Don't you find it interesting that we have had a rather significane price decline right in the middle of peak driving season. At first I thought maybe the fact that the Fourth fell on Wednesday this year had something to do with it, but obviously not because I heard that travel was actually up this year despite the actual holiday falling midweek.

Are we in for another price spike around Labor Day? And is there any kind of political motive behind the continuing gas price yo-yo?

We're down to $2.899 for regular nowadays. Yes, I expected prices to spike during the summer driving season as well. It has occurred to me that, booked-out airliine flights not withstanding, more people are staying home this year.

$2.849 in Vancouver... and still dropping. Very strange.

Could one of the reasons for the constant gas price yo-yo be that the government doesn't want prices at an extraordinary high level for too long out of fear that eventually people will curtail their driving, and they don't want that because they get so much revenue from the taxes on gasoline?

Here in Chicagoland there seems to be a mass transit funding problem every year where huge fare increases and service cuts are threatened. Just the other day there was a piece in the Sun-Times with the suggestion that we should let oil firms fund transit, as it was largely their doing that nearly everyone had to obtain a car. The auto industry, in conjunction with the oil industry, worked to take people from the buses with good advertising to buy cars and drive them to work and shopping. the buses were getting emptier, service was reduced and in time lines were eliminated. The writer goes on to say that since the oil companies worked so hard to take business away from transit people and they are turning in record profits, then let some of that moeny come back to mass transit so all the good people can move around more easily with job and shopping growth. If you cannot get the oil executives to cooperate, then pass a law that will force as much of their profits to mass transit as you want.

I hope gas prices go up to $4.00/gal and stay there, PERMANENTLY. Then the idiots who complain about 'high gas prices' and 'price gouging' yet obstinately refuse to cut back on their driving and recognize the volatility of the bloomin' oil market! Some people...

Originally Posted by Roadbldr '59

$2.849 in Vancouver... and still dropping. Very strange.

Down to $2.79 here in the PRC. Yet oil prices are >$70 and have been for weeks. Is the change due to supply (refinery capacity) or demand (lower travel, higher efficiency?)

Originally Posted by catfishncod

Down to $2.79 here in the PRC. Yet oil prices are >$70 and have been for weeks. Is the change due to supply (refinery capacity) or demand (lower travel, higher efficiency?)

A quick primer on gas prices, courtesy of the EIA. Today's national average price of $2.84 has the following components:

A) $1.42 Crude
B) $0.65 Refining
C) $0.37 Taxes
D) $0.40 Distribution

Component A, the input crude price, is the barrel price divided by 42, which means that current gas prices only reflect a barrel price of $60. Expect gas prices to rise in the near term some 20-25 cents to reflect just the rise in crude costs.

Component B is the cost of refining the crude. This is a national average -- some "boutique" refinery mixes are much more expensive.

Components A+B combined are the "wholesale" gasoline price, what gas stations pay to buy gasoline from the refiner. If gasoline inventories are very low (as they were earlier this year), this may include the cost of importing refined gasoline directly from overseas refiners (e.g. Venezuela).

Component C is the average federal+state taxes. Component D is everything else. It looks like a healthy profit margin for the gas stations, but that includes the cost that the gas stations pay for transport and delivery (as well as all their other overhead costs.) The gas stations themselves certainly aren't gouging; in fact, most only make a few cents profit per gallon.


To answer your question, in the short term gas prices don't respond to either the supply or demand you mention, but rather they track the clearing price for current gasoline inventories. They will lag crude prices by several weeks, and only reflect end-user demand once gas stocks are significantly constrained (e.g. at times of demand spikes around Memorial Day and Labor Day.)

In short, the lower gas price reflects the increase in inventories after the Memorial Day crunch, and prices will continue to increase over the next month as higher crude prices and higher demand start depleting stocks.

An excellent source for all matters crude supply related is The Oil Drum.

Originally Posted by sean '90

I hope gas prices go up to $4.00/gal and stay there, PERMANENTLY. Then the idiots who complain about 'high gas prices' and 'price gouging' yet obstinately refuse to cut back on their driving and recognize the volatility of the bloomin' oil market! Some people...

Be careful what you wish for. As I've written before, the likely effect of $4/gal gas prices would be an overwhelming clamor for Congress to Just Do Something. Congress has already indicated what it would do: blame the oil companies for "gouging", and set some arcane rules that would only hurt the independent gas station owners (90% of gas stations in the US are independently owned.)

