Skip to comments.High Prices Won't Curb America's Thirst for Gasoline
Posted on 04/05/2011 8:06:37 AM PDT by Red Badger
As an investor with significant exposure to oil prices, Im always worried about something like the financial panic of 2008 that might trigger a quick drop in the commodity. One thing Im not overly worried about is the American public kicking its addiction to oil any time soon.
For years Ive always gotten a big kick out of analysts on CNBC talking about how $2 then $3 and now $4 per gallon for gasoline would kill the demand for the product in the United States.
And that is a bit strange, considering that Canadians pay quite a bit more than Americans at the fuel pump. Last week AAAs fuel gauge report showed that the average price per gallon in the United States was $3.59. In Canada we are at $5 per gallon in many parts of the country.
You would think that $5 per gallon would change your fuel consumption habits. It hasnt. And $4 per gallon or even $5 per gallon in the United States isnt going to change much, either. Sure, if the price of gasoline jumps from $3.50 to $5 in the span of six months, there will be some short-term reaction. But over the long run, Americans arent going to be willing to significantly stray from the personal freedom a car allows.
And if you think Canadians have it bad, consider some of these prices per gallon where citizens still drive cars on a regular basis (from AAA):
Turkey: $9.63 per gallon Norway: $9.27 per gallon Greece: $8.50 per gallon Denmark: $8.42 per gallon Sweden: $8.18 per gallon United Kingdom: $8.17 per gallon
(Excerpt) Read more at seekingalpha.com ...
I am amazed at how passive Americans are about gas price hikes this time around. Remember when prices spiked upwards to around $4? The gnashing of teeth and the outrage! This time... just a meek shrug of the shoulder. Of course, it always helps those in power to own the media, which will dutifully tamp down passions by giving the subject minimal treatment.
The article may have some merit, but I HATE this "addiction" simile. The correct comparison is water. Oil is no more an addicting drug than water is. We need water to live. Our economy needs oil to live. There is no forthcoming replacement. The greenies need to get over it.
Not only will Americans continue using gas at current levels, since it’s a Democrat in the White Hut, they will barely notice that prices have gone up.
$5 per gallong gas? Bring it on, my neighbors barely notice. As long as it’s not Bush and Haliburton manipulating gas prices, it’s all good baby.
Fricken morons. I do worry that the dough heads who don’t notice such things will re-elect that POS in the White Hut now.
Another economically ignorant article.
When Canadians pay $5.00 for gas, and Americans pay $3.00 for gas, the question is: How many miles does each driver drive?
If the average American drives 12,000 miles per year, and the average Canadian (because of the higher fuel costs) drives 10,000 miles per year, then the effect of the higher Canadian price is fully explained by a reduction in the quantity demanded.
Jeez. This was from Seeking Alpha?
The next time a liberal needs an ambulance, police car, limo, airplane, fire truck, etc. I DEMAND that they end their addiction to oil and go without!
High prices may not eliminate my thirst/need for gasoline, but the higher it goes, it will certainly cause me to alter my behavior in ways to reduce the number of trips I make to the well to fill my buckets.
I heard Britain sells petrol after the conversion to an equivalent $9.60 US dollars. Whats ironic is that you can get high performance good looking vehicles there such as the jaguar and such with even some with diesels that get over 70mpg.
But not here in America, instead we get rubbish thats too soft, too vague, too big and too cheaply built with fuel hungry engines and a complete smothering of exotic high performance diesels.
Try watching a few episodes of Top Gear, just how many US vehicles did they like or approve?
The ignorance on the left about this topic is really stunning. Oil is used for so many other things besides gasoline/diesel/transportation it's ridiculous. Oil is so much more than fuel. Remove oil from your life and you remove many, if not most, things that make life "modern", i.e., plastics, pharmaceuticals, solvents, chemical precursors used in virtually every area of chemistry, etc. The list is endless. Not only that, but there isn't a substance on the planet that is "organic" than oil......
They said the same thing last time, and they were completely wrong.
So, now we’re supposed to believe them?
It's because, at our core, we know we are a beaten and conquered people. I knew it in November 2008. We have no hope of any relief while the Obama regime occupies America.
I was in Brazil about two months ago. I was amazed at all the interesting, fuel efficient cars (mostly of European origin) that I saw down there. There were probably at least a dozen models (Ford, Honda, Toyota, Citroen, Fiat, Mazda) that aren't imported to the USA.
I hate the term “addiction to oil”. It is essential - not a choice. And oil was $109 this morning. Probably not going down any time soon.
Now that the gas prices are so high, the fuel savings fully compensates for the car payment.
Yeah, those models likely won't pass NTSHA crash tests, or cannot without $millions of upgrading. (The adding of weight is what is commonly done, and this sort of ruins the smallness of the car's key to being economical). Note that I am not saying this governmental involvement is necessary; Only that it exists.
I agree, and made the same point in my #2.
Oil has advanced our civilization to heights that no other material or element ever will. It's a simple and undeniable fact. Take even a small portion if it away, and our whole way of life would change dramatically.
Whoa. The UK Imperial gallon is slightly more than the US gallon. The diesels with direct injection are closer to 55 mpg for an Accord sized vechicle.
Clarkson actually likes European Ford’s including the Mondeo. Ford and GM Opel actually have very good diesel technology. GM should have gone into chapter 11.
Jaguar was a pile of s**t before Ford spend billions fixing the old factories. Ford then needed the money and sold jag to Tata.
The Germans - VW, BMW and Mercedes plus Audi are among the best in diesel as they invented it.
I'd second that, and add a third and fourth: the internal combustion engine, and plastics (made from oil) Upon this power trifecta (oil, IC engines, and plastics), we have built our present standard of living. Oil is the fuel of our civilization. "Drill, baby, drill!"
If European standards for automobiles are anything like European standards for aircraft those European cars would probably be at the top of the list for crash worthiness. JAR standards for airworthiness are far more stringent that FAA standards......
Yep, gasoline prices are somewhat inelastic and the gov’t takes advantage of that with taxes. They stand to benefit from higher gasoline prices. Obama also wants to push his green initiative and wants to make it cheaper than gas for that reason. It’s about $4.20 here in So. Cal and at these prices, they are Obama’s wet dream.
All the more reasons that the people that control the auto industry in America need to be bitched slapped around and pointed out that its time to offer something different other than obese-mobiles that are draining our minimal reserves of income to feed them.
Although I personally drive a Silverado dually with an 8.1 liter engine that gets HORRIBLE gas mileage its also a tool in my trade, and when I don’t need it for work I want something else.
Our greedy dysfunctional government is turning America into a 3rd world country at a record pace and we have allowed this nonsense to go on.It’s hard to even believe how things have changed in 20 years and my life long friends moved on to other countries for a better life and have become very successful.
” Econ 101 reminder: “
High School Econ reminder: “Opportunity Cost”, which observes simply that money spent on one thing can’t be spent on something else...
In a quick search, I came up with a figure of roughly 140billion gallons of gasoline consumed in the US in 2009 (unclear if this includes Diesel and other Petroleum motor fuels - but for the sake of this demonstration, it’s close enough)...
Raising the price of gasoline by 10cents means that $14 billion is no longer available to be spent on other things - and then ya have to figure in the ‘multiplier effect’ that increased production and transportation costs causes in the price of food, and everything else....
So, a 10cent raise in gas prices may not feel like a big deal when you fill your tank, but it’s a significant hit to the economy in toto....
Higher gas prices are causing all of us to find ways of using less gas. Look at all of the small cars and more fuel efficient cars now on the road compared with 20 years ago.
We can cut the use of gas tremendously by increased car pooling and use of mass transit. We will do these things on our own — no need for government edicts.
I agree the conversion does tend to be inaccurate at times.
But mostly they are vehicles that scavenge the fuel much better, yes they cost more especially the Mercedes. They also don’t view vehicles as disposable items like we do here in the states either.
I drive a Ford F-250 (3/4 ton) crew cab with the IH 7.3L Powerstroke. With an aftermarket chip mod I get 24-26 mpg on the highway. With my 2200 lb truck camper mounted I still get 18 mpg and pass most people going up hill, even though I’m very near gross. This truck is 14 years old with 348,000 miles on it. There ought to be diesel powered light trucks (1/2 ton) that get well in excess of 30 mpg if my old truck can do that kind of mileage. I had a VW diesel pickup in 1981 that got 48 mpg. The technology is there. We’re just not using it. I suspect bleeding heart Libs at the EPA are a large part of the problem....
Mass transit is a great way to get sick and have a pile of medical bills.
Do not fear! Obamacare is here! Obama will pay your medical bills from his "stash"....../s (as if a sarcasm tag is even necessary!)
I already limit my driving ;the extra $2 or $3 a day mean less for everything else.
Given that our thirst for gasoline will not be quenched with higher prices, I wonder if auto sales will decrease. The money has to come from somewhere.
You are correct concerning weight of todays vehicles. MY wifes new Honda Accord is 3,600 lbs!!!! WHATTTTT? Yeah, it is a V6 and the Accord is now a larger car than before. Weight is a primary killer to fuel mileage in town, during acceleration. Weight can often times be offset by aerodynamic stlying on the highway but no offsetting can be done in town.
3.600 lbs is the approximate weight of my old 1967 Dodge Charger with a cast iron 383 engine, a car I wish I had back. My wifes V6 is ALL aluminun.
Cardboard in Food Won't Dampen America's Appetite
< /currency destruction is Great!>
As one financial adviser with a radio talk show pointed out a couple of years ago, high oil prices are "counter-inflationary" in some respects because they drive down demand for a whole bunch of different things like consumer electronics, cars, new homes, college education, etc.
When oil was trading over $140/barrel a couple of years ago, we saw huge discounts on a lot of things because demand had dropped precipitously. Huge rebates were offered on new cars, home entertainment gizmos, etc. For commuting, the higher price I paid for gasoline was largely offset by a big discount offered on my monthly parking pass, as so many people stopped driving to work due to unemployment or changing commuting habits.
You have to do some simple math to understand why oil use does not go down as much as you think it will when prices go up. About 28% of all oil use is non-fuel in nature. Demand in that 28% of the market doesn’t go down appreciably when the price of oil goes up.
So, using less gasoline only affects 72% of the market for oil. Also, there is a lot of fuel use that is inelastic. A certain amount of driving happens at all price levels. Local, state and federal government vehicles for example drive just at much as high prices as at low ones. Business related driving adjusts much less than the price of gasoline would suggest also.
Decrease is gasoline use starts with low income people and slowly leaks upward. As you reach higher income levels, people drive about the same miles no matter what the price (so far).
This is why gasoline use is defined as inelastic.
it was arguably the other way around, Einstein.
Also, America "thirsts" for gasoline about like you fat, stupid head "thirsts" for blood. America runs on gasoline, as does any modern civilization.
So your a big investor with a "significant" exposure to oil? I think youre a wannabe living with his mother.
You literally cannot step out of bed without immediately bumping up against the onslaught of government regulations. Nearly every citizen is now a criminal some way some how because of all our inane rules and mandates.
Don't have a smoke detector in your house? You're a criminal. Not wearing a seatbelt? You're a criminal. Is you lawn mowed? Did you use the wrong fertilizer? And the list goes on and on and on.
What happened? I told my spouse that once Obama gets into office things would go fast. Her we are high unemployment, declining wages, inflation, crushing national debt, three kinetic military actions, and a country that has been transforming into a welfare state by the liberals and the corrupt MSM.
Honestly, it's hard to be optimistic about the future of this country. Everyone talks a good game about reducing the size of government and spending right up until it affects them, and then they go out in the streets and hold state capitols hostage and complain to high heaven that everyone is being cruel.
No one wants to work. No one is allowed to fail. Government is god and controls every thing and everyone, and the people are apparently fine with this.
He’s like a gold bug, for crying out loud. “Oh, no, my speculative position is going to go nowhere but up.”
What would you call him, an “oil slick?”
“Of course, it always helps those in power to own the media, which will dutifully tamp down passions by giving the subject minimal treatment.”
Bingo, last time around the MSM was harping on it every night on the national news. Now its crickets.
Some states do add sales taxes to fuel costs, however, most states tax the fuel at a per-gallon rate. The fed rate on fuel has been 18.4 cents/gallon for gas and 24.4 cents/gallon for diesel for years now. So, in actuality, the higher the price of fuel, the lower the effective tax rate (again, the exception being where sales taxes are tacked on to the price).
I've considered my own situation, and cannot foresee a substantial reward for giving up my gas guzzling SUV. I'm a city dweller, and drive around 10k miles per year. If my fuel efficiency trebled, and gas prices increase $2/gallon, I'd be saving around $1,000/year. Considering the concessions I would have to give to gain the fuel efficiency, no way.
That sounds too high. Do you have a source for that information?
Petroleum Product Supplied http://eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbblpd_m.htm