Gas Prices Rising Fast

[Phoebus]

A fuel price stabilizer would be counterproductive.

The entire point of rising fuel cost is to signal scarcity, relative to current demand, whilst the purpose of falling cost signals abundance, again in relative terms.

If use doesn't fall as price goes up, because of artificial price controls, then you will get artificially high scarcity as seen in the US in the 1970s: lines at the pump.

Rapid price changes merely suggest uncertainty in the market. This is not something which should be regulated away, and the only thing which is for certain is that any such attempts will be met with failure. Humans are fallible, and thus market prices will be volatile. This is nothing to be upset over.

Regarding the overall price of gasoline, my own opinion, certainly not to be popular here, is that potential harm in far off jurisdictions and in far off decades is pretty much impossible to quantify - let alone pay for - and should thus not be taxed in the current time. If indeed harm does befall Bangladesh due to AGW, the largest emitters can pay restitution and provide assistance at that time. Attempts to measure and pay for such distant harm now seem... Impractical and a bit odd.

[Arlo1]

It'd be interesting to see the percentage income spent of fuel for a few other countries around the world.

The figures for most of Europe seem to average around the 10 to 12% of income expenditure mark; Eritrea is an odd case, presumably because of the small number number of cars vs the low average pay rate. I wonder what the figures are for the US? Pay rates in the US are broadly similar to those in Europe, I'd guess, but distances travelled and hence amount of fuel used may well be greater, offsetting the dirt cheap price of fuel.

I spend ~ 6.25% of my wages on fuel and thats before deductions. If after deductions its close to 10% I know its not a lot now... But I drive a some what fuel efficient car and only use it to get to and from work and a little running around. Its to bad the Gov can't give a tax break for thouse who need to drive to and from and for work. But at the end of the day I know where the prices are heading and I have known it for ~ 17 years since I started paying for gas. Thats why Im on the electric path!

[Joseph C.]

Not the same thing, but the UK government promised a "fuel price stabiliser", whereby as crude prices rose, tax reduced, keeping forecourt prices (and tax revenue) constant. We've not seen anything of it yet...

This is copied from a news report a few weeks ago:

Country / Price per litre (£) / Percentage of monthly income spent on petrol*

1. Norway / 1.64 / 7.4%
2. Turkey / 1.62 / 34.2%
3. Netherlands / 1.48 / 10%
4. Italy / 1.46 / 15.5%
5. Greece / 1.45 / 25.4%
6. Denmark / 1.43 / 8.1%
7. UK / 1.42 / 10.3%
8. Sweden / 1.41 / 7.7%
9. Eritrea / 1.41 / 61.1%
10. Belgium / 1.40 / 8.7%

*Monthly petrol costs are based on an individual owning a car that does 37.8 MPG, driving 12,000 miles a year.

The weak/dying Euro is a lot to blame for the higher prices. Oil is purchased in dollars.

[Punx0r]

I agree. Although only four of the countries in the list use the Euro

IMO spending 10% of your income just on fuel to get to work is too much. That's not even considering the other costs to running a car. Unfortunately, decades of planning mean a car is essential for many people.

The entire point of rising fuel cost is to signal scarcity

Are we talking in the long term (over decades), or the record peaks we've seen in the last few years? As far as I can determine, the recent highs were caused merely by wild investor speculation, and nothing to do with supply/demand.

[John in CR]

It'd be interesting to see the percentage income spent of fuel for a few other countries around the world.

The figures for most of Europe seem to average around the 10 to 12% of income expenditure mark; Eritrea is an odd case, presumably because of the small number number of cars vs the low average pay rate. I wonder what the figures are for the US? Pay rates in the US are broadly similar to those in Europe, I'd guess, but distances travelled and hence amount of fuel used may well be greater, offsetting the dirt cheap price of fuel.

I spend ~ 6.25% of my wages on fuel and thats before deductions. If after deductions its close to 10% I know its not a lot now... But I drive a some what fuel efficient car and only use it to get to and from work and a little running around. Its to bad the Gov can't give a tax break for thouse who need to drive to and from and for work. But at the end of the day I know where the prices are heading and I have known it for ~ 17 years since I started paying for gas. Thats why Im on the electric path!

I spend less than 0.5% on fuel for transportation. That's because my gas guzzling minivan sits parked for months at a time, and my ebikes are my primary transportation. That's saying a lot, because I loved being a cager and was always the driver of any group for over 30 years until I discovered the traffic avoidance potential of ebikes. Soon that % will go to zero as I just need to build something for the rain, and I'm dumping the car, though to get to zero I need to build my ebike solar charging station. I've had the solar cells for a year, but I'll get to it someday. I don't ride because it's green or to save money. The are just nice side benefits. I just abhor my time being wasted in traffic, and an ebike is better than anything in traffic and it's uniquely fun too...far better than any moto I've ever owned. That was before my main ride was a 117lb 21kw ebike, and now it's an absolute BLAST.

