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#213904 - 02/24/12 11:05 AM Re: Gas Prices... Again [Re: itstarted]
logtroll Offline
old hand

Registered: 04/25/10
Posts: 6183
Loc: New Mexico (not old Mexico)
I put "dealers" in quotes because I meant metaphorical drug dealers, aka anyone who controls the oil industry/markets. The same crowd you are identifying. Sorry for the confusion.

Let's try and use so much less oil that we reduce the size of the oil baby to the point where we can drown it in the bathtub!
_________________________
"If you would make a person happy, add not to their possessions but take from their desires"
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#213942 - 02/24/12 05:33 PM Re: Gas Prices... Again [Re: itstarted]
Jeffery J. Haas Offline
veteran

Registered: 08/03/04
Posts: 10490
Loc: Downey, California
The last time the speculators went on a rampage (it was Summer 2008 was it not?) Americans STOPPED driving, did they not?
A lot of speculators got burned, did they not?
_________________________
"Our options for change range from basically what we have plus a little more Hayek,
to what we have plus a little more Keynes. Why?"

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#213952 - 02/24/12 07:09 PM Re: Gas Prices... Again [Re: itstarted]
Mechanic Offline
journeyman

Registered: 04/19/11
Posts: 802
One thing I missing from the arguments offered is an evaluation of gas prices in terms of constant-value dollars. Most of the current "rise in pump price" is, I suspect, more reflective of dollar inflation, not a "cost rise", per se. But, then, politicians of every stripe/ilk have long had a love affair with inflation !

Of course the "bitter edge" of inflation isn't even perceivable from the perspective of politicians - or their crony capitalists - is it ? What may mean a shorter stay at some cushy resort for some means there won't be as many franks in the beans for a lot of folks !

Perhaps we ought to be demanding our pols answer how - in real world economic terms - obligating oneself for a 40K debt to save <$2/gallon at the pump is viable ? Or why government - in this era of its declared "fuel crisis" - isn't pursuing every means to explore/develop/deliver fuel we need now; not "pie in the sky' in some vague future ? Proposing "solutions" with no short-term viability or even long-term promise without major economic/environmental impact isn't "political grandstanding" ! It isn't even responsible - unless, of course, your objective is to create a "social revolution", pitting the the "losing "haves" against the "never hads" while the "ruling elite" gull both sides ! >Mech

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#213954 - 02/24/12 07:34 PM Re: Gas Prices... Again [Re: Mechanic]
itstarted Offline
old hand

Registered: 01/27/03
Posts: 6354
Loc: Florida/Illinois
Mech... you have great theories..

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#213959 - 02/24/12 08:03 PM Re: Gas Prices... Again [Re: Mechanic]
Ted Remington Offline
old hand

Registered: 07/09/08
Posts: 4890
Quote:
One thing I missing from the arguments offered is an evaluation of gas prices in terms of constant-value dollars.


Not any more, Mechanic.

Look at the green line on the chart. That line represents what gasoline would have cost in various years if bought in 2005 dollars.

Interestingly, it is only since 1969 that gas prices were LOWER than they were in 2005, after adjusting for inflation.

So far as I can recall, no one has mentioned on this thread that one of the reasons gasoline is higher right now is because none or almost none is produced when the changeover is made from winter production to summer production at the nation's refineries. They have to shut down the refineries, which means that the consumers of gasoline are drawing down the reserves at the refineries and elsewhere, which has the natural effect of driving the price of gas up temporarily.

I am NOT saying that this is the cause of the huge jump in prices, but it certainly is contributory. This volatility is one of the reasons gasoline was removed from the CPI.

The saber-rattling in the Mideast is almost undoubtedly the major driver of this increase in gasoline prices. Speculators come out of the woodwork in times like these, as noted in the excellent article posted up above.
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Take the nacilbupeR pledge: I solemnly swear that I will help back out all Republicans at the next election.

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#213979 - 02/25/12 09:11 AM Re: Gas Prices... Again [Re: Ted Remington]
logtroll Offline
old hand

Registered: 04/25/10
Posts: 6183
Loc: New Mexico (not old Mexico)
Originally Posted By: churlpat lives
Quote:
One thing I missing from the arguments offered is an evaluation of gas prices in terms of constant-value dollars.


