work in many cases.

Jim

[jziegler]

Man, I see this getting political....

Anyways, I think people do make too big a deal on the price of gas. Compared to many many other things, it's still cheap. Buy a gallon of Acetone, and compare prices. Milk is more $ than gas too... I remember when a gal of milk was less than $2...

I hate paying these gas prices, but you do have a point. I pay far more each month on my car payment. Although I think that the recent rate of increase is pretty unreasonable.

What really hurt though was heating oil prices this past winter. As diesel fuel went up, so did heating oil (since they are a very similar distillate). So for the last couple months of the winter I was spending nearly $500 a month for heat in a not too cold winter. About one and a half times what I paid last year, and over twice my first winter in the house, 2005. Absolutely insane. I'm planning to contact the natural gas company soon (why the house was never converted with a gas line running right down the street, I don't know).

Jim

[OpaDC]

Man, I see this getting political....

Anyways, I think people do make too big a deal on the price of gas. Compared to many many other things, it's still cheap. Buy a gallon of Acetone, and compare prices. Milk is more $ than gas too... I remember when a gal of milk was less than $2...

I think in the first article, the cost of ownership statistic is a very insteresting point.

Frankly, I think we have been hamstringed by environmentalists into not producing any oil ourselves. Why don't we do more oceanic drilling? What can't we go into the 4% of ANWAR and get our oil from there?

Even if we go electric for all of our individual cars, we will still need oil for deisel and/or the production of synthetic materials. So regardless of our driving habits, we need to invest in alternative sources for our oil needs.

Man, I see this getting political.... hope not, was meant as economic commentary

Buy a gallon of Acetone, and compare prices. Milk is more $ than gas too... I remember when a gal of milk was less than $2... I don't disagree. Include bread, other dairy products, rice, etc. That being said, I use exponentially less of all of these products even collectively. Haven't done actual figures, but suspect gas taking bigger bite from budget. Oh, and for you heat by oil people...

As to the last two paragraphs, I agree. I live on the Gulf coast and have seen the results of offshore drilling in California. Would hate for that to happen here, but you gotta do what you gotta do. Just do it properly and less chance for problems, even at extra cost. One of those trade off things.

[BigguyZ]

As to the last two paragraphs, I agree. I live on the Gulf coast and have seen the results of offshore drilling. Would hate for that to happen here, but you gotta do what you gotta do. Just do it properly and less chance for problems, even at extra cost. One of those trade off things.

I agree that we wouldn't want to have an ecological impact. However, with Katrina, I don't remember seeing reports of massive spillage from the rigs that the US and other countries operate. Maybe I missed them, but if they survived that large a hurricane, I think the technology is such that we can drill in the ocean responsibly.

[dkerfoot]

From my perspective, anyone that drives a car larger than say, a Datsun B210 (50 MPG Highway in 1978!) and rides with less than 1/2 the seats full most of the time while not carrying big, bulky items need not complain. In fact, those of us who fall into that category should more properly be apologizing.

In my case, I drive 5 miles a day in an old Escort wagon so I could almost feel self-righteous if LOML didn't drive 90 miles a day in a Town & Country. We do need a larger vehicle for our 4 kids, but not 25,000 miles a year's worth.

We sowed, now we reap. The question we all gotta ask is: What am I going to do about it? The answer for most of us is of course: whine...

[sparkeyjames]

The most tossed about reason for high gasoline prices I have heard lately is the market speculators biding up the price. There is a solution for this. Pass a law that states you may not bid on oil futures or contracts for delivery if you cannot store it or refine it.

[LCHIEN]

I read the article the OP was taking issue with and can't find much to fault in the article.

A few of my overall observations of oil/gas prices:
1. we have been spoiled by low gas prices and prices under $2 for a long time lead to a rash of these large SUVs and gas guzzlers, which unfortunately will be with us for years.
2. As much as I hate government intervention, the high dollar investment in vehicles combined with long lifespan (10 years) of said vehicles makes it attractive to either offer steep incentives for buying fuel efficient vehicles or raising the price of gas. Otherwise we will be too slow to get these off the road. Having big vehicles is an intimidation factor - yoiu want to be in as big a vehicle as the guy next to you in case of a collision.
3. as an engineer, I see it will be hard to displace gasoline with new technologies. From the inception of the gas car, it has been noted that gasoline is the lowest weight per stored energy, lowest cost per stored energy and lowest volume per stored energy over batteries or any other electro- chemical, hydraulic/pneumatic or dynamic system, and relatively safest by far and probably for some time to come.
The hybrid car is still a gasoline car in which 100% of it energy comes initially from gasoline and electricity is used to buffer and convert the energy into a more efficient means of final delivery.
4. though there's lots of hydrocarbons in the world, the cost of retriving many of them are high, deep offshore and carbon shales all will take large investments and cost over $100/BBL to produce which will make the investors money at todays prices. The reason they don't do it is that the competition (Saudi and other OPEC nations) can produce oil for $10-50 per BBL, what's to keep them from turning up the tap once the money's been spent and leaving them with an expensive oil no one wants to buy?
5. The economics of oil are very complex.