The result of that would be that many independent operators would simply stop selling gas (since it would be at a loss). Especially hard hit would be those areas that are already most price-constrained, i.e. the rural areas. In short, significant fuel shortages, and the return of gas lines. (And maybe even odd-even days.)

Much of what was written about in the last post has already happened. During the gas line period of 1973-74 many independent operators shut down. My mom, who wasn't really a big political person, perceived the gas shortage as being an artificial creation of the big oil companies to wipe the independents out. Many gas station operators are franchised, but many more of their stores are corporate owned. They operate in conjunction with a large oil concern. And there are many merged companies in this area now, such as Exxon-Mobil, Conoco-Philllips, and BP-Amoco.

What is ironic about the post is that when a lot of seemingly arcane rules were disposed of during the Reagan years is when many large corporations really began becoming modern-day Genghis Khans, conquering nearly everything in their path.

Wouldn't a good leader have the backbone to tell the people that there isn't that much they can really do about high gas prices and suggest they try to conserve as much as possible? Yet we really haven't even begun to talk about trying to reduce auto dependency. How come?

Originally Posted by Brian Beecher

Wouldn't a good leader have the backbone to tell the people that there isn't that much they can really do about high gas prices and suggest they try to conserve as much as possible? Yet we really haven't even begun to talk about trying to reduce auto dependency. How come?

We once had a president who tried to warn Americans about all of this.

His name was Jimmy Carter.

Every president scince then has studied his fate and acted accordingly.

Originally Posted by Brian Beecher

My mom, who wasn't really a big political person, perceived the gas shortage as being an artificial creation of the big oil companies to wipe the independents out.

Yes, and I recall that's why the majors diversified out of the station business, to insulate themselves from such accusations.

Originally Posted by Brian Beecher

What is ironic about the post is that when a lot of seemingly arcane rules were disposed of during the Reagan years is when many large corporations really began becoming modern-day Genghis Khans, conquering nearly everything in their path.

Such is the nature of an Unraveling.

Originally Posted by Brian Beecher

Wouldn't a good leader have the backbone to tell the people that there isn't that much they can really do about high gas prices and suggest they try to conserve as much as possible?

We're only 2 years and about 2% in production removed from the all-time crude (C&C) peak. There hasn't been enough time yet for the fact to sink in that "there isn't that much they can really do." Until that fact becomes inescapable (in another 2 years or so), any pleas for conservation will fall on deaf ears.

Originally Posted by herbal tee

We once had a president who tried to warn Americans about all of this.

His name was Jimmy Carter.

Every president scince then has studied his fate and acted accordingly.

President Carter's reelection bid was thwarted by an organized criminal conspiracy commonly referred to as "Iran-Contra", not by his conservation advocacy.

Originally Posted by Finch

President Carter's reelection bid was thwarted by an organized criminal conspiracy commonly referred to as "Iran-Contra", not by his conservation advocacy.

While I won't disagree with your root cause, a lot of people seemed eagar to throw in their lots with the 'dark side.' Of course, it wasn't totally thier fault, the think tanks funded after the Powell memo came out influenced even The Hidden Persuaders.

People have just began to realize that it's not a good idea to mix foxes and henhouses, so to speak, after being told to do so for years.

Originally Posted by Brian Beecher

Much of what was written about in the last post has already happened. During the gas line period of 1973-74 many independent operators shut down. My mom, who wasn't really a big political person, perceived the gas shortage as being an artificial creation of the big oil companies to wipe the independents out. Many gas station operators are franchised, but many more of their stores are corporate owned. They operate in conjunction with a large oil concern. And there are many merged companies in this area now, such as Exxon-Mobil, Conoco-Philllips, and BP-Amoco.

What is ironic about the post is that when a lot of seemingly arcane rules were disposed of during the Reagan years is when many large corporations really began becoming modern-day Genghis Khans, conquering nearly everything in their path.

Wouldn't a good leader have the backbone to tell the people that there isn't that much they can really do about high gas prices and suggest they try to conserve as much as possible? Yet we really haven't even begun to talk about trying to reduce auto dependency. How come?

Unfortunately, the American people like to whine about things rather thab actually do anything about them. Such is the nature of the 3T. Well, at least the 4T will come and the American people will shut up about this so-called "price-gouging".

On Google I found an article which I am pasting here for discussion purposes only which suggests a solution to reduce auto dependency by 30 percent.



A better way; the 30% fewer car solution
by Paul M. Bray

Our nation is in a dual crisis of dependence on "polluting, terror-promoting foreign oil" and rising energy prices hampering the "financial freedom of the working family, their employer and their economy".