Not any more, Mechanic.

Look at the green line on the chart. That line represents what gasoline would have cost in various years if bought in 2005 dollars.


Used to be I would freak out semi-irrationally every time gas prices jumped a bit, just like everyone else seems to do. You know when the rumor sez "it's going up 10 cents", and the lines are so long that it takes 30 minutes to get to a pump? Or, the word gets out that Nifty Gas 'N Go has gas for 12 cents off, and the street is clogged until midnight with folks saving money? Or it's 25 cents cheaper in a town 45 miles away, and Gabe sez he's going to go there to buy a tank of diesel?

Well, I'm a naturally calkilating in my head all the time kind of guy, and I would run the numbers on what it would cost me to take advantage of the price differentials. Let's assume a pretty empty tank that would take 15 gallons to fill up, and a price spread of 20 cents per gallon on $3 gas. The savings on making a special effort to get a good deal would be $3 bucks (a cup of Starbucks every week). Now consider the investment in getting that $3 bucks from a dead start - maybe drive 4 miles round trip from home and wait in line for 15 minutes. With a 20 mpg vehicle you'd burn .2 gallons, or 60 cents. Your drive time plus wait time would be 30 minutes, or $5 bucks if you make $10 bucks an hour. So, you would pay $5.60 to save $3.00.

Let's say you are down half a tank and see a price 20 cents cheaper and you take advantage of the windfall opportunity and stop to save some money. 8 gallons at 20 cents off, a buck sixty, hooray! - and it only cost an extra 15 minute stop at the pump! Again, if you are a $10 bucks an hour worker, you just spent $2.50 to save $1.60, good fer you!

My point here is that it's always a good idea to use scale and relativity when you really just want to panic. Sure, you can look through the telescope from the other end in order to make things scarier (how much will it cost in a year, what will it do the the economy, etc.) but if you don't understand the scale and associated relativity of those monster numbers, then what have you got? At my scale, those monster numbers mean a cup of coffee a week.

"Don't Panic!" The Hitchhiker's Guide to the Galaxy

(PS - Thanks for the chart, Churlpy)



Edited by logtroll (02/25/12 09:41 AM)
Edit Reason: nod
_________________________
"If you would make a person happy, add not to their possessions but take from their desires"
Unknown

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#214022 - 02/25/12 02:36 PM Re: Gas Prices... Again [Re: logtroll]
AustinRanter Offline
enthusiast

Registered: 10/29/06
Posts: 3643
Loc: Austin, Texas
Originally Posted By: Mechanic
One thing I missing from the arguments offered is an evaluation of gas prices in terms of constant-value dollars. Most of the current "rise in pump price" is, I suspect, more reflective of dollar inflation, not a "cost rise", per se. But, then, politicians of every stripe/ilk have long had a love affair with inflation !


One more perspective...

Quote:
The high and rising price of oil does, however, contribute to the decline of the dollar, because the increasing cost of oil imports widens the United States’ trade deficit.

In 2007, the US spent $331 billion on oil imports, which was 47% of the US trade deficit of $708 billion dollars. If the price of oil had remained at $65 a barrel, the cost of the same volume of imports would have been only $179 billion, and the trade deficit would have been one-fifth lower.

The dollar is declining because only a more competitive dollar can shrink the US trade deficit to a sustainable level. Thus, as rising global demand pushes oil prices higher in the years ahead, it will become more difficult to shrink America’s trade deficit, inducing more rapid dollar depreciation.

Martin Feldstein, a professor of economics at Harvard, was formerly Chairman of President Ronald Reagan’s Council of Economic Advisors and President of the National Bureau for Economic Research. Link

_________________________
Turn on ANY brand of political machine - and it automatically goes to the "SPIN and LIE CYCLE" wink

Yours Truly - Gregg



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#214038 - 02/25/12 04:52 PM Re: Gas Prices... Again [Re: AustinRanter]
itstarted Offline
old hand

Registered: 01/27/03
Posts: 6354
Loc: Florida/Illinois
Analysis
comments at the end very worthwhile

just one of dozens:
Quote:
But there's a strong profit incentive for people who buy or sell crude oil or crude oil futures contracts to try to get it right." Um, no there isn't. There is a strong incentive to make a profit, which means there is a strong incentive for the price of oil to be wrong.

