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Showing posts with label Gasoline Prices. Show all posts
Showing posts with label Gasoline Prices. Show all posts

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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Wednesday, August 01, 2012

Like Clockwork, Refinery "Woes" Boost Gas Prices In Midwest

SEARCH BLOG: GASOLINE

Every summer, there is some "problem" that strikes a Midwest refinery during the summer that sends gasoline prices skyrocketing.  A pipeline leak here, a small mechanical problem there.  If I were a collusion sort of guy, I'd think that there is something about the Chicago/Indiana refineries that wasn't quite Kosher.

Gas prices up 17 cents in biggest July jump since 2000


The Midwest is particularly pinched. Refinery woes in Indiana and Illinois have crimped output, propelling prices to as high as $4.29 a gallon in Chicago and to near $4 levels in several regions of the Rust Belt. [source]

[image]


US Refiners Continue Stealth Rally


2012 IS HERE

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Friday, May 11, 2012

A Funny Thing Happened On The Way To The Oil Forum

SEARCH BLOG: OIL and GASOLINE

A few people may have noticed that oil and gas prices have been falling during a time of the year when they normally rise.  This, of course, was due to President Obama's great leadership when he said, "High gasoline prices are a bad, bad thing."

Mark J. Perry, economist and blogger, asks:

Oil Prices Are Falling, Do Speculators Get Credit?
A lot of things affect the price of oil and gasoline.

  • demand
  • demand
  • demand
  • supply
  • supply
  • supply
Of course, there is the anticipation of demand and the anticipation of supply.  That's when "speculators" will buy and sell future contract based on their best guesses of what is going to happen. It appears there is a "consensus" that supply will be plentiful and demand will be low.

Funny how a "consensus" can change with new information.  Apologies to Zero Mostel and Phil Silvers and thanks to all you speculators out there.


2012 IS HERE

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Monday, April 09, 2012

Write Your Congressman - I Did

SEARCH BLOG: GOVERNMENT and ENERGY

This is an email sent to my U.S. congressman:

Came across this article in Forbes via Dr. Mark Perry, economist:
http://www.forbes.com/sites/christopherhelman/2012/04/03/ethanol-minus-the-corn-it-could-fuel-america-if-it-werent-illegal/  
"Thirteen congressmen led by Pete Olson, whose district around Houston, Tex. encompasses dozens of chemical plants, including Celanese, have introduced a bill to add natgas-derived fuels to the RFS. Any change would face attack from the greens but is supported by animal farmers who want cheaper feed corn. “We would prefer not to have the RFS at all,” says a spokeswoman for Olson, “but this is a step in the right direction.”"
Hope you will support it.
Hope you will, too - CLICK HERE.

2012 IS HERE

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Wednesday, February 29, 2012

California: It's A Gas

SEARCH BLOG: GASOLINE

From The LA Times:

California gas prices jump 26 cents in a weekThe average cost of self-serve regular hits $4.29 a gallon, 57 cents higher than a year ago. The average nationwide is $3.29. 
February 27, 201210:28 p.m.  [image source]
That was so 2 days ago.

Yesterday, we put some gas in my son's car to cover the hour trip to the Detroit Metro airport.  That was $3.85 per gallon... more than we've spent on gas in quite awhile.  Eight hours later, our oldest son picked us up in San Francisco and we noticed the gas prices were $4.50 per gallon.

That's got to be good news for the energy self-starving state.


2012 IS HERE

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Wednesday, July 08, 2009

Economic Weakness Continues

SEARCH BLOG: ECONOMY

Local gasoline prices have dropped from this a month ago...

to this today...

As oil has dropped from the mid-$70s to the lower-$60s.


Oil speculators... including OPEC... were convinced that they could move the price of these commodities higher because speculators on Wall Street had moved the stock market higher. They were playing off each other rather than reality. The DJIA has dropped some 600 points during the same time.


The reality is that the economy is not getting better. It may not be worsening as much, but a slower decline is hardly an "improvement." That is simply PR talk similar to the way that our state government has said that there are "budget cuts" when they are talking about not increasing the budget as much as they wanted.

Until business perceives that the government is not going to continually change the rules of the game, there will be a reluctance to commit resources and hire people. And until that happens, the economy will languish.

The government is trying to push the economy higher with mandates, taxes, and higher spending; but it needs the private sector to pull it higher with real demand.
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Thursday, June 11, 2009

Michigan Gasoline Prices Skyrocket On Demand

SEARCH BLOG: GASOLINE

Michigan's overheated economy has created so much demand for gasoline that it appears refiners simply cannot keep up with the demand. Hence, gasoline prices in Michigan are among the highest in the nation.

