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Gas prices reach all-time highs in America May 21, 2007

Posted by Matsu in Business, News and politics, Random.
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At the risk of being flamed by my readers living outside of the United States, let me say that the recent jump in the cost of gasoline is going to be a significant drain on the US economy. And to make matters worse, while the price at the pump goes up past record levels the cost of crude oil in April was $7 per barrel less than a year ago. At the same time the price per gallon is 50 cents more than it was last year. Something just doesn’t add up, the raw material (crude oil) price is down and the finished product (gasoline) is up, significantly. Oh, and did I mention that the oil companies are making record profits? The biggest profits in the history of not just the fuel industry, but of any industry, ever. WOW! I wonder who is in control of the price and profits. Hmmmmm.

To read more about the current state of gas prices, read this MSN Money article. Along with a good review of the current state of oil and gasoline prices it also provides a breakdown of the average price of gas in every state. I don’t know why, but New Jersey has one of the lowest prices right now.

Obviously, while I may be getting my facts from a reliable source (actually, several sources), the rest of the statements are all mine. I don’t usually rant in my blog posts, but this time I’m making an exception. I understand the concept of a free market economy and forces of supply and demand, but this is getting ridiculous.

I don’t like the idea of more government controls or intervention, but it seems that something has to be done by someone. All of the goods and services are affected by the price of transportation (which is dependent on fuel). So, such a sharp rise in costs can really cause havoc on the economy. Just as fast as the gas company profits go up, all other businesses’ profits will drop. In the end, we will all suffer.

Bert, oh great and all-knowing crude oil connoisseur, help me out here. What is one to do? How is this going to turn out? Speak, oh great oracle of the crude!

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Comments»

1. Pedro Pinheiro - May 22, 2007

I’m not going to flame you – gas over here is too expensive to spend on flaming anything! 😀

Gas here in Portugal, regular, has reached €1.36 a liter, or around $7.00 a gallon, and diesel, €1.06 a liter, or around $5.45 a gallon (a significant portion of “regular” family cars run on diesel here in Europe). The way to save money is to invest in cars with good mileage – in town, my scooter gets around 43MPG, and my RAV4 gets around 27.7MPG of diesel – if driving on the open road, as long as I don’t get HFS (heavy foot syndrome) the values are better. Which by the price difference, makes each kilometer I run on the scooter cost almost the same as driving the Toyota…. oh well.

2. generalmole - May 22, 2007

Matsu, I completely agree that this “situation” has finally gotten out of control. There has been an email circulating the internet recently/ again via email FW: on a resolution that has worked in the past. I have pasted the contents below.

This actually has some potential, I think, to make a difference and make a point:::
======================================
======================================

GAS WAR – an idea that WILL work

This was originally sent by a retired Coca Cola executive. It came from one of his engineer buddies who retired from Halliburton. It ‘ s worth your consideration.

Join the resistance!!!! I hear we are going to hit close to $4.00 a gallon by this summer and it might go higher!! Want gasoline prices to come down? We need to take some intelligent, united action. Phillip Hollsworth offered this good idea.

This makes MUCH MORE SENSE than the “don’t buy gas on a certain day” campaign that was going around last April or May! The oil companies just laughed at that because they knew we wouldn’t continue to “hurt” ourselves by refusing to buy gas. It was more of an inconvenience to us than it was a problem for them.

BUT, whoever thought of this idea, has come up with a plan that can really work. Please read on and join the battle! By now you’re probably thinking gasoline Priced at about $1.50 is super cheap. Me too! It is currently $2.79 for regular unleaded in my town. Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a gallon of gas is CHEAP at $1.50 – $1.75, we need to take aggressive action to teach them that BUYERS control the Marketplace….. Not sellers. With the price of gasoline going up more each day, we consumers need to take action. The only way we are going to see the price of gas come down is if we hit someone in the pocketbook by not purchasing their gas! And, we can do that WITHOUT hurting ourselves. How? Since we all rely on our cars, we can’t just stop buying gas. But we CAN have an impact on gas prices if we all act together to force a price war.

Here’s the idea:

For the rest of this year, DON’T purchase ANY gasoline from the two biggest companies (which now are one), EXXON and MOBIL. If they are not selling any Gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit.

Acting together we can make a difference. If this makes sense to you, send this to some friends. I suggest that we not buy from EXXON/MOBIL UNTIL THEY LOWER THEIR PRICES.
Buying in force can work.
It does for the big boys.

3. Moose - May 22, 2007

Free Economy. We are not socialists. The fuel companies know that they have a market that requires them. Personally, I think they should charge $10/gallon in the US for a while.

(done being shocked?… it’s okay… I’ll wait….)

(waiting….)

(waiting…)

Like I said, I think they should make it $10/gallon. What would be the effect of this?

Short Term:
a. lots of complaining and threats of lawsuits – particularly from State Attorney Generals… but, that’s okay, lawsuits take *forever*, so they can be ignored.
b. The cost of everything goes up by some percentage.
c. Americans have to make a choice – buy gas to get to work (it would suck to have to pay a week’s pay to drive to work for four days, wouldn’t it?) or pay for fresh fruit, milk, cheese, etc to feed the family.

