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Thursday, January 10, 2013

Gasoline Prices To Go Down... Up... Down... Up

SEARCH BLOG: GASOLINE.

It's interesting to follow the "experts" when it comes to gasoline price predictions.  One gets the feeling that an expert is only such in forecasting the past.

The government is quite optimistic that gasoline prices will fall.  That's because the economies of the world are improving which will lead to greater demand which will lead to falling prices.  Perhaps there is a supposition that there will be even greater supply... something that "peak oilers" have denied... to offset the greater demand.

In its monthly Short-Term Energy Outlook released today, the U.S. Energy Information Administration (EIA) has for the first time forecast crude oil prices for 2014 to go along with forecasts for this year. A more dramatic difference, though, comes in the expected differential between WTI crude prices and the price for Brent crude.
The EIA reported that the price of Brent crude in 2012 averaged $112 a barrel and expects that to fall to an average of $105 a barrel in 2013 and to $99 a barrel in 2014. The differential between Brent crude and WTI crude averaged $18 a barrel in 2012, and the differential is expected to fall to $16 a barrel this year and to $8 a barrel in 2004.
Based on the EIA’s figures, WTI crude will average about $89 a barrel in 2013 and $91 a barrel in 2014, compared with $94 a barrel last year. WTI crude is trading at around $93 a barrel today.  ]Read more: Gasoline, Oil Prices to Fall Further — EIA - 24/7 Wall St.] 
On the other hand...
The current national average for a gallon of regular gasoline is $3.30. Drivers shouldn’t expect prices to get cheaper at any point in 2013.
That’s according to the analysts at GasBuddy, who have just released a forecast for gas prices throughout 2013, which include month-by-month projections. The predictions call for an average price of $3.29 throughout January, followed by a gradual run-up to the year’s highest prices come springtime. Prices are expected to retreat in fall and early winter, though the lows reached in December 2012—average of $3.25 per gallon nationwide—aren’t likely to be repeated.  [Read more: http://business.time.com/2013/01/09/2013-gas-price-forecast-around-4-per-gallon-by-spring/#ixzz2HaGDEnLy]
On the third hand...
Increased domestic oil production and lower demand will push gas prices lower in 2013, AAA said.
The national average price of gasoline should peak at $3.60-$3.80 per gallon barring any significant unanticipated events, which compares to a peak of $3.94 a gallon in 2012.
Wednesday's national average price of gasoline was $3.30 per gallon, which is 7 cents less than last year and 4 cents less than a month ago.
Florida’s price per gallon now averages $3.41 — up 5 cents over last week, AAA Auto Club South said. Gas prices in Jacksonville averaged $3.45 a gallon on Thursday, up 7 cents from a week ago. [source]
On the fourth hand...
But oil prices should dictate what happens next with pump prices. The economies in the U.S. and China are showing improvement, while Europe remains in recession. 

"They set it down and raise it back up whenever they want to; right before Christmas it seemed to go down quite a bit and the right back up after Christmas it seems to jump right back up again," said Jackson resident, Tim Caldwell.

Energy experts said the wild card in prices is the Middle East.  In the past two years, threats to shipments of oil form the region drove crude prices during the winter, which led to a surge in prices. [source]
So there you have it... forecasted gasoline prices for 2013 will be either up or down.
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CO2 Cap and Trade

There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates

FEDERAL RESERVE & HOUSING

SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)