This comes on the heels of announcements by automotive manufacturers that they will be increasing production by 25% and hiring thousands of new employees. Workers are moving into Michigan at a rate unprecedented anywhere else in U.S. history. Home prices are increasing at a rate of 5% per month.



The long lines at the Michigan gasoline pumps have resulting in this startling comparison with Georgia that is on the brink of economic collapse. Demand is so weak in Georgia that gasoline stations have begun offering free glasses or coffee mugs with a fill-up to compete for the few customers available.

Okay, maybe the law of supply and demand is not enforced in Michigan. That presumes a free market economy. In Michigan, there is a requirement for "summer blend" gasoline to combat pollution.
The Michigan Department of Agriculture (MDA) is charged with enforcing ozone protection measures in accordance with Michigan's Motor Fuel Quality Act. This environmentally friendly program, started in 1996, will be mostly transparent to consumers, who may notice a slight increase in fuel efficiency using the slower to evaporate gasoline. Gasoline stations in the eight - county Southeast Michigan area, however, must sell only the summer-formula gas and meet other state and federal requirements. Use of the reformulated gasoline will prevent the release into the atmosphere of an estimated 28 tons of smog-causing compounds per day. [ed. consumers may also note a slight increase in gasoline prices]
When confronted with the fact that motor vehicles already have sophisticated electronic pollution control devices costing hundreds of dollars, plus very expensive catalytic converters, and that the industrial production conditions affecting the atmosphere in the 1990s have changed, a government spokesperson responded, "So what? Who's gonna complain?"

UPDATE

Just in case you were wondering why the heck the government thinks this situation is such a good idea... it doesn't... at least the part of the government tasked with thinking things through. This is nothing more than bureaucratic inertia costing the American consumers and businesses billions of dollars each year.

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Wednesday, May 06, 2009

Summer Run-Up In Gasoline Prices

SEARCH BLOG: GASOLINE and ECONOMY

Today, gasoline prices jumped about 20 cents per gallon in our area. No particular reason except that with the warmer weather comes the government-mandated "boutique blends" that are supposed to save us from all sorts of foul pollutants.

Strangely, the government-mandated vehicle requirements were supposed to do that as well. The hundreds or thousands of extra dollars for sophisticated fuel combustion controls and tailpipe emission limits apparently don't work, so the government mandates double-dip the consumer with special gasoline blends that for some reason don't seem to go beyond limited geographies... each geography having its own special blend.

Now lets add in the individual state CAFE and emission standards that are proposed and, wallah!, we have pandemonium... and a bureaucrat's orgasmic fantasy.

Here we are in a state that's in a state of depression and the only people driving seem to be leaving the state... and gasoline prices are going up... again. Is there not one lick of common sense in our government? This is not a supply-demand issue; this is a government muck-up issue. One politician has the right idea, but because he is a Republican, nothing will happen.

If our Democratic Party President and our Democratic Party Congress really want to do something for our economy, pass the damn bill and save consumers billions of dollars... or don't and blame the Republicans for not caring about the "little guy."

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Wednesday, April 22, 2009

The Answer Is Not Blowing In The Wind... What A Gas

SEARCH BLOG: ENERGY

She said it, but she didn't mean it:

Washington Wire
Political Insight and Analysis From The Wall Street Journal's Capital Bureau

August 24, 2008, 4:14 PM ET

John D. McKinnon reports on Nancy Pelosi’s statements on energy.

House Speaker Nancy Pelosi’s message on energy, already evolving in recent weeks, might have to evolve a little more.

On NBC’s “Meet the Press” on Sunday, the speaker twice seemed to suggest that natural gas – an energy source she favors – is not a fossil fuel.

“I believe in natural gas as a clean, cheap alternative to fossil fuels,” she said at one point. Natural gas “is cheap, abundant and clean compared to fossil fuels,” she said at another.

The speaker apparently was trying to contrast her support for expanded use of natural gas as a motor-vehicle fuel, and many Republicans’ preference for more domestic oil drilling — particularly through opening up more of the Outer Continental Shelf for exploration.

He said it, but he didn't mean in our lifetimes:
Saturday, April 18, 2009
Obama Adminstration’s Energy Radicalism

By Dr. Michael J. Economides

Only a few years ago radical environmentalists would have been more circumspect in their energy pronouncements than members of the Obama Administration, many of whom seem to want to govern by slogan and sound bite rather than reality. Things have been happening in rapid fire and it seems now abundantly clear that the recession, economic crisis and economic stimulus will be used as a cover to usher measures with agendas that, if enacted and stay, would have a major negative impact on our lifestyles and our economy for decades to come.

