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Gas Prices: Is It Really the Economy?

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I had to stifle a shout when I pulled up to the gas pump, yesterday morning, though the soccer mom in the minivan next to me actually shook her head in agreement with the words I mumbled. Almost overnight, prices have surged about 20 cents, here in Michigan, and the premium gulped down by the Land Rover LR2 I’m testing rang up at $3.29 a gallon.

Wasn’t it just a couple months ago that gasoline dropped down below $2 in many parts of the country? Yet, now we’re hearing some analysts project prices of as much as $4 before the summer ends. What’s happening here?

Let me stress that I am not a conspiracy theorist. I don’t spend time wondering who was really shooting at John Kennedy from that grassy knoll. I don’t take Oliver Stone too seriously. But I have a hard time believing there really isn’t some sort of collusion on the part of the oil industry. If you watch the pattern of the last few years, it’s unmistakable: gas prices rise to the limits of elasticity, then slump back, then, after consumers catch their collective breath, the numbers rise again, pushing a little bit higher before again slipping back.

For several years, that pattern has repeated over and over, each time nudging the top-line price a bit higher. American motorists freaked when the figures topped $2 a gallon, but the next round, $2 seemed cheap. And this time, last year’s $2.85 seems like a veritable bargain. Keep it up and we may soon accept $4-a-gallon gasoline as our norm.

There are some folks who like that idea, and not just ExxonMobil, the company that has, on average, invested less than any of its competitors in developing alternate fuel resources. There are plenty of regulators, lawmakers and environmentalists who think that despite the impact on the consumer’s pocketbook, high fuel prices are ultimately a good thing. In the long run, they argue, motorists will trim back their driving and switch to smaller, more fuel-efficient vehicles.

Perhaps they’re right, but I have a hard time accepting what’s happening at the pump. The irony is that despite all the dire warnings about our reaching the peak of oil production, the world is awash in petroleum. Yes, concerns about Mideast instability play into the hands of commodity traders. But there’s also the issue of refinery capacity. Whether you blame strict environmental regulations or greedy oil barons, U.S. production capacity is stretched thin, as we saw in the wake of Hurricane Katrina. That only makes it easier for the petro-giants to charge what they think they can get away with. I don’t need Oliver Stone to make me feel angry about that.

A lot of Americans agree, by the way. Notes a press release that crossed my digital transom, earlier today:

“Most Americans think they are being gouged at the gas pump and say that will cut back on their summer travel plans and general spending if fuel prices continue to climb to $3.50 a gallon or even higher, according to a major new Opinion Research Corporation (ORC) survey conducted for the nonprofit Civil Society Institute (CSI) think tank and its 40MPG.org project.”

The full report will be released on Wednesday, though you can get some advance information at http://www.40MPG.org and www.CivilSocietyInstitute.org.

AP: $4 Gas Is Nearly Here—Associated Press
 
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Comments (18)
  1. Gas prices in the US stay in a very narrow range relative to the global price of crude oil.

    http://i14.tinypic.com/62778t4.gif

    "Wasn’t it just a couple months ago that gasoline dropped down below $2 in many parts of the country?"

    Yes, in January when the global price of crude oil was $18/bbl below the current price.
     
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  2. There is no way it can be the economy if the gas companies keep posting profits (not sales, but profits), it doesnt add up. What can we as a whole do to make a change?
     
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  3. Desiri, Your point is taken but if you do the math, $18 less/bbl does not justify the huge run-up in prices since then. The fact is, the oil industry is just sticking it to us at every opportunity.
     
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  4. I think the Oil Industry is pretty screwed up. The leader of the country for letting it happen is also. The 1950s is the best its been for family life in america and it gets further from it each year since.
     
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  5. I have to agree that it surely seems like gouging at the pump. However, I do think the government should tax gas and get the price up to $4.00 a gallon. Don't tax diesel to encourage more efficient diesels and keep shipping costs down. By increasing gas prices using taxes, the government will have more money to invest into our roads and reducing pollution in factories. At the same time, the higher prices will force consumers into more economical transportation and the auto companies will have no choice but to build vehicles that have better fuel economy. By taxing gas, it is a win win situation for everyone. Those that tow or need large vehicles for families will soon have the option for hybrids and diesels that will produce better mpg numbers. By doing this the government won't have to worry about cafe requirements and all this CO2 talk. CO2 is a direct byproduct of combustion and can only be reduced by increasing fuel economy. Higher prices cause the public to desire more efficiency and inevitably reduce our independence on oil and reduce emmisions. I cannot believe that this hasn't been brought up as it is an easy solution that essentially solves many issues in one shot.
     
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  6. I agree whole heartedly with the reasoning as stated regarding how the oil companies have been priming us for the price increases. Every year riasing the prices just alittle bit higher although this year seems to be the one to let us have it with both barrels.
    One only has to look at the quarterly earnings, of the oil companies, and read their thinly disquised/phony reasons for the prices and it tells whos kidding who.
     
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  7. the oil companies have the supply and they demand the prices. too few companies. in my opinion the only shortage must be in tanker trucks. i've never seen so many on the road.
     
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  8. Gas was at it's low point on election day!
     