John

[Phoebus]

The vast majority of trading in any large market is conducted by speculators, and it is literally their sole purpose in life to analyze whatever it is that they consider their speciality, and to then make a bet based upon that knowledge. Thus, markets are technically the most efficient and effective information aggregators ever devised: a deep market reflects, via price, the culmination of all knowledge which the participants deem valuable.

Thus, to say that a price went up because of speculation is tautological - all price moves in all large markets are due to speculation, whether they be up, down, or flat. Whether a price moves over decades or over milliseconds, the speculators are the ones on the front line, ensuring that prices reflect pertinent information as quickly as possible.

Finally, this shows why government price controls, especially on a fungible and easily transported commodity such as oil, are always fruitless. The government obviously knows inordinately less than the traders about the future price oil, and any attempt to force the price this way or that results in long lines at the pump as oil traders send their wares to more profitable locales - unless, of course, the government is willing to subsidize the price by paying out of its' own pocket and making up the difference.

-

On a completely separate note, all excise taxes on cheap energy - fossil fuels at the moment - are in my opinion pointless. Every last drop of cheaply accessible oil, every last gram of cheaply mineable coal, WILL be consumed. Perhaps not by us rich folk in the west, but by someone. Cheap energy is a matter of life or death for billions of poor humans, and it will not be kept away from them - whether right or wrong, I simply don't see consumable oil sitting idle when people are begging for it.

[dogman]

Yeah, well, just another of my stupid fantasies that something could be done.

But I do believe there are guys in the poduction biz with deep enough pockets to bid up oil every spring, and do. They pay people to yak about it on the news and get a buzz going. Then they get out, and stick the dummies with the falling price. Even if they were to lose some money in the market, they make up for it 100 fold on the higher price for the oil they produce. They know how to make a bubble, and have the money to do it. It's totally worth it to them to see that they get top dollar for the oil they produce.

Unfortunately, it's just one of the things we have to live with if there is a free market. But it's just annoying to have it fluctuate as much monthly as it has in the last few years. Back in the 80's gas cost way too much relative to my income, but at least you knew what the price would be for the year. I'm not whining about an increase each year, I get it that it's going to keep going up. I just don't like it when start hearing them say on the news that the price will double by summer. It's clearly trying to hype it up so others can make mo money, while anybody with a fixed budged gets hammered by an artificial bubble in the price.

[Punx0r]

Phoebus,

Clearly you know quite a lot about this sort of stuff. I only comment based on second-hand tidbits from books and documenturies.

Men with letters after their names said oil hitting $150/barrel was a speculation bubble of some sort, and I believed them.

Perhaps I should have said the price spikes were caused by "over speculation", rather than speculation?

I would have to disagree that investors/speculators are generally wise. Otherwise we wouldn't have bubbles and the stock market wouldn't crash with alarming regularity! I also vaguely recall that a statistic study found very, very few traders consistantly made good trades!

As said though, I'm largely ignorant about the whole thing.

[dnmun]

the nearby WTI contract traded as low a $82.27 yesterday. lowest since last october.

how do these conspiracy theories about speculators account for that?

why are refineries losing so much money that the three large refineries on the east coast have now closed?

how can we have such huge crude inventories and such small gasoline and distillate inventories and yet have record gasoline and distillate exports?

why do the saudis publicly announce they want the price of brent to drop to $100, which it has just done?

how does this conspiracy operate? secret phone calls among the millions of 'speculators'?

is there like one big papa bear speculator who tells the other baby bear speculators what to do?

does he get to make all this evil money and all the little baby speculators lose it?

doesn't it seem just impossible for this conspiracy to be capable of functioning in a free market?

that is what free markets are all about.

[Joseph C.]

The vast majority of trading in any large market is conducted by speculators, and it is literally their sole purpose in life to analyze whatever it is that they consider their speciality, and to then make a bet based upon that knowledge. Thus, markets are technically the most efficient and effective information aggregators ever devised: a deep market reflects, via price, the culmination of all knowledge which the participants deem valuable.

Thus, to say that a price went up because of speculation is tautological - all price moves in all large markets are due to speculation, whether they be up, down, or flat. Whether a price moves over decades or over milliseconds, the speculators are the ones on the front line, ensuring that prices reflect pertinent information as quickly as possible.