On April 17 the EPA declared finally what many had hoped and others loathed that there is “overwhelming and compelling evidence” that “greenhouse gases in the atmosphere endanger the public health of current and future generations”. In spite of a growing chorus of skeptical scientists on the causes of global climate change and even more objections on the expected effects, the EPA went on to adopt the most strident and alarmist presumed catastrophes from climate change such as rising sea levels, more wildfires, more hurricanes and degraded air quality. Under attack is plainly carbon dioxide, the product from the use of hydrocarbons (fossil fuels such as oil, natural gas and coal) from which 87 percent of the world and US energy supply comes from.

The Obama Administration seems to be unmoved by the fact that according to almost all estimates, by the year 2030, while the world energy demand will increase by 50 percent, oil, gas and coal will still account for 87 percent of world energy. While international pressure is often cited for the recent government actions, in this era of American self-flagellation, one thing should be made abundantly clear: global warming rhetoric has always been largely a full frontal attack on the United States, its lifestyle and its apparent success compared to other countries, especially in Europe. It is clearly ironic that Pravda, the former official instrument of the Soviet communist party has implored the United States to stop “carbon communism”.

The EPA of course does not offer solutions to the 87 percent problem and it defers to Congress to do so. Surely Congress will find the right solution from a position of knowledge as demonstrated by the honorable Nancy Pelosi who on NBC’s Meet the Press said “I believe in natural gas as a clean, cheap alternative to fossil fuels,” and lest one thought she misspoke, she went on to say in the same interview that natural gas “is cheap, abundant and clean compared to fossil fuels.”

The Secretary of Energy Steven Chu in an April 4 Newsweek guest editorial also proved that his Nobel Prize notwithstanding, common sense and rudimentary knowledge are lacking. First he did not offer one sentence on securing the United States 87 percent of energy supply other than “advanced biofuels”; this from the Energy Secretary. People hate to hear statistics like this but biofuels are a negative energy balance and even ignoring this science, if we were to use all of the corn grown in the United States to produce motor vehicle fuel, without regard to what that would do to food prices, it would still be less than 20 percent of our gasoline demand. Chu also went on to say “we must move beyond oil because the science on global warming is clear and compelling: greenhouse-gas emissions, primarily from fossil fuels, have started to change our climate. We have a responsibility to future generations to reduce those emissions to spare our planet the worst of the possible effects.”

His main solution? Conservation as “the most direct way to reduce our dependency on foreign oil is to simply use less of it.” Let’s just become less seems to be the Administration’s mantra and it has many adherents all over the world, especially when it refers to the United States. This in spite of the fact that beyond ideological feel-good there is no evidence historical or otherwise that conservation can reduce energy consumption. In fact the opposite is true. Energy conservation and efficiency in one sector has led to increase in total energy demand, finding new uses of energy such as the internet and next-day package delivery. People the world over have identified the use of energy as perhaps the single most important factor for a better life. But according to Secretary Chu the answer is this simple. “All Americans can strike a blow for energy independence by choosing to buy fuel-efficient cars, take public transit or join a carpool.” Jimmy Carter all over?

There is some merit to another suggestion by him: electrical cars, but he destroys the notion when he writes “generating that electricity from clean, renewable sources like solar and wind power.” Another dreaded statistics. If we triple current electricity output from wind every year for the next 20 years, it will still be less than 20 percent of the nation’s electricity demand.

Not to be outdone in slogan -style exaggeration, Secretary of the Interior Ken Salazar, on April 6 in Atlantic City to discuss America’s offshore energy resources, in what the Wall Street Journal characterized, “raised eyebrows when he said offshore wind farms could replace 3,000 coal-fired plants.” We have only 1,400. He also claimed that offshore Atlantic could deliver wind electricity equal to 1,000 gigawatts. That’s the entire electricity generation capacity of the United States.

Even by vested interests, such as wind turbine manufacturers, offshore wind farms, which internationally now account for an imperceptible fraction of wind power the total of which is less than 0.4 percent of electricity production, may account for 5 to 7 percent of electricity after many decades. Salazar’s statement should raise a lot more than eyebrows.

One has to wonder what is the point and what are the motivations of all this “gusher of lies” which surely falls under psychobabble rather than energy policy? Why is it, that potential changes which may take many decades, if ever, are presented as imminent solutions all the while ignoring taking care of business today? I can find no answer to such nonsense. Let me make two predictions which for most who understand energy may generate chuckles for the dearth of daring: By the end of Obama’s first term, oil consumption in the United States will be up and the imported portion will increase. In the meantime never underestimate the power of politicians to sound ridiculous and out of touch with reality. PDF is here.

