Reuters Money
Gasoline prices can be curbed: Here’s how
The U.S. Government already has a steel truncheon to curb high oil and gasoline prices. It’s called Dodd-Frank.
Petrochemical companies, banks, Wall Street and hedge fund speculators, though, don’t want to see real policing of this financial reform law to go into effect. They make billions with the status quo — at your expense.
In a classic red-herring tactic, House Republicans blame the federal budget deficit, EPA regulations and President Obama for high gas pump prices. Who’s really to blame? Let’s follow the numbers.
You can make a minor argument that increased demand for crude oil — and to some extent reduced supply — has some bearing on gasoline prices. There is a modest economic recovery going on here, in Europe and in developing countries like China and India. Everyone’s continuing to demand more black gold.
Yet there’s a huge disconnect between actual rise in demand and prices. According the American Petroleum Institute, gasoline demand rose 6.1 percent (year over year) in March while the pump price rose 22 percent during that period. The prices of all grades of gasoline rose 5.3 cents in one week (ending April 20), which was the highest level since August, 2008.
Gas prices are up 133 percent since the Wall Street meltdown gob-smacked the world economy in December, 2008. Is it possible that demand has risen that much in a sluggish period coming out of the largest economic downturn since the 1930s? Highly unlikely. You can blame slack production and Middle East crises for some of the price disparity, but certainly not all of it.
“There is no question that speculation is playing a role in the rise of gas prices,” said Rep. Barney Frank (D. Mass.), the ranking member of the House Financial Services Committee and key author of the Dodd-Frank law.
How to beat the energy tax
With crude oil prices once again shooting above $100 a barrel, getting a fill-up at the gas pump is getting pricey again. I just spent $60 to fill up my minivan over the weekend.
Even if the numerous Middle Eastern fights for freedom are resolved soon — unlikely at this point — we will still be hostage to foreign oil producers. Each increase in the price of oil is a direct energy tax on our transportation budgets.
Since conservatives in Congress appear unwilling to greenlight a comprehensive federal policy that will boost alternative energy, renewable electricity or green buildings, you’ll have to jumpstart your own conservation plan.
I don’t need to tell you how much gasoline is costing you at the pump. Across the entire U.S. economy, every extra penny at the pump costs us $1.38 billion, according to the U.S. Energy Administration. And that doesn’t include fuel surcharges that delivery services add on or the embedded costs of any consumer goods that need to be shipped.
If you commute by car — public transportation is better where available — you can’t avoid those extra dollars at the gas pump. But you can buy a fuel-efficient vehicle if you need to replace one.
Surprisingly, the smallest cars aren’t necessarily the most energy stingy. You can buy a pint-sized sub-compact and find that slightly larger car is more efficient.
The Mini Cooper, a pixie-like sub-compact with a 1.6-liter engine and manual transmission, averages 29 miles to the gallon in the city and 36 mpg on the highway. That’s not bad if your current vehicle is getting under 20 mpg.
Prius envy: Revenge of the hybrid driver
Jade Boyd lives in the People’s Republic of Pickup Trucks. As a science editor for Rice University in Houston, he’s literally surrounded on the road by Ford F-150s and Chevy Silverados. “I grew up in Texas, my dad always had a pickup, and if I had my druthers, I’d have a pickup too,” says the married father of two. “The Texan in me would love to drive a truck every single day.”
But then there’s the little issue of gas costs. With his friends filling up their pickups at around $75 a pop, twice a week, that’s $600 a month disappearing right into the tank. That’s why in 2007, Boyd went against his natural Texan instincts and bought himself a hybrid Toyota Prius.
Now with Libya in virtual civil war, the rest of the Mideast bubbling with unrest, and gas prices going through the roof, Boyd feels pretty prescient. He has a 60-mile work commute every day, but between carpooling and his gas-sipping Prius, he only has to fill up once a week. “For the longest time I couldn’t even put $20 worth of gas in the car,” he says. “It wouldn’t even hold that much.”
Great for him. Not so great for his truck-driving buddies, who are feeling Mideast turmoil right in their wallets. According to the Lundberg Survey of 2,500 gas stations around the country, gas prices just rose 33 cents a gallon in two weeks –- the second-biggest leap in the history of the gasoline market.
That’s why auto experts are now noticing a dramatic turn in car-buying behavior: Call it Prius Envy.
“We’ve seen conclusive evidence of that in the last two weeks,” says Karl Brauer, a senior analyst with auto-information site Edmunds.com. “There’s been a major shift in activity towards compact cars and hybrids, and away from large trucks and SUVs.”
Just take Toyota’s Prius sales numbers for February: 13,539 of the cars were sold last month, compared to 7,968 a year earlier. That’s a 70 percent year-over-year jump. When you look at average gas costs, it’s not difficult to figure out why. At 51 miles per gallon, Prius owners pay an average of $900 per year for fuel, while someone driving a 25-mpg car forks out more than double that, at $2,100.
As a Prius owner I can tell the remarks posted are biased through second hand observation. I decided that the extra expense for the vehicle was better directed to a country that is friendly towards the west. The popularity of the Prius gives Toyota the R & D funds to continue to evolve their technology.
As to Top Gear’s bashing of the Prius, they needed some deprecating entertainment. The Prius is not a sports car and driving any vehicle hard will waste fuel. My driving patterns yield 51 mpg.
When all electric vehicles become commonplace, the electricity used to charge batteries will be a domestic product. Did I mention how dysfunctional the mid-east has become?
Randy: “I watch the energy department reports on consumption closely, and there was never an increase in demand or reduction of supply in 2008 that would drive up the price the way it did.”
You do? Well, maybe you need to pay more attention(1). As shown in the figure, it was really a long term thing. Demand had been increasing for several years, while supply had stayed flat.
Randy: “And at the end of 2008, there was never the reduction in consumption, or the increase in supply to warrant the prices tumbling far below last marginal barrel cost.”
You’re kidding, right? The US economy goes into a tailspin, but miraculously there is no impact on oil demand? Tell me another one.
For those interested in the facts, the facts that Randy has so much trouble spotting, here they are (2).
May I suggest some coffee BEFORE you check those figures? Other than that, don’t let the facts get in the way of a good story.
Randy: “Yes Obama, there is a solution. Use the SPR the way it was intended to be used.”
Yeah! Let’s use the SPR for speculations! What could possibly go wrong? You know, other than causing MORE volatility in the oil markets…(3)
JEYF: “You then price gasoline at $100 a barrel …”
Oh, that was easy! You just price oil at $100/bbl, eh? But if it was that easy, why go through that elaborate scheme? Why not just price oil at $150/bbl, and keep it there, while you rake in the profits?
(1)http://www.consumerenergyreport.com/2 008/05/22/an-amazing-disconnect/
(2)http://www.eia.gov/emeu/ipsr/t21.xls
(3)http://www.consumerenergyreport.com /2011/04/07/speculators-political-reser ve/