$3 gas -- is it here to stay?

CNN/Money ^ | 9/7/05 | Chris Isidore

[Rodney King]

that jack up of .75 a gallon in a day was just gouging, at least in this area... those who remained calm will buy it cheaper... those that ran around like idiots will be burning their $3.19 gas that they put into every container they could find for the next few weeks cursing themselves and gas prices continue to fall.

Your two sentences are conflicting. On the one hand you say that the price rise was gouging, then you turn around and acknowledge a large increase in demand (people running out and filling up containters). Which is it?

[kjam22]

There are some factors that differentiate computers from oil and gas. For one, it has become cheaper to produce computers, but unfortunately that hasn't happened in producing oil and gas. It costs more to drill. It's more difficult to find large reserves etc. Oil and Gas is a traded commodity. Computers are not. It's a little disingenuous to compare the two and then state that someone else doesn't understand economics.

[tubebender]

I was paying 12 cents a gallon when I was in high school, so what?

I'll see your 12 cents and raise you 5 for a $1.00 hamburgers.

My wife and I are carpooling to the Casino so we have more money to lose...

[Terabitten]

I remember a dollar a gallon gas, back in...what?..1994-5?

When I joined the Army in 1995, I would go on leave to my parents' place in Virginia. I'd gas up for $.83 a gallon.

[HamiltonJay]

No, there was no large increase in demand.. .there were a few idiots who went out after the price was raised and acted like mammals... it was very limited. There was no mass run on the pumps, but there are always a few foolish folks who respond to bright shiny stimuli without much cognitive thought.

[Rodney King]

There are some factors that differentiate computers from oil and gas. For one, it has become cheaper to produce computers, but unfortunately that hasn't happened in producing oil and gas. It costs more to drill. It's more difficult to find large reserves etc. Oil and Gas is a traded commodity. Computers are not. It's a little disingenuous to compare the two and then state that someone else doesn't understand economics.

For an equal reserve of oil, it has become cheaper. However, the easy to drill places have been drilled. But anyway, take out computers. ANY PRODUCT. To suggest that prices won't come down because people have paid higher shows a complete lack of knowledge of basic economics.

[Osage Orange]

Just paid $2.88 yesterday for gas.....

Is that LESS than $3?

[Rodney King]

No, there was no large increase in demand.. .there were a few idiots who went out after the price was raised and acted like mammals... it was very limited. There was no mass run on the pumps, but there are always a few foolish folks who respond to bright shiny stimuli without much cognitive thought.

1. In certain locales, like Atlanta, I would disagree with you. I think there was a mass run on the pumps. 2nd, there doesn't need to be a mass run on the pumps in order for their to be a massive increase in demand. There can be a massive rise in demand from wholesaler on suppliers, which there was as they all feared supply disruption.

[No.6]

Or more efficient cars

Not or, and.

[kjam22]

For an equal reserve of oil, it has become cheaper.

That's simply not true. If you talk to any drilling engineer, you'll know that drilling costs are higher now than they were just 10 years ago. Also, geologists are paid more, pipelines to transport the oil cost more. Finding costs and production costs have risen over the years.

[Rodney King]

That's simply not true. If you talk to any drilling engineer, you'll know that drilling costs are higher now than they were just 10 years ago. Also, geologists are paid more, pipelines to transport the oil cost more. Finding costs and production costs have risen over the years.

Yes it is true. Drilling costs are higher because the oil that is being drilled is a lot more difficult to get at. But, if we were drilling the same oil as we were 15 years ago, the costs would be less.

[Osage Orange]

For years the refiners have been yelling about restrictions preventing them from building new refineries but now that the energy bill was passed and restrictions removed the refiners went silent. All they had to do to release some pressure on the market, placed by speculators, is announce future refineries but in reality they never intended to build new ones, it was just an excuse to them.

Would you mind directing me to your reference material. re: "restrictions removed" & "they never intended to build new ones"....

Thanks-

[kjam22]

The thing about oil and gas is that it is effected by supply and demand... but it's also effected by pure speculation....because it is a traded commodity. Because of fears of war in the middle east, or fears of shortages in years to come. Or because of fears of new technology etc. Because of a lot of factors that are difficult to measure without a "crystal ball."

We have a blip in production in the gulf coast that will effect the immediate production....and yet the strip changes 2 years out. There is no logic for that based on pure supply and demand.

So I'm just saying that the people on this board who make supply and demand statements regarding the cost of oil and gas are only telling half of the story. And comparing a traded commodity to something produced in a manufacturing plant is just not an accurate depiction.

[television is just wrong]

rush based his free market evaluation on Forbes comment also.

[kjam22]

Yes it is true. Drilling costs are higher because the oil that is being drilled is a lot more difficult to get at. But, if we were drilling the same oil as we were 15 years ago, the costs would be less.

That's not true... because it still takes people. Their salaries are higher. The cost of equipment is higher. Federal regulations have added cost. Production equipment sitting on the well costs more. And on and on. You can't say it only costs more to drill because oil is more difficult to find. That's just not accurate.

[NormB]

Don't forget the nine-tenths!

$2.99 & 9/10

[Osage Orange]

Hmm. We used to pay 3K for 386 computers. Now we pay a lot less for more powerful computers. We proved we would pay 3K for computers, why did the computer companies ever lower prices? I don't know anything about biology, and therefore don't opine on it. Why people who don't know anything about basic economics insist on sharing their opinion on it I have no idea.

Hehehe.....

Geesh, Rodney...don't go throwing logic into this discussion.

Ha!

FRegards,

[Rodney King]

We have a blip in production in the gulf coast that will effect the immediate production....and yet the strip changes 2 years out. There is no logic for that based on pure supply and demand.

There is plenty of logic for that. The futures are not just traded by "specualtors". They are also traded by suppliers and end-users.

Besides, there is nothing wrong with "specualtors".

[rattrap]

If $3 a gallon of gas is here to stay, next elections some elected officials aren't.

Yep, probably more than some.

[Rodney King]

That's not true... because it still takes people. Their salaries are higher. The cost of equipment is higher. Federal regulations have added cost. Production equipment sitting on the well costs more. And on and on. You can't say it only costs more to drill because oil is more difficult to find. That's just not accurate.

Well, for one thing I am assuming that we are adjusting for inflation, etc. 2nd, I still stand behind my statement. Sure, it might cost $25 million to drill some deep-water well. 15 years ago, that same deep-water well wouldn't have been drilled at all because it would have cost too much. Since then, the techonology has improved. For example, the spar's developed my Kerr-Mcgee.

Sure, it might cost a lot to drill some directional well in the LA. Chalk. 15 years ago it wouldn't have been drilled at all because the technology wasn't there, and one would have had to drill a number of vertical wells to extract the same amount of oil.