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This topic comprises 4 pages: 1 2 3 4
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Topic: Gas prices is creeping up again
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Bobby Henderson
"Ask me about Trajan."
Posts: 10973
From: Lawton, OK, USA
Registered: Apr 2001
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posted 02-15-2009 10:42 AM
The proverbial bloom is off the rose when it comes to America's previous love affair of driving large, gas guzzling vehicles.
The insane, record high prices we saw last summer (and the previous 2-3 years leading up to it) created a great deal of demand destruction. The literal tax it gouged out of the general public is one of the reasons why the economy is in the toilet now. Years ago it seemed like anyone here in Lawton was driving a big truck or SUV and making fun of anyone in a Prius or similar economy car. When those drivers started spending upwards of $100 per week to commute back & forth, etc. it created some big problems. Diesel prices really did a number on a lot of businesses. Today I see far fewer trucks and SUVs on the roads. Most people here are driving smaller, much more fuel efficient vehicles.
I don't see the American public reverting back to driving gas guzzling vehicles any time soon. Everyone remembers vividly how fast prices spiked above $4 per gallon and knows the same thing can happen again. This is essentially why the Big 3 US automakers are on the verge of collapse. The only cool vehicles they sell use a lot of fuel. Want a stylish, well built vehicle that gets great fuel economy? More than likely you'll be buying from a foreign name plate to get that.
With that said, I'll be surprised if the oil industry can prop prices back up in the $3-$4 per gallon range this year at all. I think the futures traders betting on $75 per barrel oil later this year are taking a serious risk.
The thought process of oil futures traders seems to be the economy will snap back to good health and be all rosy near the end of this year. The problem is we're not in a normal cyclical recession. The disaster perpetrated to the housing industry gutted a lot of the spending power of the American public. Long term structural damage has been done to the economy. It will be at least a few years, if not more, before the American public sees home values going anywhere near those peak levels we saw just a couple of years ago. On top of that we still have other looming issues like unchecked price inflation in the higher education and health care sectors that will plunge consumers and our government even deeper in debt.
Unless key people in private industry and government come up with some real solutions to deal with these fundamental problems our economy could be bouncing along in its current shape for much of the next decade. If Americans want to create new wealth, they're going to have to do something besides flipping houses to the next sucker. They'll have to create wealth the old fashioned way: create a new product or service people want or need.
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Monte L Fullmer
Film God
Posts: 8367
From: Nampa, Idaho, USA
Registered: Nov 2004
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posted 02-16-2009 04:52 AM
As this topic of "Gas prices crepping up again" continues, I saw an interesting story in this morning's "The Idaho Statesman" - the Boise Idaho newspaper;
Linky
February 15, 2009
"Crude oil prices have fallen to new lows for this year. So you'd think gas prices would sink right along with them.
Not so.
On Thursday, for example, crude oil closed just under $34 a barrel, its lowest point for 2009. But the national average price of a gallon of gas rose to $1.95 on the same day, its peak for the year. On Friday gas went a penny higher.
To drivers once again grimacing as they tank up, it sounds like a conspiracy. But it has more to do with an energy market turned upside-down that has left gas cut off from its usual economic moorings.
The price of gas is indeed tied to oil. It's just a matter of which oil.
The benchmark for crude oil prices is West Texas Intermediate, drilled exactly where you would imagine. That's the price, set at the New York Mercantile Exchange, that you see quoted on business channels and in the morning paper.
Right now, in an unusual market trend, West Texas crude is selling for much less than inferior grades of crude from other places around the world. A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows.
But it is the overseas crude that goes into most of the gas made in the United States. So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil.
"We're going definitely over $2, and I bet we'll hit $2.50 before spring," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. "This is going to be an unusual year."
On the last day of 2008, gas went for $1.62 on average, according to the auto club AAA, the Oil Price Information Service and Wright Express, a company that tracks transportation data.
The recession in America has dramatically cut demand for crude oil, and inventories are piling up. So prices for West Texas crude have fallen well below what oil costs from places like the North Sea, Saudi Arabia and South America.
That foreign oil sells in some cases for $10 more per barrel - and that doesn't even include shipping.
Brent North Sea crude, which feeds some East Coast refineries - and therefore winds up at many gas pumps around America - now costs about $7 more per barrel than the West Texas crude. Deutsche Bank analysts say the trend should continue.
Historically, West Texas International crude has cost more. So nobody bothered building the necessary pipelines to carry it beyond the nearby refineries in the Midwest, parts of Texas and a handful of other places.
Now that the premium oil is suddenly very inexpensive, refiners elsewhere can't get their hands on it.
"It's so cheap," said Lynn Westphall, the senior VP of external affairs at San Antonio-based Tesoro, which owns a half dozen refineries on the West Coast and Hawaii. "But you can't just build a pipeline to everywhere. We know we can't get it."
Tesoro's refineries in North Dakota and Utah use locally drilled oil and Canadian oil, which also has been running about $10 more per barrel than West Texas crude.
So why not build more pipelines? Because investing billions of dollars over several years makes no sense when the prices could just flip a year from now to where they were before.
"How long is WTI going to be cheaper than Venezuelan oil? Than Canadian?" asked Charles T. Drevna, president of the National Petrochemical and Refiners Association. "You just don't build a pipeline like that."
At the same time, refiners have seen the same headlines as everyone else about job losses and consumer spending. They've slashed production just to avoid taking losses on gasoline no one will buy. Result: Higher gas prices.
"Why should a refiner produce more gasoline when the stuff we produce is not being used?" Drevna said.
Of course, complex explanations of the diverging price paths of West Texas crude and gas are unlikely to placate frustrated drivers. Memories of last summer's $4-plus gas have not receded.
"Drivers are being ripped off even more now than before," said Stuart Pollok, who was filling up recently at a Chevron station in downtown Los Angeles. He pointed out Exxon Mobil Corp. reeled in billions in profits last year when oil prices neared $150.
Others see the conspiracy reaching higher.
"It got really low during the elections and now it's going back up," said Christel Sayegh, a 23-year-old graphic designer in Los Angeles. "They do that every election, though, right?" "
------------Idaho Statesman, Feb, 16, 2009--------------
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Mike Blakesley
Film God
Posts: 12767
From: Forsyth, Montana
Registered: Jun 99
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posted 02-16-2009 09:40 AM
quote:
Historically, West Texas International crude has cost more. So nobody bothered building the necessary pipelines to carry it beyond the nearby refineries in the Midwest, parts of Texas and a handful of other places.
Now that the premium oil is suddenly very inexpensive, refiners elsewhere can't get their hands on it.
"It's so cheap," said Lynn Westphall, the senior VP of external affairs at San Antonio-based Tesoro, which owns a half dozen refineries on the West Coast and Hawaii. "But you can't just build a pipeline to everywhere. We know we can't get it."
...
So why not build more pipelines? Because investing billions of dollars over several years makes no sense when the prices could just flip a year from now to where they were before.
So according to that article, there is NO WAY we can ever cut our dependence on foreign oil. Meaning a large part of the recent political campaign was total baloney, assuming the politicians knew that fact.
No surprise, I guess.
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