Finally, this shows why government price controls, especially on a fungible and easily transported commodity such as oil, are always fruitless. The government obviously knows inordinately less than the traders about the future price oil, and any attempt to force the price this way or that results in long lines at the pump as oil traders send their wares to more profitable locales - unless, of course, the government is willing to subsidize the price by paying out of its' own pocket and making up the difference.

-

On a completely separate note, all excise taxes on cheap energy - fossil fuels at the moment - are in my opinion pointless. Every last drop of cheaply accessible oil, every last gram of cheaply mineable coal, WILL be consumed. Perhaps not by us rich folk in the west, but by someone. Cheap energy is a matter of life or death for billions of poor humans, and it will not be kept away from them - whether right or wrong, I simply don't see consumable oil sitting idle when people are begging for it.

Rubbish. The financial markets are the commercial equivalent of headless, schizophrenic chickens. If they were indeed as knowledgeable as you have made out they would be less volatile than they are - there are paranoid insane dictators that display more rational behaviour than they do. A few individuals may actually know what the hell they are doing, a la Warren Buffet, but the rest are idiots.

'As every individual … therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce maybe of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the general [Smith said "public" not general] interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security, and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, [as in many other cases] led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it'

Adam Smith's oft-misquoted 'invisible hand of the market'.

You may as well get used to forms of protectionism as there will be economic blocks. It is already happening - the EU is taxing any goods that originate outside of the EU - the United States has already commenced putting tariffs on Chinese solar. Eventually, oil will be placed into this category as alternatives are put into use.

One factor for the increased oil prices has been the closing down of refineries due to bankruptcy allowing the others to charge extra and claw their way back to safer levels of profitability. The other major factor is inexpensive cars in China and India allowing a lot more people to become consumers for the first time.

[dogman]

Well, for one, I always believe what the govt's say is what they are actually doing. So if the Saudis say they want to sell their oil for less I would simply have to believe it.

I do believe the oil producers don't care who they frock to get more money. They routinely leave refinerys twisting in the wind same as consumers.

The bubble is over because it's summer, when demand normally peaks in the US at least. It's regularly scheduled now for late winter and early spring, which was historicaly when they got the least for thier oil. They want the price to go up early nowdays, rather than wait for June.

So they create the bubble, then get out before it pops. And yeah, it is secret phone calls, on very high levels. Obama doesn't get one though, because he doesn't controll the US production. The calls go to people in countries where one guy does controll it, who have the most to gain.

[dnmun]

yep, the nearby contract just touched $81.21. dammed speculators! we need $140 to slow the waste of crude. let the saudis burn it up for their air conditioners.

[Tommy L]

Some food for thought:

Can "Mother Earth" churn out crude faster than we can use it?

I'm sure the true answer is out there............ \\m//

[Punx0r]

There's a theory that crude isn't the product of millions of years of decomposition of organic material, but is made much more quickly deep in the earth by some geological phenomenon.

However, there seems no reliable evidence for this, and it goes against the vast majority of scientific opinion.

So no, I wouldn't pin your hopes on oil being sustainable

[Ykick]

There's a theory that crude isn't the product of millions of years of decomposition of organic material, but is made much more quickly deep in the earth by some geological phenomenon.

However, there seems no reliable evidence for this, and it goes against the vast majority of scientific opinion.

So no, I wouldn't pin your hopes on oil being sustainable

Who really knows? I've always suspected oil might be important to help support tectonic plates much like a hydraulic jack and maybe pumping it out of the ground ain't the best thing to be doing with regard to earthquakes?

Crude oil is a shitty deal since everybody on the planet actually owns the stuff but only a small number reap huge profits from it. Same deal in my mind with the massive volumes of air we burn with that oil. Nobody owns the air so just burn baby, burn!

[cal3thousand]

There's a theory that crude isn't the product of millions of years of decomposition of organic material, but is made much more quickly deep in the earth by some geological phenomenon.

However, there seems no reliable evidence for this, and it goes against the vast majority of scientific opinion.

So no, I wouldn't pin your hopes on oil being sustainable

Who really knows? I've always suspected oil might be important to help support tectonic plates much like a hydraulic jack and maybe pumping it out of the ground ain't the best thing to be doing with regard to earthquakes?

Crude oil is a shitty deal since everybody on the planet actually owns the stuff but only a small number reap huge profits from it. Same deal in my mind with the massive volumes of air we burn with that oil. Nobody owns the air so just burn baby, burn!

If air were as "difficult" to get as oil, they might start raping us for that too.