Posted on 04/18 at 04:52 PM
... and no windfarms off Cape Cod where winds are strongest and most consistent.

Wednesday, February 11, 2009

Gasoline Rises On Drop In Oil Prices

SEARCH BLOG: GASOLINE

Northeast and midwest gasoline prices jumped 10-20¢ per gallon as oi prices dropped further to around $36 per barrel. Keeps happening here. Must be in anticipation of the stimulus package.


Oil plummets on global demand report
U.S. inventory report also shows bigger-than-expected rise in crude supply.
By Julianne Pepitone, CNNMoney.com contributing writer

oil_pump_pipes_zoom.03.jpg
Oil prices sank after one report said global demand for crude will continue to fall, and another said U.S. crude stockpiles increased.

NEW YORK (CNNMoney.com) -- Oil prices plummeted Wednesday after an international report said global demand for crude will continue to fall in 2009, re-igniting oversupply concerns.

The International Energy Agency reduced its predictions for demand to fall 84.7 million barrels per day in 2009, according to the monthly report.

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Thursday, January 15, 2009

Gasoline Prices ... Try Another Explanation

SEARCH BLOG: GASOLINE

From the U.S. Department of Energy and parroted by the American Petroleum Institute [or is it the other way around?]:

Why do gasoline prices differ according to region?

Although price levels vary over time, Energy Information Administration (EIA) data indicate that average retail gasoline prices tend to typically be higher in certain States or regions than in others (Figure 2). Aside from taxes, there are other factors that contribute to regional and even local differences in gasoline prices:

Proximity of supply - Areas farthest from the Gulf Coast (the source of nearly half of the gasoline produced in the United States and, thus, a major supplier to the rest of the country), tend to have higher prices. The proximity of refineries to crude oil supplies can even be a factor, as well as shipping costs (pipeline or waterborne) from refinery to market.

Supply disruptions - Any event which slows or stops production of gasoline for a short time, such as planned or unplanned refinery maintenance, can prompt bidding for available supplies. If the transportation system cannot support the flow of surplus supplies from one region to another, prices will remain comparatively high.

Competition in the local market - Competitive differences can be substantial between a locality with only one or a few gasoline suppliers versus one with a large number of competitors in close proximity. Con-sumers in remote locations may face a trade-off between higher local prices and the inconvenience of driving some distance to a lower- priced alternative.

Environmental programs - Some areas of the country are required to use special gasolines. Environmental programs, aimed at reducing carbon monoxide, smog, and air toxics, include the Federal and/or State-required oxygenated, reformulated, and low-volatility (evaporates more slowly) gasolines. Other environmental programs put restrictions on transportation and storage. The reformulated gasolines required in some urban areas and in California cost more to produce than conventional gasoline served elsewhere, increasing the price paid at the pump.
Now look at the present GasBuddy.com map of U.S. prices:

The relative pricing has changed dramatically. The Midwest and Northeast consumers are being "pumped" for more money. Yet, demand is dramatically down and so are oil prices.
Do we have our own "Putin" controlling things? The Midwest and Northeast are beginning to feel like Europe does about natural gas.
Or is it just history repeating?
Published: June 28, 2000
Energy Secretary Bill Richardson said today that Midwest gasoline prices were still too high and that the Clinton administration was working to alleviate refinery problems and investigating oil companies for ''potential price fixing.'' Gasoline at the pump has fallen 7 to 12 cents a gallon in the Midwest the last week. Before last week, gasoline prices had surged for eight straight weeks.
Midwest gasoline prices continue to defy the market economics... just as they did 8-1/2 years ago... explanations and excuses notwithstanding.

In western New York, a state legislator wanted to have consumers boycott Sunoco which is the dominant player in an area of especially high relative gasoline prices:
Updated: 12/17/08 02:41 PM
NIAGARA COUNTY
Boycott of Sunoco urged by legislator

LOCKPORT — Niagara County Legislature Vice Chairman Clyde L. Burmaster called Tuesday for a boycott of Sunoco gasoline by local governments and citizens to protest high local gasoline prices.

Burmaster, R-Ransomville, sponsored a resolution that passed two weeks ago to ask for a state investigation of local gasoline price gouging. Sunday, The Buffalo News revealed that prices here are high because Sunoco, the dominant gasoline supplier in the region, is trying to make up for profits lost when crude oil prices were at record highs earlier this year.