Long Term:
People would be more responsible with…
a. car purchases
b. driving speeds
c. driving habits
d. where they choose to live relative to where they choose to work, shop, etc.
Businesses would raise salaries…
a. minimum wage would go up
b. non-essential businesses would go out of business
c. unemployment would hit double digits
d. service people would do more work “virtually” in smaller offices or at home

But, for those of you who have studied Economics you already now that these negatives are coming anyway… in particular we are looking at 2010-2012 being very bad for our economy – double digit unemployment, non-essential business going out of business, etc. Add to that collapse of healthcare, the boom business for drug companies – particularly retail drugs companies/pharmisists – and the black plague that is building in Louisiana that will spread to other parts of the country… things are already going to get much much worse…

4. TRUSTWORTHYPOOH - May 22, 2007

NO NAME/CUT-RATE STATIONS AND OTHERS BUY GASOLINE ON THE SPOT MARKET….OFTEN THIS IS FROM THE ‘BIG BOYS’ . WE HAVE NO WAY OF KNOWING THE SOURCE OF GASOLINE WE BUY AT THE PUMP..FURTHER , After adjusting for taxes there is minimal difference in worldwide gasoline prices (yes there are some exceptions) usa PAYS MUCH LOWER TAX/GALLON

5. Matsu - May 22, 2007

Pedro — Yup, I thought gas prices were a lot higher in Europe than in the USA. When compared to your $7 per gallon, $3.20 looks a LOT better. We have no reason to complain.

I guess we should plan for our gas prices to eventually go up to the price of gas in Europe. It certainly won’t be going down given the fact that it’s a limited natural resource and limited production (refineries are not able to keep ups with demand – or so the oil companies say).

It’s well past time to look at alternative sources of energy and fuels.

6. Pedro Pinheiro - May 23, 2007

Paul,
If the US had invested in wind power what was and is being spent in Iraq (generating even more and definitely less risky jobs), you probably could live by your own domestic oil production now, and definitely without having to resort to any of the OPEC countries. I think oil based fuels will be around for long than we expect – there’s no magical one stop solution to the world’s energy demands, but increasing the efficiency and decreasing the waste of our energy expenditure is an important first step, regardless of anything else we do.

7. TRUSTWORTHYPOOH - May 23, 2007

We Americans tend to be short-sighted and rarely respond until our backs are against the wall.BUT WE DO RESPOND. Eventually!( I could speculate endlessly as to why we do…one reason we have been very lucky so far, ………i.e.our Civil War could have destroyed this country)
We gave little thought to space travel until the USSR got there first
Then, we really got going
I am troubled by a (usually Republican) governmentwhich focuses on the interests of big business that is, the Oil Gas And Coal lobbies to the exclusion of common sense interests.
SUV sales up 3% this year

8. Shawn - May 23, 2007

My little Ford Festive gets great gas milage, but even so what used to be a $5 fill up is now $15 and that can add up quickly. I only live about 10 miles from work so I invested in a decent road bike (approx. $500 initial investment) and commute as often as possible. I realize not everyone is able to commute via bicycle but for those that are able, I highly recommend it. It does take a little planning ahead as you will probably want to have an extra pair of shoes and socks and other clothing items to be left at work. If you prefer you could pack them in a back pack, but this adds extra weight and bulk and heat on those hot summer days and from my experience it is a much less enjoyable ride. Also, I realize the intial investment in the bike might be a deterrant for some, but economically and physically it will pay off in many ways. For instance aside from the obvious savings at the pump and the added health benefits (how much have you invested in fitness equipment and gym memberships), you will be helping the economy by helping out a local small business bicycle shop. You may even look into local riding clubs and join them for an evening or two each week on their group rides. This can really be an exciting hobby with many benefits, and if your up for it you might even try riding competetively!

9. JD - May 29, 2007

Wow you got a lot of comments on this one! Well I am doing something about it. Bicycle and carpool. Each time I ride my bike to work and back I don’t have to spend for $2.33 gas @ $3.50 a gallon. I really want to think that the best thing for the gov’nment to do it nothing. Some group out must be thinking that their is a lot of money to be made by making a new refinery and undercutting the bad oil companies. There *has* to be room for more competition. I dunno maybe I wrong, let the gov’nment place price controls.

10. Jay - May 27, 2008

I don’t think sales of SUVs are up 3% this year:
“Published reports say half as many SUVs will be sold this year as in the peak years that enjoyed annual sales of 3 million units.

Sales of large SUVs plummeted 28 percent in the first quarter this year, while subcompact sales rose 32 percent, says Autodata Corp.”

Most of the things that would happen if gas hits $10/gal are really bad things: businesses closing, inflation, fewer jobs, etc. Wouldn’t it make more sense to start drilling in the Atlantic? This would result in much lower prices of gasoline. We could even have the gov. add an additional tax to the cheaper gasoline (still be cheaper than gas is now) and have that tax go straight to the development of alternative energies such as hydrogen, electric cars, etc.


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