Gas prices hit high

CNN ^ | August 14, 2005

[BulletBobCo]

CNN) -- Gas prices surged 20 cents over the past three weeks to an all-time high of $2.50 per gallon of self-serve regular, according to a national survey.

The price surge "does smash the all-time record high for the third time this year," Trilby Lundberg, publisher of the Lundberg Survey, said Sunday.

"Crude oil has caused this jump at the pump," she said of the survey, taken August 12 at about 7,000 gas stations in every state.

"And even at the current record-breaking pump prices, gasoline demand, while not galloping, is still growing."

Oil prices rose to record highs of $67 a barrel Friday, amid concerns that demand was straining the world's capacity to pump and refine crude oil. (Full story)

Lundberg noted that if the crude oil supply remains undisrupted, "the gasoline price surge itself will probably be ending soon, if it has not already."

"Our demand for gasoline is always highest for June, July and August," she said of the summer months, when families typically take vacations. She said gasoline demand is expected to taper off after August.

(SNIP)

Though a record in absolute terms, the price is still well shy of a record, if adjusted for inflation. The peak price would have been set during the Iranian revolution in March 1981, when a gallon of gas cost about $3 in today's dollars, Lundberg said.

[NYorkerInHouston]

A combination of things

1) There are known fields that could be developed (i.e. ANWR) as well as areas both here and abroad that could be explored. New fields will take about 6 years to come online and for as yet undiscovered fields the time frame would be longer. All the while we are loosing production due to older fields declining. Unfortunately there are likely no Ghawar sized fields out there. Unconventional sources of oil do exist, in Alberta, the American West and elsewhere, and these reserves contain perhaps 1 trillion barrels of oil or more but questions remain as to how much of this could be recovered and how easily. More importantly could these unconventional sources be extracted sufficiently fast to feed the world's 84 million barrel a day oil habit.

2) Demand is probably not yet outstripping supply but it is nudging against it in large part due to growth in demand from China and India. In addition what excess capacity remains is largely Saudi heavy, sour crude difficult for refinery's to process.

3) I wouldn't use the term nefarious but market speculation is playing a role in part because of the underlying market fundamentals already mentioned. Supply is very tight. The least little thing seems to set the traders off. Hurricanes, terrorist threats, Iran, refinery problems, etc... But as to why this warrants $66 oil as opposed to $40 or $80 I don't know.

[Jaysin]

I agree with you on that, but a temporary rollback on gas tax would be appreciated and at least show that the government is doing SOMETHING to help us out.

some states might want to do it too.

[steenkeenbadges]

I heard an oil company market report a couple of quarters ago. $680 million (don't quote me) in ONE oil company's profits and they can't afford to fix their refineries? Whos kidding who? (Whom).

[mysterio]

That would be socialism.

Slightly, yes. But government has its hand in the cookie jar when things are good. That means it needs to do something when times get bad, like with this gas situation. There are small things that could be done which would have an impact. Speculation needs to be temporarily suspended, we need to reduce the number of blends, and we need to stop exporting finished product to other countries. It's $2.70 a gallon here. The economy is going to tank if this keeps up.

[newgeezer]

> At what point does the government step in and help out?

That would be socialism.

Not if the government help comes in the form of removing its restrictions on free enterprise.

[Trust but Verify]

Oh, I agree. I'm surprised it hasn't slowed things until now. Gas prices have gone up a whopping .50/gal in only 2 or 3 weeks. This is going to put a major dent in people's wallets if it doesn't subside.

[txhurl]

Does China's de-pegging the yuan have anything at all to do with this?

[CommandoFrank]

eat at home instead of going out for dinner

Never, no NEVER will I cut out the 'eating out'.

My wife and I were standing in the 'easy finance' line at the gas station, discussing this very subject. Our conclusion is never, never stop eating out.

[biblewonk]

Not if the government help comes in the form of removing its restrictions on free enterprise.

Oh yeah, that sorry old conspiricy theory that says that enviros are preventing refiners from building more refineries which they are just dying to build. /off sarcasm/

[FreedomAvatar]

They could start by dissolving the EPA.

[RayChuang88]

3) Nefarious trading activities manipulating the market?

There are three names I can think working together that could cause a massive "bubble" speculation on oil prices to happen:

George Soros, the head of the Quantum Investment Fund

Warren Buffett, the head of Berkshire Hathaway Corporation

Peter Lewis, the head of Progressive Insurance

I'll almost bet they working together to heavily engage in "longing" crude oil prices and "shorting" US currency value to ruin the US economy to embarass President Bush. All three probably have a lot of money socked away in Swiss and Grand Cayman banks to protect themselves when the US economy collapses from over-high oil prices.

[biblewonk]

How would that actually do anything to help the situation? It wouldn't, it would make it worse. The "situation" is a result of demand and that would increase the demand, nothing more.

[biblewonk]

Speculation needs to be temporarily suspended,

Socialism to the extreme.

we need to reduce the number of blends,

How much do you think that really adds to the price?

and we need to stop exporting finished product to other countries.

More socialism!

It's $2.70 a gallon here. The economy is going to tank if this keeps up.

No, it's going to stop growing at a bullish rate, that is not tanking.

[Terabitten]

Oil prices rose to record highs of $67 a barrel Friday, amid concerns that demand was straining the world's capacity to pump and refine crude oil.

Speculation needs to be temporarily suspended

That's the crux of it right there. Our demand has NOT increased by 300% in the last two years. China and India's demand, added with ours, doesn't add up to a 300% increase in demand. Our refinery capability, which certainly needs to be increased, hasn't essentially changed in 20 years. The only thing that is changing is that there is WILD speculation in the market.

Before the Iraq War (not blaming it, just using it for time reference), gas was about $1.25 a gallon here in Georgia. It had been more or less stable there for around five years. In March 2003, prices jumped to $1.50. In September 2003, they eased down to the $1.30 range, then spiked up to $1.80 and kept climbing. What changed between March 2003 and now? Not a damn thing. There is NO reason for the prices to be where they are other than out-of-control speculation.

[subterfuge]

FWIW:

I'm sick of hearing that "if you adjust for inflation, gas is a bargain, crap.

No one cares what they are paying in friggin' Europe, it's irrelevant.

Build some Nuclear power plants near John Kerry's houses.

Hybrid cars are not going to solve the problem, so people should stop saying that.

[RedBeaconNY]

Sorry I forgot to post the exchange rate. Yeah, it's almost 6 bucks a gallon there. It was the same way when I visited England 4 summers ago. It certainly puts things in perspective.

[mysterio]

Socialism to the extreme.

Well, if the government does nothing, count on having a lot of dems get elected in 2006 and 2008.

How much do you think that really adds to the price?

Bottlenecking supply seems to raise the price quite effectively each summer. We have limited refining capacity and countless blends required by different areas. We need to fix that.

More socialism!

What is your short term solution?

No, it's going to stop growing at a bullish rate, that is not tanking.

Recession in 2006 if prices stay where they are.

[traumer]

Start subsidizing poor families with gas vouchers...

[Ghost of Philip Marlowe]

Sounds exactly like the type of confinement the ecomarxists are hoping for. They're regulations are adding quite a bit to the cost per gallon.

[NCC-1701]

I'm not an expert in the petroleum field but I can't help but feel that a certain amount of gouging is going on. While understanding the supply & demand issue and the fact that there's a war going on, Big Oil must be engaing in a small amount of price gouging. Call me parinoid about that, but there must be others that feel tha same way. With prices as high as they are, it would be easy to tack on a little bit extra without raising eyebrows. I may get flamed for this but this is my opinion.