In a speech at Tuesday’s Legislature meeting, Burmaster said, “As in the Old West, it is time for the vigilantes to ride. . . . Why don’t people want to move to Western New York or Niagara County? Is it too expensive to live here? Go ask Sunoco.”

He said residents should call Sunoco at (800) 786-6261 to protest prices and should call Gov. David A. Paterson’s local office at 716-847-7968 to ask him to respond to Burmaster’s resolution asking for an investigation.

The real problem is identifying which companies are the dominant players because of the variety of independents that get their gasoline from the majors.
I suspect, however, that in the Detroit area, Marathon sets the pace because they have a local refinery. Tough to verify, however. It could be argued that Marathon's refinery expansion is affecting this area's pricing [cover costs, etc. etc.]... but that would be tough to verify, too.
Perhaps this is a case of not having a local refinery increases gasoline prices and having a local refinery increases gasoline prices. Heads, I win; Tails, you lose.

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Monday, January 12, 2009

Gasoline And Oil Prices Do Not Mix

SEARCH BLOG: GASOLINE

Oil prices have returned to the level that resulted in gasoline prices around $1.60 per gallon a few weeks ago.

Gasoline prices have stayed where they were when oil prices were $10 per barrel [25%] higher.

Who is rigging the market?

ADDENDUM:

Michigan gas prices leap 20 cents
Average cost at pump of $1.84 topped by only three states; reasons for weekend surge unclear. Doug Guthrie / The Detroit News

Less predictable than the weather, the price of gasoline spiked statewide over the weekend to make motorists in Michigan pay more at the pump than any other state except California, Alaska and Hawaii.

Local prices on Sunday ranged from $1.62 a gallon for regular at Costco and Sam's Club in Madison Heights to a high of $2 per gallon at a BP station in Romulus, according to Detroitgasprices.com.

The statewide average of $1.84 per gallon is only topped by the average of $1.86 in California, $2.28 in Hawaii, and $2.36 in Alaska.

Meanwhile, average prices in several western states like Texas, Utah, Montana and Colorado remain below $1.50 a gallon, according to GasBuddy.com.

Even AAA of Michigan spokesman Jim Rink was at a loss to explain Michigan's weekend price surge.

"There really is nothing I know of that should have caused a 20-cent jump overnight," Rink said Sunday.


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Saturday, January 10, 2009

Supply And Prices Greater Than Demand

SEARCH BLOG: GASOLINE

Continuing to defy economics, Midwestern gasoline prices remain near $2.00 gallon despite oil at or below $40 per barrel. That is high, relatively speaking, to the rest of the country. All of the excuses about Venezuelan oil problems and Russian oil problems and Gaza problems is a smokescreen for some major supplier to be jacking up prices. There is no refinery problem; there is no pipeline problem; there is a supplier problem.

See this post on Wednesday.

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Wednesday, January 07, 2009

Gasoline Shortage In Midwest Or Booming Economy

SEARCH BLOG: OIL

Is it mere coincidence that the area with some of the highest gasoline prices in the U.S. also has the weakest economy? Could be a gasoline shortage... but a lot more people are unemployed and staying home... so it can't be caused by a booming economy either.

Maybe it's just a case of "hit 'em while they're down." Or maybe it's all those refineries getting ready for producing their "summer blends."

Just how are those wholesale and retail prices being set? And who is doing it?

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Monday, December 15, 2008

Northeast Gasoline Prices

SEARCH BLOG: GASOLINE

While gasoline prices continue to decline around the country, in the northeast they have stalled or risen slightly.

In the summer, gasoline is usually higher than many states because we need a "boutique blend" to meet EPA regulations... and it is the tourist travel season, so the prices go up with the demand... at least that's the official line, along with hurricanes and refinery outages.

I suppose the official line now is that because there are so few tourists and local demand is so low and there are no hurricanes and refineries are on line, the prices have to go up to offset the lower volume and lack of EPA smog controls. Maybe it's just that the pipelines are frozen.

Or maybe it's just that the map needs some red to go with the green because it's Christmas!

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Wednesday, December 10, 2008

Oil... Going Once... Going Twice

SEARCH BLOG: OIL

Global oil demand will collapse next year and commodities will not return to the highs they reached this summer in the foreseeable future, two authoritative reports said on Tuesday as they forecast a long and painful worldwide recession.

The stark conclusions came as the World Bank’s chief economist predicted that the world faced “the worst recession since the Great Depression”.

The US energy department said global oil demand will fall this year and next, marking the first two consecutive years’ decline in 30 years.