Regrettably, President Bush, his inner circle beginning with VP Cheney and the Republican Congress don't get it. They would rather fight terror at the same time as they fan the flames of terror with our oil dependency. Most everyone else gets it including New York's Republican governor and a growing number of corporations all seeking a way out of this crisis situation.

Without leadership from Washington, it leaves the vast array of stakeholders to fashion remedies, all of which will be at best half measures until we have a national leadership.

Governor Pataki's way is to "jump-start a new era of statewide availability and use of renewable fuels" and thereby maintaining our auto dependency.

The Governor wants to begin "with an initiative to make renewable fuels available at service stations all across the state, starting with the New York State Thruway". His plan includes elimination of state taxes on renewable automotive fuels; creation of new renewable fuel stations across the State; development of "clean coal" power plants; a new hybrid vehicle tax credit; discounted Thruway tolls for hybrid vehicles; creation of a new state-of-the-art alternative fuel vehicle research lab; and new tax-free benefits for clean energy companies that create jobs. He also talked about creating ethanol refineries that use agricultural and wood products.

No thank you, Governor, there is a much better way than trying to maintain auto dependency, congestion and sprawl. The better way maintains mobility and gets us walkable communities.

First of all, the renewable energy solution is a minimal solution at best. It takes energy to make energy. The New York Times reported that a Cornell University study points out "that producing ethanol from corn costs more energy that it creates, when the diesel fuel used by tractors and the production of fertilizer and other factors are considered". The Times also quotes Peter Iwanowicz from the American Lung Association saying that, "Ethanol increases ozone formation, which is obviously harmful for people with lung disease, and biodiesel increases emissions of nitrogen ozide".

Furthermore, growing non-food use of crops places affordable supply of food at risk. Instead of paying more at the pump we will pay more at the supermarket. Use of vegetable oil as a substitute for diesel fuel has increased the price of canola oil. Joachim von Braun, Director of the Washington based, nonprofit International Food Policy Research Institute said, with regard to the demand for energy from farm products, that "the mouth of your car is a monster compared to your family's stomach needs". He forecasts instability of energy prices will be mirrored by instability in food prices.

These renewables and the far off dream of a hydrogen economy have huge start-up and maintenance costs. As Albany columnist Fred LeBrun concludes, "So look at those pump prices today, folks. It may never get better than this."

There is a better way through non-auto dependent mobility options. In 2002 I wrote an Eye column suggesting that the way out of auto dependency is by out competing the automobile through other and better means for mobility. Since that column was written, albeit very quietly, many things are happening that will allow us to reduce out auto dependency and thereby out dependency on foreign oil.

In fact there are a number of things happening to reduce auto demand like increased demand for city living by empty nesters and young professionals where residents use transit, take elevators and walk rather than drive to get a loaf of bread. Car sharing, cost effective transit and customized paratransit for groups with common mobility needs also reduce the demand for auto use.

Former Mayor Jaime Lerner of the Brazilian city of Curitiba, population 1.7 million, has been traveling around the world with the mantra, "Imagine a City with 30 Percent Fewer Cars", as he touts the benefits of bus rapid transit (BRT). BRT is a cost effective way of transforming "dowdy bus lines" into fast, comfortable and reliable" transportation. Light rail is 10 to 20 times more expensive than BRT. With BRT encourages growth along the BRT line for integrated living between home and work.

West coast cities that were in the vanguard of auto dominance when they tore up trolley tracks are now along with cities like Seoul, South Korea and 60 other cities worldwide opting for some version of BRT.

The tip of the BRT iceberg is about to happen in New York State along an approximately 20 mile stretch of Route 5 between the downtowns of Albany and Schenectady. Although much of this BRT route will not have the dedicated lane Lerner desires, quality stations for express service displaying time of arrival as well as having priority at traffic lights will make fast, reliable service possible.

Transportation brokering for organized ride sharing is another emerging approach for reducing traffic and thereby dependence on foreign oil. The technology of the internet, integrated geographic systems, computer assisted scheduling programs, and commercial billing systems can be combined to deliver transportation to affinity groups as a utility.

"In a transportation brokering system", claims Dorothy Camer who is organizing a paratransit project in Prince George's County, Maryland, "the customer will have the opportunity to interact with the system to identify the specific transportation needs. The system will then search for solutions with no additional hassle to the customer and deliver the service. The service should be as unobtrusive as possible, very much as utilities are delivered." Camer's handbook on a brokerage system for group ridesharing to reduce traffic congestion can be found at www.geocities.com/takoma20912.