The threat of Iran is, as you say, speculative. Furthermore, it has already been priced into oil many times before, for instance, with the invasion of Iraq, with the Arab Spring, etc. Each one of those occurrences brings with it an increase in price derived from the threat of a closure of the Strait of Hormuz.

"Does it make sense for consumers to suffer now just because of something that may or may not happen in the future?" No, it doesn't. The price of oil has risen because of the threat of Iran. However, in the event that oil supply is actually disrupted the price of oil will rise further. So what just happened there? One action, Iran, caused the price to rise twice. This makes sense since oil producers, including Iran, want the price of oil to be as high as possible -- that is their profit motive, not to get the price "right."
_________________________
In what concerns you much, do not think that you have companions: know that you are alone in the world. ~ Henry David Thoreau

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#216147 - 03/13/12 02:46 PM Re: Gas Prices... Again [Re: itstarted]
itstarted Offline
old hand

Registered: 01/27/03
Posts: 6354
Loc: Florida/Illinois
Think of a casino...where the odds are very stongly with the "house"... Let's say from 30% to .5%. casino odds

Now think of a casino where the odds may be 70% to 85% with the "house". A casino where you only have a 30% chance of getting your money back.

That's where we are in the oil derivatives market.

Now, realize what happens when the casino shuts down... after being in business for a year. Do you get your money back? Of course not. The casino walks away with their profit.

That's what's happening in the derivatives market. A win-win proposition for the speculators, because they passed on the price increases to the public. The public pays for their unreasonable bets.

Here's the nub of the current situation. From a time when end users (Airlines, trucking firms, energy companies) accounted for 70% of the "hedging" in futures (derivatives)... to today, when they account for about 15% of these hedges. That means the "betting" is being done by the banks and brokers.
Further more, because the actual final price is laid at the door of the consumer, they are not at risk... even if the prices fall, later on.

As long as there are no regulations, and no oversight on collusion to drive up prices, the speculation will continue. No risk. Trading done in unregulated markets, or without CFTC oversight, means that supply demand will not result in losses for the speculators.

Like the casino that has not yet closed, speculation continues, even though the US surplus increases and worldwide demand levels off. The oil companies reduce refining, and the rumor market gears up to a panic pace. Like the way the Brazilian Coffee Planters conspired to drive up coffee prices, so will the speculation and betting continue. The public will continue to pay the higher prices... just the same way that coffee prices went up by 50% in the past two years.

As the supply/demand level reverses, the gas prices will eventually go down... the speculators will walk away with their profits, and we'll again wonder what happened, and why we're always on the short end.

Read about it here.
_________________________
In what concerns you much, do not think that you have companions: know that you are alone in the world. ~ Henry David Thoreau

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#216220 - 03/13/12 09:22 PM Re: Gas Prices... Again [Re: itstarted]
Mechanic Offline
journeyman

Registered: 04/19/11
Posts: 802
Then Ill add another IS !

Had the U.S. not followed the beaded/bangled non-science anti-nuke luddites circa 1980 we'd have plenty of clean electrical power ! And, had we used this power to implement efficient public transportation the computer age afforded, we would have even cleaner air, far fewer traffic fatalities, and more efficient ground transport.

The hell of it is, with a true "leader" we can implement these benefits within a generation or less, while stimulating the economy, for far less cost than the Apollo Program ! But one early casualty is going to be the "green energy" fairy tale ! Which means a lot of politicians are going to have to be dragged free of their firm bite on the lobby tit ! Right now - under the Obama Administration - its "pay to play", with the Administration "kicking back" most of the costs from the taxpayers' pockets ! Disagree ?


Then by all means "splain" how every economic "bailout" the OA has promoted has tanked ! "Splain" how every "green energy" corp its subsidized has gone tits up even as its executives reap major bonuses ! >Mech

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