“The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices,” it said, forecasting that demand would drop 50,000 barrels a day this year and a hefty 450,000 b/d in 2009. US oil demand will drop next year to the lowest level in 11 years.

Meanwhile, the World Bank’s Global Economic Prospects report said the commodities boom of the past five years – which drove up prices 130 per cent – had “come to an end”.

Exactly one year ago I wrote this.... One doesn't have to be an economist to see the effect of these macro disruptions and the inevitable outcome. Actually, an historian might have an advantage in that arena since economists always seem to be analyzing last year's data.

The irony is that this creates a terrible dilemma for the alternative energy folks... the same ones who were screaming about the automobile companies not recognizing that everyone wanted small cars when the market... with the exception of less than a year... had demanded just the opposite.
With gasoline headed toward $1.50 per gallon and lower, there are a lot of people who will soon forget about the "energy crisis" and move on to the next issue... survival. How will the AE people convince the rest of us to shell out thousands of dollars more when oil is cheap again. They'll have to convince us it was the Saudis and Wall Street manipulators who are trying to "hook" us again.
Still, those who hate big oil and big cars have an opportunity to force the issue. GM and Chrysler have been brought to their corporate knees before the Council of Congress. Now, despite what might happen in the marketplace, those companies will be forced to do what the Council proclaims as the "correct path of the marketplace"... a path determined by the $100 billion CAFE and Carbon Credits Contingent from California. After all, the Council will "own" them.

Well, sooner or later the Council will be proven right... when there is not enough energy development for a global economy that can't be fully revive without enough energy. But we can exchange Carbon Trading Cards and drive golf carts to the next 2-hour plug-in 100 miles down the road. Maybe we can just live a "virtual" life on Xbox.
Besides, the rest of the world will start using that oil even if we decide that we are going to have an "alternative economy."
I think Poland had one of those after WWII

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Friday, November 07, 2008

Reducing CO2 Through Suffering

SEARCH BLOG: CO2 and POLITICS and ECONOMY

President-elect Obama hardly caused a ripple of concern when he announced that his plans for our future energy needs included bankrupting producers of coal-powered electricity. After all, his voters would enthusiastically back the economic suffering needed to move to alternative sources such as wind power.

Regardless, the real driver of reducing the use of fossil fuels appears to be a forced reduction in the standard of living as the economies move into a severe recession. Worldwide demand for oil has reduced the price from $147 per barrel this summer to near $60 now... nearly a 60% decrease. Those fortunate enough to live in a mild climate and wealthy enough to afford upscale urban housing are the first to self-righteously proclaim that as a bad thing. We need high prices and economic suffering to save the planet.

For the poorer folk who live in colder areas and are forced to live in older, poorly insulated houses and have to drive to work if they are still fortunate to have jobs, the reduction of gasoline prices is a good thing. Ironically, the new government's focus on cap and trading vapor and sharing the suffering resonates as good change with those most likely to suffer the most.... Or could it be that those folks just haven't been listening?

Winter is coming. Money is scarcer. Heating costs are still high and, for those using natural gas, going higher despite vast reserves the government keeps off limits. Fortunately, the economic downturn will hold increases in natural gas prices lower than expected... 6% to 10% increase as opposed to 20% projected earlier. That's good news for people who can't afford it anyway. I'm sure Obama feels their pain and will do something about it... as soon as he finishes bankrupting coal companies and saving the planet through vapor scams.

Oh, did I mention that CO2 is mostly irrelevant? It seems that the proof so many cap and scammers want us to rely on are computer models that bear no relationship to reality. Well, we should suffer anyway. Misery loves company, you know. I guess that means if we suffer together, we will love each other more. Change is sooooo good.

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Tuesday, October 28, 2008

A Different Welfare For Detroit

SEARCH BLOG: AUTOMOBILES

Yesterday, The Washington Post ran an editorial titled "Welfare For Detroit."

AFTER YEARS of decline, U.S. auto companies face the double whammy of a credit crisis and a recession. Car and truck sales fell 26.6 percent in September, the first month since 1993 in which fewer than 1 million vehicles moved off the lots. General Motors, threatened with bankruptcy and burning through $1 billion in cash reserves per month, is groping for a merger with Chrysler. Ford's stock is down more than 70 percent in the past year, and investor Kirk Kerkorian is dumping his shares.

The $25 billion federal loan approved by Congress on Sept. 25 may not reach Detroit for six to 18 months because of red tape. So Detroit's allies are pushing for waivers of the usual rules and, perhaps, another $25 billion before the end of the year. And why not? Everyone else seems to be getting a bailout these days. Hundreds of thousands of people depend on Detroit for their jobs, directly or indirectly.

