Prices for regular unleaded gasoline at one station (ConocoPhillips) was $3.35. This is up from last Monday's price of $3.19. A prior prediction of my own was made that summer gasoline prices would rise to as much as $4.00 this summer. The rate it is increasing, it'll be that high around the first week of June.

Last night, a person told me that a wholesale gas distributor for this region is having to bring the gasoline to Oklahoma stations from St. Louis, Missouri. He mentioned that the demand is much greater on the coasts, so the shipments are being directed there or kept in that area. Prices in Dallas, Texas may be cheaper which is quite unusual but explained by Gulf oil production and Mexican imports.

Are gas companies starting to maximize out their profits due to the more limited supply? Is OPEC always going to agree to ramp up production for their exports to us? And is our government going to make it a habit to bleed off some of the strategic reserves? Since the fall of the Soviet Union, the need for such reserves has decreased, has it not?

But that doesn't resolve the underlying issue.

Thoughts?

Unemployment in Houston has dropped to its lowest levels in 7 years because of new hirings by the oil companies.

Well oil's unreliable.

Ethanol comes with it's own new set of problems.

So what's new with hydrogen fuel cells?

Is that why Haliburton is moving to the Middle East?

Driving past one gas station yesterday, they were selling regular unleaded gasoline for $2.99 per gallon. There were lines on both sides of the pump islands. It even looked like it forced a station half a mile away to drop their prices from the $3.24 to around $3.09. In other words, it sure looks like we were being gouged a good quarter per gallon.

According to a post office employee last week, gas prices in some part of Florida were under $3.00. Listening to N.P.R., they were talking about gas-efficiency practices and measures. One fellow from Germany called in to indicate they pay closer to $8.00 per gallon (after converting current prices from liters).

Guess by comparison, shouldn't scream too loudly yet. Kinda like the guy with no shoes whining when there are some folks without feet.

Its not really fair to compare European prices to American prices of gas. The simple truth of the matter is that Americans use cars more, have a less reliable public transportation system as far as nationwide transportation works, and is generally, well, larger, geographically speaking.

No, that's mostly because there's a shitload of oil in the Middle East and not nearly so much in Texas anymore.

Gas prices are holding at $3.09 per gallon around here. With the start of the hurricane season, do we have any guesses on how high it will get before month's end?? They've already claimed they anticipate downtime in Gulf Oil production. Yet we have less than maybe 10% of our oil consumption even coming from that source??

Whatever the numbers on for percentage of oil supply, they will surely cite that as reasons for jacking prices up even higher. And during the first quarter of next year, we will again hear about record profits.

Gulf oil may be a small percentage of our total oil consumption, but that doesn't mean that variations in it can't have a big impact on the market price. With goods like oil, where you've got highly inelastic demand, even tiny shifts in the supply cause significant price changes. Anything less than those dramatic price changes would mean that people would not reduce their consumption, we'd have gas shortages and huge lines like we did back in the '70s.

Thank you for the economics lecture, professor (note the sarcasm). Now I'll kindly point to the argument that they make about the 10-15% increased prices within the last month not being based upon the crude oil supply but rather about the lack of refineries to process it. So pointing to the supply coming from the Gulf as the primary factor doesn't make sense if the are BEHIND in the refining process. It means they have plenty of crude but aren't able to handle it fast enough.

Unless you are indicating that was a rather flimsy excuse. That we do have the refining capability but they are intentionally misleading or falsifying information. So when the crude numbers drop and they happen to site that as the cause, shouldn't there have been a break-even point of when the crude = amount refined?? Or are they going to simply fail to report when that occurs to be sure to use whatever reasons they'd like to justify another 15% or 20% increase. Maybe even 50% percent if they can come up with enough plausible reasons. A terrorist explosion in the Alaskan pipeline would probably do nicely for that, right?

Rancer, you are the one that made (or anticipated) said argument. I have no idea whether it's true, I've seen no news claiming that Gulf oil extraction is going to go down, or oil companies claiming price hikes are a result of this.