As reported in the New York Times in an article, "By the Hour, Your Chariot Awaits; A Few Keyboard Clicks Put Car Sharers on Wheels", car sharing is a growing business phenomena in a growing number of cities. Car sharing programs allow members to reserve and drive a car whenever they want without the hassle of car ownership.

Shuttle services for short trips at malls and residential developments are also on the rise. As you can see alternatives to the auto and more efficient use of the auto are beginning to reduce auto dependency and therefore dependence on foreign oil.

Let us consider financing renewable energy sources against the option of a mobility campaign to reduce auto use by 30%. Not only will reducing auto dependency be less costly, it will allow us to foster a pattern of living where activities of life are better integrated and that make for more humane and healthy communities.

Hopefully, some of our political leaders will step up and make the case for the 30% solution.



--------------------------------------------------------------------------------

Paul M. Bray is President of P.M.Bray LLC, a planning and environmental law firm in Albany, New York. His e-mail is pmbray@aol.com.



--------------------------------------------------------------------------------
More Eye From Albany
For Eye From Albany columns prior to August 2002, visit BrayPapers.com









--------------------------------------------------------------------------------

Here in South Arlington/West Alexandria (Northern Virginia), gas is creeping very close to $3.00. And it seems as if we are slightly below the national average. According to msn.com:

At the pump, meanwhile, gas prices continued to rise, following oil’s 39 percent price rally since August. The national average price of a gallon of gas jumped 2 cents overnight to $3.024 a gallon, according to AAA and the Oil Price Information Service.

In the past few years, gas prices have hit their annual low right around now. $3.00/gal gas in early November bodes ill for spring.

Jesus H. Christmas!

My neighborhood station just hit an all-time record: $3.49/gal. for self-serve regular unleaded. That beats the $3.45 of last time 'round.

Luckily there are still places within the general area that are as low as $3.15 but that won't last for long.

You guys are making me feel a bit better (thanks). I'm paying right not 21.00p for a liter of 97 gas -- crept up a bit. Which is $3.24 a gallon, even with the precipitous crash in the dollar (down to 24.50p from about 27 a year ago, with no bottom in sight)

Yikes!!!!!!

Just went up to $3.53 this morning.

The other day I heard that with gasoline prices rising already, there is much talk that $4/gal will be possible by next spring. Will this be enough to change many peoples driving habits, or will they continue to go about their merry way until there is no more to be had?

Originally Posted by Brian Beecher

The other day I heard that with gasoline prices rising already, there is much talk that $4/gal will be possible by next spring. Will this be enough to change many peoples driving habits, or will they continue to go about their merry way until there is no more to be had?

I don't know, but I saw a $3.69 somewhere else in my town!

This is going to have to have an impact.

Originally Posted by Brian Beecher

The other day I heard that with gasoline prices rising already, there is much talk that $4/gal will be possible by next spring. Will this be enough to change many peoples driving habits, or will they continue to go about their merry way until there is no more to be had?

Total gasoline consumption has already been dropping about 1% YoY for the last 6 months, compared with a long-term average of 1% annual increase. Not much, but it's a definite downtrend.

Originally Posted by Finch

Total gasoline consumption has already been dropping about 1% YoY for the last 6 months, compared with a long-term average of 1% annual increase. Not much, but it's a definite downtrend.

Last time I checked gas was running $3.149/3.249/3.349 at the corner 76. This is up 25 cents per gallon in the past three weeks... at a time of year when gasoline prices are usually headed down.

Originally Posted by Brian Beecher

The other day I heard that with gasoline prices rising already, there is much talk that $4/gal will be possible by next spring. Will this be enough to change many peoples driving habits, or will they continue to go about their merry way until there is no more to be had?

It will likely cause some people to rethink non-crucial and frivolous trips, maybe drop consumption by 5-10%, but that's it. $4 per gallon is, adjusted for inflation, what gasoline sold for when it peaked in 1981. It will likely take $6 or $7 gallons to make a serious dent in consumption.

Originally Posted by Roadbldr '59

Last time I checked gas was running $3.149/3.249/3.349 at the corner 76. This is up 25 cents per gallon in the past three weeks... at a time of year when gasoline prices are usually headed down.

I think you misread me. I was referring to gasoline consumption declining, presumably as a result of the rapid price increases you mention.

This was in response to Brian's musing about whether $4 gas would cause us to change our consumption habits. It would appear that habits are changing, but very slowly (only a 1% decline in consumption for a ~10% increase in price: very inelastic.) As a result, I think we will see $4/gal by the spring, and I again predict that the calls for political intervention will rise to deafening levels.