Posted on 04/03/2005 6:16:32 PM PDT by BulletBobCo
Gas prices are not high.....historically speaking. 30 years years ago I was paying over a $1.00 per gallon for premium and was living in a $35,000.00 4 bedroom w/den and family room suburban house in Orange County California.
Today, I pay about $2.50 per gallon for premium and live in a 4 bedroom w/family room and library (square footage is about 30% more than the old house) and they are selling all over town(So. Orange County) for about $850,000.00 to over a million.
So......real estate has gone up 20 to 25 times and gas prices have not even tripled.
Gas prices seem high because they have a tendency to spike up rapidly when increasing and just sort of drift downward when decreasing....like all commodities do. Commodities are bought on fear and anxiety and when things settle down they are sold into a slowly declining market because the demand is still there to support the price. Just the fear.... (international tensions, politics, opec rumors etc.etc) has left the equation.
Gasoline is traded in a very tight market. We simply do not have the production capacity to meet the demand. When we enter the summer driving season and inventories begin to decline, the price is bid up because of the fear of running out. When you can only refine so much product in 24 hours but the demand keeps going up price spikes are a normal market mechanism to decrease demand. When this country has not built a new oil refinery in 30 years and all the refineries have to schedule their maintenance operations jointly to insure enough are still online to meet the demand ,you will have problems with price spikes.
The answer really is quite simple. We have enough PROVEN oil reserves in the ground to sustain our markets for hundreds of years at present usage.....we just cannot make it fast enough. If the oil industry was allowed to build new refineries without the fear of NIMBY or countless lawsuits from the Sierra Club you would find a decline in price occuring naturally. Think about it. The oil companies explore, drill, pipeline, supertanker, refine into product and transport it down the freeway to your local gas retailer for less than 1/3 the cost of a bottle of water. The water was probably run from a tap through a filter and then delivered to the store where you bought it.
Gasoline is a commodity,and as such,you cannot manufacture it and store it away in a warehouse somewhere. Like lettuce, when you pick it, you've got to get it to market! Gasoline cannot be stored either. When refined it has got to be sold now!
If we had more refining capacity gasoline prices would still react to market forces.....just not as radically.We have an extremely efficient delivery system in this country. More refineries would work wonders on the price.
The U.S. refining capabilities are atrocious. It's not an oil problem as much as it is a refining problem.
$ 1.99 yesterday in Cairo, Ga.
its not a supply issue - if it were, there would be shortages. there are no shortages, you can buy as much gasoline as you want. sure, it would help to have new refineries. but the current short term prices are about hedge funds and speculation in the financial markets, not about supply and demand.
"its not a supply issue - if it were, there would be shortages."
You don't have to have shortages to have spikes in gasoline prices.
I think the Iraqi oil goes mainly to Europe.
Why has their been a substantial increase in the money supply? Trade deficits? Thanks for taking time to explain!
Thank you very much for taking the time to explain it.
Thanks!
Okay - so we don't refine oil because of environmental regulation?
"When adjusted for inflation"
Screw inflation. It's too damned high.
Natural gas? $7 or so. It was higher when Enron played bug on windshield.
If gasoline, somebody needs to make it and somebody evidently wants to buy it, so, there is a market and a market price.
Nice post. Right on.
My ideal world would have us driving electic as is done with bumper-cars. A positive post on top, and a ground beneath with a couple dozen nuclear reactors providing the juice.
That would be nice to get a reduction in the price of gasoline to $2.50 per gallon. Let's hope!
Californians should be walking or riding bicycles as punishment for not pumping their own oil offshore as Texas and Louisiana have done for 50 years. We've carried them long enough.
My sentiments exactly!
In order to pay for the war on terror and the multitude of government handouts that everyone can not do without. Also to keep the asset bubbles (stocks, bonds and real estate) afloat. Printing money is alot easier than raising taxes.
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