Regardless, if oil production in the Gulf shuts down completely, as you've indicated it might, that would certainly exceed the production gap which can arise at the refining bottleneck, and would diminish supply.

Understand that the fact that there is a refining bottleneck doesn't mean that we've got huge tanks of oil just piling up in front of the refineries, excess that could go into the plants during the shortage. Crude extraction is kept at more or less the rate that the refineries can handle. If we suddenly discovered extra refining capacity, it would take some time to ramp up extraction to meet it.

Anyway, I don't generally hear the lack of refining capacity as a reason for price hikes (except when refineries are shut down, due to storm damage or for maintenance like this spring), so much as they're the reason that when we score big political petrol victories, like convincing the Saudis to tap their excess extraction capacity or open the SPR, it doesn't have much of an impact on price.


Finally, Rancer, the main thing you need to realize is that oil and gas prices are never going to go down, never ever again. The price is only going to increase, from now until there is no more use for the stuff or it's all gone. Demand is rapidly expanding as global demand for all the many oil byproducts continues to increase in the developing world. At the same time, production is more or less flat, and there's only a very little room for expansion, with new discoveries slowing and production on existing fields very near to capacity. We all need to accept that economic reality.

Sure, can understand that we won't have billions of barrels of oil waiting in storage tanks on U.S. soil (not counting the SPR). Yet when VLCC's come into port they don't have their entire load processed right away IF the refineries are as behind as they claim.

So citing immediate shortages as the reason for a price increase by gas companies is like your local gasoline retailer marking up the gas in their tanks another dime while they didn't pay any extra but are anticipating or told of another price hike.

Back when the Valdez ran aground, I boycotted Exxon by buying anyone else's fuels. It probably saved me quite a bit of money seeing as how their prices were almost always so much higher. The reasons for that were not only to cover a loss of their shipment, their leased/purchased oil carrier AND the anticipation that they were going to have legal costs to cover. Not to mention the likely possibility of having to pay for clean-up costs and other civil damages.

Citing economic theory doesn't change the perceptions of those corporations nor do they care. They look at one thing when setting prices. Maximizing profits at all costs. They aren't trying to ensure longevity. They are preying upon the fact that oil production isn't going to jump by any great factor. And yeah, it is silly to expect those prices to fall at the pumps. Yet if they suddenly start price gouging, either they will learn to drop prices to affordable rates or start losing customers.

You say that the oil demand is consistent. Yes, it will be fairly consistent for some time. Yet with alternative fuels and more efficient fuel cars, that will change over time. Don't get me started on the fact that oil companies probably had a lot to do with LACK of progress on fuel efficiency with our automotive makers. So their outlook is to get it while they can. Right? That's what your outlook would be. Gouge people while you've got a demand base? And if price-fixing weren't illegal, you'd probably suggest that they do that as well.

And maybe your economics thought process realizes that prices on everything goes up because of the transportation costs on all goods when distributed throughout the country. While the idea of Chinese "dollar" items aren't in oversupply, other niceties will become shortages because their profit margin isn't there any longer. Let us not forget that their is the perpetual inflation involved in trucking gasoline to remote locations and the more you raise the fuels the transport vehicles use, the more you have to justify inflating fuel prices!


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P.S. Produce at the grocery stores is already showing the effects. Onions are over a buck a piece and tomatoes are over two bucks. Maybe the next time folks pay $2.50 for their dollar-menu hamburger, they realize the extra charges came from adding veggies (which came from the fuel used in distribution costing more than growing the stuff did!). And don't cite that isn't so because a great example is the Columbian coffee growers are paid 6 cents a pound. How many pounds of coffee can you afford to pick if you drive 20 miles to work in Columbia?

That is how it works much of the time, yes. Oil is mostly traded in a futures market, expectations and anticipation are everything.

Most economic theory begins by assuming that is the goal of firms. ;)


Rancer, what is your point?

The point dear friend, is this...

At some point maximizing profits as much as you can JUST because you can is price-gouging. Sure, some people are gonna buy gasoline if it hits $4.00, $7.50 or $12.00 because it isn't cost-prohibitive to them and they still will want to drive to work. That doesn't mean price gouging is good or that it should be allowed.