Well, we can think of several objections. First, there is the question of whether the U.S. government should be picking winners and losers in a business such as this. It's one thing to bail out the financial sector, whose product -- credit -- is essentially fungible and on which all other businesses depend. Automobiles, however, are not interchangeable, and Congress can't substitute its specific technological and aesthetic preferences for those of the market. What if we lend Detroit $25 billion and still nobody buys its cars?

Second, this bailout taxes the less well-off to protect the relatively privileged. The average individual General Motors production worker, whose job would be saved by the bailout, makes $56,650 per year, according to the Center for Automotive Research, and that doesn't count better-paid, white-collar types. Meanwhile, half of all households-- which typically include more than one earner -- make less than $50,000 per year. Where's the justice in that?

Congress approved $7,500 tax credits for purchasers of GM's much-touted plug-in hybrid Chevy Volt, built to run 40 miles on a single electric charge. That would knock the net cost of the four-seat Volt, due out in late 2010, down to $32,500 -- not much less than a basic Cadillac CTS costs now. Even then, it could take a decade of Volt driving to recoup the difference in purchase prices between it and the far cheaper Toyota Prius. Assuming a few well-heeled drivers take that deal, why should poorer people be taxed to enable them?

The downfall of the American auto industry is indeed a tragedy. But the automakers and the United Auto Workers have only themselves to blame for much of it. For years, they pursued protectionism against foreign competitors rather than tackle them head-on. The automakers say that they need $25 billion from Congress to offset the additional costs of tough new fuel-efficiency standards. Perhaps they wouldn't be in that situation if they had accepted such standards a long time ago and retooled to meet them, rather than persisting in the more familiar, and profitable, business of making gas guzzlers.

We would all have been better off if the federal government had enacted a higher gas tax so that the Big Three could have planned production on that basis. A stiffer gas tax, rebatable in some form to consumers, would still be the best way to guarantee a long-term shift to more economical cars. Alas, there's a limit to how much taxpayers can spend ensuring that such cars get built in Detroit.
I couldn't resist commenting:
Toyota and Honda, the largest competitors for Detroit automakers, have enjoyed a protected home territory and continue to do so. This has allowed them to develop and sell a variety of vehicles that, until the recent gas price increases, were only niche products in the U.S. In fact, because Japan was a market virtually closed to U.S. manufacturers, Toyota, Honda, and a variety of other Japanese manufacturers used the Japanese buyers to subsidize their sales in the U.S. You might note the same thing is happening with the Korean manufacturers.

In fact, Toyota spent large sums to develop full-sized trucks and SUVs to compete in the U.S. market because that was where the demand and profits were.

The U.S. companies had a variety of small vehicles that couldn't be given away... and were subsidized by the profits from the larger vehicles that were in demand by the public. It is interesting that the Ford Focus, which was one of those vehicles that couldn't be sold profitably, has become a big seller for that company... and at a profit. Does that make Ford execs geniuses for keeping a dud around for so many years?

The combination of an artificial gas price bubble [which is correcting], credit availability, and onerous government mandates for the next ten years, have turned economic "engines" for the U.S. economy into stalled scrap.

So, while the U.S. manufacturers are not blameless, you might recognize the complicity of the U.S. and foreign governments in this situation. You might also recognize the the U.S. manufacturers are both successful and profitable in most other global markets. You might also recognize that U.S. vehicle quality... particularly Ford... is virtually the same as Toyota's.
I noticed this comment received more "recommendations" than the others... except this one which received the same number.
"We would all have been better off if the federal government had enacted a higher gas tax so that the Big Three could have planned production on that basis. A stiffer gas tax, rebatable in some form to consumers, would still be the best way to guarantee a long-term shift to more economical cars."

I agree with one exception. REBATABLE. My suggestion has been that the money raised from an increasing gasoline tax go one third to repair and expansion of our infrastructure, one third to health care and one third to social security.

Is there a politician in the country with the cajones to even discuss raising the gas tax? Al Gore said we should talk about it and he got hammered. Six months ago would have been a very bad time to add a quarter or so to gas prices but the post election "new found courage period" would be perfect.