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  9. How bout this idea: raise federal taxes on gasoline by $2/gallon. Use the funds to work on replacing the internal combustion engine (ala Lutz's idea). I'm paying $5.25 gallon equivalent in Ireland so you won't get much sympathy from me. My 1.6L Golf does me just fine. As a born and bred Detroiter I can only ask you to look outside the box now and then (box = N. America).
     
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  10. The part that really irks me is the fact that part of the oil industry profits are subsidized by taxpayers. The ability for an oil company to drill on public land for way less than market price or even royalty free is absurd. And why should a profitable industry need gov't monies for risky offshore ventures? The Royalty Relief Act and more recent energy bill have made this a reality.

    http://www.pbs.org/now/shows/224/royalty-relief.html
     
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  11. Years ago and since I have writen to my "government" suggesting a gas tax of $1 dollar additional to present. The caveat is that I want the annual income tax form to have a box that indicates miles (total including all dependents claimed) driven. There is no care for the type of car driven. A genreral calculation of 15 miles per gallon is used. Then when the salaries (prior to deductions) are put in the people making less than $12K get all dollars in that extra tax money back. Up to $18K they get .90/per gallon back, etc.
    Corporate/company cars get nothing back as they get the tax deduction as a part of the business. Diesel would not be charged this extra dollar in tax. I have written this "government" in the past and never received an answer.
     
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  12. It's the REFINERIES, Stupid! (on top of the annual demand surge around this time, refs have to re-tool for the summer blends. As if it was not bad enough, thanks to YOU NIMBY CROWD, that the USA has not built a new refinery in three decdes!

    And yes, you are a clueless conspiracy theorist just as bad as Oliver Stone is.

    Please GET SERIOUS, STUDY the problem and report to us its REAL CAUSES!
     
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  13. "donaldd3 Says:
    May 1st, 2007 at 10:19 am

    Years ago and since I have writen to my “government” suggesting a gas tax of $1 dollar additional to present. .."

    Hi DOn. I fully agree with you. I did even better. I PUBLISHED a FORUM article back in 1995 in a journal of a particular engineering branch suggedsting very similar measures. Back then gas was $1. I knew even then I was right, and that people would NOT listen to me. They should NOT complain now. ANd regardless of how efficient we become, CHINA and later INDIA will put enormous pressure on prices, even with huge supply of oil, so you can kiss that $1 and $2 per gallon gasoline good buy, no matter which of theseclueless demagogues that promise "energy independence" (PROVEN imporssible) becomes the prez in 2008!
     
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  14. " Brad Says:
    April 30th, 2007 at 8:39 pm

    There is no way it can be the economy if the gas companies keep posting profits (not sales, but profits), it doesnt add up. What can we as a whole do to make a change?"

    Obviously, if you want prices to drop, or at least not to increase that much, you will need to drive less miles and drive more efficiently (there are tons of advice sites how to do that on the web), and, if you can, trade in your 15 mpg SUV for a DECENT Vehicle. But all that may produce little improvement if China keeps growing at 11 % REAL growth every year and trhe CHinese keep wanting to live just as you do! Even if the OPEC Supply does not drop!
     
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  15. If you thought the price of gas was "correct" in the 1970s, then today it should be $3.21/gallon when factoring in inflation. Funny how there's no similar outcry about the price of the SUVs which consume so much fuel.

    The problem is demand, plain and simple. If the oil companies wanted to gather more market share, they could simply lower the price (similar to the pizza wars in my college town) - has anyone ever considered that? But they don't do this due to sustained high demand and the cost of production. And I'll bet the complainers about the "oil company gouging" are happy with their investment return on their oil stocks in their 401k plan.

    And I've never heard anyone calling for a reduction in government taxes on fuel, which are about DOUBLE the profits that the oil companies make on each gallon. For those of you seeking a government solution, start there!
     
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  16. There is definitely gouging at the gas pumps by all the oil companies & with the complicity of the government whose elected members are all on the take (campaign contributions at the very least + bribes & kickbacks and whatever other benefits they are given) and co-opted by the oil companies. A few months ago oil dropped to $57 a barrel (42 gallons) and regular unleaded gas was selling for close to $2 per gallon. NOw we have oil at $64 per barrel and increase of about 18 cents per gallon and the price at the pump jumped a dollar because of a rise of 20 cents in the price of crude.
     
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  17. steve spelling:

    Congress wasted well over $ 36 million of the hard-earned ztaxpayers dollars over the years to conduct a dozen or so 'gouging investigations' ALL OF WHICH PROVED THAT THERE WAS NO GOUGING.


    The corrupt morons will KEEP wasting our hard earned tax $ to do more of these silly so-called investigations because they please their IGNORANT conspiracy-theory fed constituents.

    Too bad.

    But don't let the facts stand in your way.
     
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  18. Thor needs to correspond with the Marquis Du Boise that is looking for folks interested in improvement,not waste time writting letters to gouvenment that don't care and thrown all letters from Ambitious folks like thor into the big recycler de papier!and sell the shreded papier d' letters of ze good folks like thore and earn itselves additional income!,Now we need to deal with Ethanol and not gasolinas!,It's a grand paradox to write to thye wrong and uncaring people du gouvernment that pretends to care but wasting taxpayers mmoney on foolish military adventures,by which they cooperate with kick back monies from gas compagnies!,they need their money better then ours collective advice!,so why waste time with the wrong guys?!.
     
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