I suppose I should acknowledge that I work in the oil and gas industry.

[dlminehart]

The talk about drilling off the US coast and in the North Slope is mainly an excuse to dump on those who've been pointing out for years that this unsustainable reliance on fossil fuels is going to come back to bite us. I.e., a political sound bite aimed at the gullible.

If our US reserves of oil continue to be used up at the 2007 rate, we have 12 more years worth, compared to Saudi Arabia's 81 years. So, if we increased the rate of domestic use by tapping the currently off-limits stuff, our reserves would just burn past quicker. In fact, if we decided to be completely self-reliant, using only US reserves, we'd use them all up in 3 years!

Then what? Um, er, well, we'd have to make the necessary social and economic and political accommodations. But there'd be even more outmoded gas-powered vehicles on the roads, more suburban developments without sidewalks or bike trails, and a lot more CO2 messing with our climate. And we'd be even more dependent on foreign oil.

As old Ben Franklin said, a stitch in time saves nine. Cancel the subsidies to oil companies, corn ethanol, and the rest of it. See that cap and trade in CO2 is installed, and let American enterprise loose on developing solutions both for our use and to sell to the rest of the world. We're not the only ones that'll need something to replace petroleum.

See http://en.wikipedia.org/wiki/Oil_reserves for more details on oil reserves.

[Black wallnut]

Advocating a political solution to an economic problem changes the discussion to a political nature. Advocating that others consumer choices are the cause is potentially inflammatory. I urge those posters that are even close to these lines in the cyber sand revise or delete their remarks.

Folks believe me I feel the pain that you do when it comes to the price of energy. I work in the transportation industry. Fuel prices have changed more than surcharges can keep up with. The endless (or so it seems) rise in the pump price of fuels will ripple through the economy as price increases for nearly everything we consume or purchase. We as a woodworking family are much better off staying with subjects of a lighter nature.

[jackellis]

Like Loring, I'm an engineer and I work in the power industry. There's no conspiracy, just the same economic forces at work that cause home prices to rise and fall.

I will say something about speculators and delivery. If speculators are hoarding oil by purchasing futures, at some point they actually do have to take delivery of the product unless they liquidate their positions. Holding long positions (meaning they've purchased a contracts for future delivery) is expensive because they have to pay interest on the money that's tied up in those contracts. If there's speculative bubble, eventually it will collapse and it will take the speculators down with it. At the same time, prices will fall pretty dramatically.

One more point. The economic pain caused by high oil prices is finally starting to provide incentives for alternatives to petroleum. Do a Google search on 'oil algae' and you'll get a slew of articles about very promising research on forms of algae that convert carbon dioxide and sunlight into oils that can be refined into motor fuel. The folks who are working on this stuff won't have any problem getting money. Their biggest problem is likely to be environmentalists who object to plopping down enormous tanks to grow the stuff on large swaths of land in the desert.

Biofuels. Coming to your car, or in my case airplane, soon.

[docrowan]

I believe the original poster was complaining about the analysis of the article, not so much the political or even economic issues related to gas prices. I have to agree on that. Several points in the article were incomplete or misleading. The fact that gas prices are close to 1922 prices while other costs of ownership have gone up five fold ignores the fact that the cars are probably 20 times as valuable. Compared to a 2008 car, a 1922 car had vastly lower horsepower, no air conditioning, unsafe brakes, no sound system, much fewer safety features and on and on. 2008 gas is not substantially different from 1922 gas. 80 years of improvement in production techniques and economies of scale SHOULD result in relatively lower gas prices for something that is essentially the same.

I've also heard various comparisons between the cost of a gallon of milk versus a gallon of gas. Our family goes through maybe 2 gallons of milk a week versus 30 gallons of gas, therefore, gas has a 15 times the impact on our budget. Also, milk generally cannot be pipelined, is sold in individual containers, must be refrigerated, etc. The costs of production and transport of a gallon of milk is vastly different than a gallon of gasoline.

My point is not economic or political, but it burns me up to see poor reasoning and specious arguments in the media. Articles like the original poster commented on will not lead to clear thinking and reasonable solutions to the gasoline problem.