Finally all the tricky ways the politicians use to lead buyers to hybrids and electrics are ill focused. It is not the purchase of cars that consumes energy. It is the USE of the car. In the DAILY DECISION to drive the car or take the train, it is the cost of the USE of the car that is critical. This is best effected through higher FUEL cost. The taxation system is in place. No new bureaucracies are needed.
No, politicians won't do anything for which they can be blamed if they can blame the automobile manufacturers instead. As I wrote earlier this year:
Now that it is obvious to everyone that the government has no intention of letting market forces act as the agent of change, it is time for the government to quit pussy-footing around and do what is done in Europe: add taxes of $3 or more per gallon of gasoline. At that point, all other government actions... mileage and CO2 regulations, restrictions on drilling for oil, and subsidies for alternative fuels... will be moot and can be eliminated because the cost of implementing the government's policies will be borne directly by consumers without the government being able to divert attention and blame to vehicle manufacturers and oil companies.

... that would be a blow to politicians who would have to stand up to their constituents and explain why the government has to be involved at all in the marketplace. It would also create issues with regard to why many other taxes would have to remain in force [and the supporting bureaucracies]. It would also highlight issues with regard to the plethora of regulations that create additional costs for manufacturers and consumers.
I absolutely feel the economic manipulation by the government in the name of important causes is the cause of so many ridiculous problems and misguided fixes... including Detroit automakers current and future problems. So, while the second commenter's arguements are logical they are not reasonable.

ADDENDUM

An indication of how "protected the Japanese market is....

(RTTNews) - The sale of foreign auto makers cars, trucks and buses in Japan dropped 5.5 percent in August from the year before.


The Japan Automobile Importers Association says weaker sales of Volkswagen and BMW autos offset a rise in sales by Mercedes-Benz.


Sales of imported vehicles by foreign car makers totaled 14,406 in August [about 168,000 annually], down from 15,249 in the same month last year. Among the top three foreign brands by sales volume, Volkswagen saw sales drop by 1.5 percent on the year and BMW sales fell 21.3 percent. Mercedes Benz saw an increase of 3.3 percent.


Ford posted the largest drop among the top 10 foreign brands, falling 28.1 percent on the year.


For comments and feedback: contact editorial@rttnews.com


Copyright(c) 2007 RealTimeTraders.com, Inc. All Rights Reserved
Meanwhile, Toyota and Honda, excluding other Japanese brands, sold over 240,000 vehicles... in the month of September, 2008.
So contrary to the Washington Post's assertion that U.S. manufacturers got "protection," The U.S. market is wide open.
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Monday, October 13, 2008

Gasoline Prices Correcting

SEARCH BLOG: GASOLINE

Oil ran out of reasons to be artificially inflated. Now it looks as if gasoline has encountered the same market correction.

While the price of gasoline is still too high, the $3.00 per gallon barrier was broken this weekend in the Detroit area approaching $2.80. Elsewhere, the $2.50 per gallon price is being negotiated.

That is certainly good news for many battered economies. The problem is that the next increase will be the price of natural gas and winter is certainly getting closer. Sure, the Democratic-controlled Congress has given the go-ahead for more offshore drilling... but just wait until all of those court challenges start rearing their ugly heads. And if Obama wins and the Democrats keep their control of Congress, you can bet that there will be more smoke and mirrors than at a magicians convention... and little will actually get done to address the long-term energy needs of this country.

It just doesn't serve the purposes of the Democratic Party to have things run smoothly. Then there are no giant honey pots of special Federal programs for them to dip into. If you think you saw pork in the $700 billion bailout, just keep looking. There's a lot more where that came from. And if you think government intrusion in the marketplace will be bigger because of the bailout, just keep looking because you haven't seen anything yet. The big alternative energy programs are lurking around the corner while nuclear, coal, natural gas, and petroleum expansion will never be realized.

Then the average Joe will realize that the few pennies per gallon more or less isn't even worth talking about.

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Monday, September 22, 2008

Bailing Out The Federal Government

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I sent this as part of an email:

Why should I have to bail out the federal government's decision to force "fair lending" to unqualified and unable-to-pay people just because some stupid politicians [Clinton/Reno] thought it was "discriminatory" to actually require 20% down payments or because banks didn't want to lend money in areas where property values were declining and loan risks were exceptionally high? Why should I have to bail out the federal government's decision to restrict domestic oil exploration and make new refineries nearly impossible to build resulting in high oil prices and exorbitant gasoline prices requiring a tax rebate bailout because lower-income people couldn't support these government policies? Why should I have to bail out the federal government's meddling in the automotive marketplace with its ridiculous CAFE requirements that will add thousands of dollars of cost per vehicle to the purchase price and, when combined with the cost of gasoline and the tight money situation, has created a crippling marketplace for automobile manufacturers and consumers?
Yes, why indeed.

ADDENDUM
Another look at the housing credit history.
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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)