The point is that laws need to be made to protect the consumers from those that would wish to prey upon their NEEDS! That is the reason there are regulatory commissions to keep them from turning off the electric on senior citizens during heat waves or to keep the gas during hard freezes.

P.S. If it offends your sense of laissez faire in regards to our national economics... then guess you can jump onto this band-wagon really late (like when it hits $100 per gallon and your loaf of bread costs $10.00).

I'm going to have to ask you to define your concept of "price-gouging" here. Seems like it's being used just as a vague term you can slap onto things to make them sound bad.

The reason that gas companies don't charge prices that high is because they would make less money in doing it. That's how market price equilibrium works, if the price is set too low, the result is shortages as people line up to buy more of a product than firms will offer at that price. But if the price gets set above that point, people leave the market, and firms would make a fatter profit by lowering the price to attract more customers.

There's a lot to be said for regulation, but it's vital to realize that the nature of regulation is extremely important. Government price fixing is a horrible, awful, no-good, very bad idea; that's what led to the shortages and lines during the embargo of the '70s (not the embargo itself). Government subsidies, on the other hand, are a minimally distortive way to lower prices for the consumer (in the immediate transaction), the costs of doing that are less damaging than trying to fix gas prices, but I would posit to you that even then it's too expensive a program for not much benefit.

High gas prices really aren't a bad thing. They raise awareness of petrol's limitations and dangers while encouraging the development of alternatives.

Well, it's been over a year since I'd originally posted this topic with the thought that gas prices were gonna soar up to $4.00 a gallon. They still haven't technically hit that price for me yet, but the average price for the country is at that level.

Do I drive that much? Nah. Do I care? Sure... in a proportionately greater amount that I use it. Does that mean I have no right to talk? Sure I do.

Loaf of bread about this time last year was $1.14. Now it's $1.34. Eggs were around $1.49 per half dozen. They're definitely more than that now. Having gotten to almost that much per dozen... and even close to $2.00. Milk fell back down to about $2.50 per half gallon or a little over $4.00 per gallon. Pretty soon, gasoline will cost more than the milk does. But the point is that it drives the cost of everything up in the process.

Say goodbye to a 25-cent tomato or the 99-cent head of lettuce. If you can find a bell pepper under 50 cents, you're doing well. Don't ask how much orange juice is nowadays. Even that semi-juice product of "Sunny Delight" costs a pretty penny (plu or minues a couple hundred).

How to fix it? Drive less. Buy smarter. Ration what you have and decide what is luxury and what isn't. Gasoline is a kind of luxury now for those driving the SUV's. Ever notice how many used cars are of that type? I won't predict that gas prices will hit $5.00 this summer. Because I don't want to look back a year later and say "oh, okay... it was a year longer than expected" or worse... "oh, it was a dollar or two shy of what it ended up being".

People like to talk about how this is just the result of a speculative market and prices will head down again but there's one problem that they're not seeing. China.

Well I was dead wrong.

Eh? Dead wrong on what? Seeing the prices drop because of rising Chinese consumption affecting the world market? I'm sure their demand is rising quickly.

But it is amazing to see a gallon of unleaded gasoline at $1.69. Can't remember the last time it was that low. Found an old June 2004 article Why Gas Prices Are Too Low on the Washington Post's news website:
http://www.youtube.com/watch?v=GfJqJVNGoBQ Wrong Link
http://www.washingtonpost.com/wp-dyn/artic...-2004May31.html

A recent article on a Los Angeles CA website says as of Nov 10th that prices have declined 55 days in a row: http://www.nbclosangeles.com/news/local/So...ue-to-Drop.html

It credits a glut in the world oil market, reduced demand because of shockingly-high prices and the effects of futures speculators. While the supply and demand can not be altered directly by anything, it would be really good to know that speculation ALONE won't drive prices into double or triple what it currently is because of their expectations of lower and lower production from here forward.

It was almost $4.00 a gallon here, probably was at least that in California... and I am here wondering how much of that was PURE speculation!! :angry: