Posted on 04/05/2011 8:06:37 AM PDT by Red Badger
As an investor with significant exposure to oil prices, I’m always worried about something like the financial panic of 2008 that might trigger a quick drop in the commodity. One thing I’m not overly worried about is the American public kicking its addiction to oil any time soon.
For years I’ve 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.
[snip]
And that is a bit strange, considering that Canadians pay quite a bit more than Americans at the fuel pump. Last week AAA’s 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 hasn’t. And $4 per gallon or even $5 per gallon in the United States isn’t 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 aren’t 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 ...
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).
Operant conditioning.
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
“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!”
CLAP, CLAP, CLAP.....”BRAVO, BRAVO!” (That statement is priceless!) CLAP, CLAP, CLAP!
Well, we needed to be looking for a third vehicle anyway, as I have two teenagers who require mobility. Their mom and I are tired of chauffering them everywhere. Our conversion van has been relegated to around-town errand-running and extended vacation trips. For us, the decision made sense; your mileage may vary.
Here's a decent chart that shows approximate percentages of what we get per barrel of oil.
Basically, a barrel of oil is 42 US gallons. There is a small production gain of approximately 2.2 gallons - so net product is 44.2 gallons from a barrel.
gasoline 19.5 (44.1%)
distillate fuel oil (Includes both home heating oil and diesel fuel) 9.2 - (20.8%)
kerosene-type jet fuel 4.1 (9.3%)
residual fuel oil (Heavy oils used as fuels in industry, marine transportation and for electric power generation) 2.3 (5.2%)
liquefied refinery gasses 1.9 (4.3%)
still gas 1.9 (4.3%)
coke 1.8 (4.1%)
asphalt and road oil 1.3 (2.9%)
petrochemical feedstocks 1.2 (2.7%)
lubricants 0.5 (1.1%)
kerosene 0.2 (0.5%)
other 0.3 (0.7%)
Off the top, fuel accounts for approximately 79.4% of use (gasoline, fuel oil, jet fuel, residual fuel oil). That leaves about 20.6% for non-fuel use.
http://www.txoga.org/articles/308/1/WHAT-A-BARREL-OF-CRUDE-OIL-MAKES
fuel - gasoline 19.5 (44.1%)
fuel - distillate fuel oil (Includes both home heating oil and diesel fuel) 9.2 - (20.8%)
fuel - kerosene-type jet fuel 4.1 (9.3%)
fuel - residual fuel oil (Heavy oils used as fuels in industry, marine transportation and for electric power generation) 2.3 (5.2%)
mostly fuel - liquefied refinery gasses 1.9 (4.3%)
partly fuel - still gas 1.9 (4.3%)
mostly fuel - coke 1.8 (4.1%)
not fuel - asphalt and road oil 1.3 (2.9%)
not fuel - petrochemical feedstocks 1.2 (2.7%)
not fuel - lubricants 0.5 (1.1%)
fuel - kerosene 0.2 (0.5%)
not fuel - other 0.3 (0.7%)
That looks more like 85~89% fuel to me.
More than likely. That's why I just took the top four. It already put us at 80% fuel use, which is higher than what was previoulsy posted (using 28% non-fuel use).
I didn't know for certain what other items may/may not be used for fuel.
I knew kerosene was, but at 0.5%, it wouldn't have mattered if I included it. I figured liquefied refinery gasses were likely to include propane, but wasn't 100% on that, either.
I believe the refinery gases are mostly propane.
Some of the terms are defined here if that helps.
Category: Petroleum Refining & Processing
Topic: Refinery Yield
Definitions
http://www.eia.doe.gov/dnav/pet/TblDefs/pet_pnp_pct_tbldef2.asp
Cheers
The fundamental issue is not the price, but the availability.
There is a big difference between “expensive” vs “sorry, we’re out”.
Then it becomes ‘priceless’................
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