Get ready for $2.50 gasoline this summer

[Donger]

I was just reading the EIA's latest Short Term Energy Outlook (http://www.eia.doe.gov/emeu/steo/pub/contents.html): "During the early summer months of 2006, the average retail regular motor gasoline price is expected to rise above $2.50 per gallon."

That's what the expected average retail price of gasoline could be. This doesn't take into account any hurricanes and other "disturbances."

Just a heads-up. I'd imagine that you will see $2.60+ in the midwest and close to $2.80 out west. The national average has been in the $2.28 to $2.36 range for the last few months.

[Donger]

Originally Posted by Skip Towne

As much as I hate the gubment being involved, this industry needs to be regulated. Gasoline is every bit as necessary as electricity in this day and age.

So are food and shelter, even more so. Should they be regulated/price fixed?

[Skip Towne]

Originally Posted by Donger

So are food and shelter, even more so. Should they be regulated/price fixed?

The free marke system is working in those instances. It is not in the petroleum industry.

[Donger]

Originally Posted by Skip Towne

The free marke system is working in those instances. It is not in the petroleum industry.

On the contrary, I'd say it's working as designed. Supplies are tight and demand is still high.

Globally-speaking, gasoline is still a veritable bargain in the United States.

[Eleazar]

Originally Posted by Skip Towne

The free marke system is working in those instances. It is not in the petroleum industry.

We are not at the price breaking point where people absolutely cannot afford it. Prices spiralled upward last year, but people kept driving.

There aren't that many less SUVs on the road anymore. There aren't that many more Honda Insights. Some people cut back on consumption marginally, but most just kept driving like they always did. There was only an increase in complaining.

If gas really cost something that people really could not afford, then you would see changes. But I don't think people have been sufficiently motivated to significantly change their consumption habits. How often recently have we seen a new thread here about someone buying a Tahoe or a Mustang GT? How often have we seen one about a basic import 4-banger?

As much complaining as there was, and I was part of it, I don't think people really can't afford it. Sure there are some, but it's a great minority, or we would see an incredible amount of shift in the market.

[Skip Towne]

Originally Posted by Donger

On the contrary, I'd say it's working as designed. Supplies are tight and demand is still high.

Globally-speaking, gasoline is still a veritable bargain in the United States.

I don't see home builders and grocers posting record profits every quarter like the oil oligopoly does. Oil stayed at $10 per barrel for 50 years and I haven't seen anything happen to cause it to go up 6X except greed.

[Eleazar]

Originally Posted by Donger

Globally-speaking, gasoline is still a veritable bargain in the United States.

At or above $5.00 a gallon around Europe, isn't it?

Those people drive less and drive smaller cars, but I would contend that this is a primary reason for those two things.

[Donger]

Originally Posted by Skip Towne

I don't see home builders and grocers posting record profits every quarter like the oil oligopoly does. Oil stayed at $10 per barrel for 50 year and I haven't seen anything happen to cause it to go up 6X except greed.

But you would if their primary material went up in price dramatically and yet their production costs remained the same, while maintaining continued high demand from consumers.

Oil was cheap for so long because they were pumping it like crazy with less demand = lower price. That has changed. Output has not increased all that much while demand has VASTLY increased.

[Donger]

Originally Posted by Cochise

At or above $5.00 a gallon around Europe, isn't it?

Those people drive less and drive smaller cars, but I would contend that this is a primary reason for those two things.

Right around there, yes. However, most of that difference is in taxes. It's some ungodly percentage, like 60%

[Donger]

Originally Posted by Cochise

We are not at the price breaking point where people absolutely cannot afford it. Prices spiralled upward last year, but people kept driving.

There aren't that many less SUVs on the road anymore. There aren't that many more Honda Insights. Some people cut back on consumption marginally, but most just kept driving like they always did. There was only an increase in complaining.

If gas really cost something that people really could not afford, then you would see changes. But I don't think people have been sufficiently motivated to significantly change their consumption habits. How often recently have we seen a new thread here about someone buying a Tahoe or a Mustang GT? How often have we seen one about a basic import 4-banger?

As much complaining as there was, and I was part of it, I don't think people really can't afford it. Sure there are some, but it's a great minority, or we would see an incredible amount of shift in the market.

Yep. The only short term thing that will have an immediate effect on gasoline prices is a significant and sustained demand reduction. If prices go as high as projected, we may see that.

[Eleazar]

Originally Posted by Donger

Right around there, yes. However, most of that difference is in taxes. It's some ungodly percentage, like 60%

I guess another factor in consumption would be that our government doesn't actively discourage use of the fuel, at least not as much as other countries do.

It's taxed heavily for revenue but not (yet) as a social engineering project.

[Skip Towne]

Originally Posted by Donger

But you would if their primary material went up in price dramatically and yet their production costs remained the same, while maintaining continued high demand from consumers.

Oil was cheap for so long because they were pumping it like crazy with less demand = lower price. That has changed. Output has not increased all that much while demand has VASTLY increased.

Output has not increased because the oil industry does not want it to increase. They want to artificially regulate the price by controlling the availability. The gov. has put a stop to that in other necessary industries like electric companies. They are called public utilities. Oil should be declared a public utility since it affects the price of everything you buy.

[DJJasonp]

I WISH for days of $2.50 per gallon.....

I payed $2.80 last week here in San Diego....

We get the ultimate reaming every time they decide to jack the prices....they do the big jacking so that when it does go back down to $2.25....everyone's happy like we're getting a freakin' bargain or something.

[Eleazar]

Originally Posted by Donger

Yep. The only short term thing that will have an immediate effect on gasoline prices is a significant and sustained demand reduction. If prices go as high as projected, we may see that.

I think it will take some time for the effects to show though. If the typical price for a car was $500 instead of $20k-40k, everyone would have switched to something else - or at least kept an economical car around for the bulk of their mileage. But people don't buy what they need in a car, they buy the absolute most they can afford. And as soon as one is paid off, they trade it in and start paying on a new one, sometimes before.

Since cars are such a large percentage of our expenditures it will take a whole car-buying cycle for change to even begin, I think. People don't feel they can just dump the Yukon they bought last year for $35,000 even if it does continue to suck down gas at 14 MPG. Other people have been driving a car that's paid off for years, and don't want to get into a payment again because they've adjusted their budget around not having one.

It will take time for peoples' attitudes to adjust, and in the meantime, there is friction.

[jspchief]

Originally Posted by Donger

So are food and shelter, even more so. Should they be regulated/price fixed?

Well, the governement doesn't fix the price of food per se, but there is a lot of legislation that insures that every american can get food, through farm subsidies, food stamps, etc.. So I'd say food isn't a good example.

There are a lot of neccessities that the government ensures will be available/affordable for us. But almost all of those things are products that this country can provide on it's own. We can't do that with oil. We can't force other countries to sell it to us for cheaper, and we can't force refineries to make gas without profit. If anything, price controls would force subsidies for the refineries, which would just raise our taxes and probably cost us more in the long run.

[Eleazar]

Originally Posted by Skip Towne

Oil should be declared a public utility since it affects the price of everything you buy.

I wasn't around in the 1970s the last time price fixing was tried, but I would rather have gas that is expensive but readily available than gas that is cheaper that I have to wait in line for an hour for, or that I can't find at all.