The challenge of $4 gasoline
By Patrick Kelley
Originally published 08:51 a.m., May 24, 2008
Updated 08:52 a.m., May 24, 2008
What are Americans going to be doing this weekend? In many cases, they will not be doing what they want to be doing.
The Memorial Day weekend, like the Fourth of July and Labor Day, has become an occasion for summer travel. These holidays are times when people throw their bags in the trunk and hit the road. Whether the destination is the mountains or a lake or just a relative’s home in another town, traveling has been part of the holiday experience.
Then gasoline prices began to rise. This year has seen the price of a gallon of gasoline go from merely high to annoying to downright frightening. As a result, Americans — a people raised to rely on good roads and cheap gasoline — find that their world is contracting. Trips that once were undertaken on the spur of the moment have become full-scale expeditions, requiring careful planning and budgeting.
Sometimes, the budget just will not stretch far enough. Boaters may still be able to afford to get to the lake and back, but can they afford gas for the boat once they get there? More and more boaters are deciding they can’t. Their boats are left at home or in storage, and increasing numbers of them are put up for sale.
Owners of sport utility vehicles — the cabin cruisers of the highway — are also being pushed into a corner by the high cost of gas. The smart thing to do, of course, is to trade the SUV in for a more economical car — a hybrid , if one can be found. But SUVs are becoming a drug on the market. Some used-car lots won’t even take them and their trade-in value is plummeting at new-car dealerships. The San Jose Mercury News reports that the value of mid-sized SUV’s has dropped 10 percent in the past eight months.
What is increasing in value? Used econoboxes from the 1990s, some of whose three-cylinder engines offer twice the miles per gallon of an SUV.
As bad as the situation may be for the owners of SUVs, it is in some ways worse for people who own more economical vehicles. Their budgets are based on those cars and when gas prices start to rise, they have nowhere else to cut. They are like the nonsmoking teetotaler in Mark Twain’s tale. When he got sick, he had no bad habits to give up, so all he could do was die.
High gasoline prices are not going to kill us. As a nation, we still have plenty of bad habits to give up and some good ones to develop — walking, biking and careful planning of trips and errands.
But no matter how well we adjust, the golden days of cheap gasoline will not return.
This week, the price of regular gas at some stations in Emporia was near enough to $4 as to make no difference. The price may break that barrier this weekend. It certainly will break it this summer. Some people in a position to know say that gasoline may hit $6 a gallon this year.
The day will probably come when motorists will think of the spring of 2008 as the good old days. Let’s hope that day is a long time coming.
create (anonymous) says...
Yes, prices continue to climb, matched only by the soaring profits of oil speculators while the rest of us have no choice but to budget for their greed.
May 24, 2008 at 9:34 a.m. ( permalink | suggest removal )
dhcc66 (anonymous) says...
well put create. if you watched the senate hearings where they asked if the CEO's of the big oil companies were bothered by what they have done to the nation's economy, one said "look, we are just ordinary guys doing a job" another said "profit is the name of the game"....
SOMEBODY PLEASE tell the government to stop listening to this big bunch of idiots and tell them to quit gouging or they will start charging the windfall profits taxes.....come to think of it, why haven't they done that already?? if we owed taxes..i'm sure the irs would be coming after us, right??
May 24, 2008 at 10:13 a.m. ( permalink | suggest removal )
emporian (anonymous) says...
They arent gouging. You want prices to go down, make the speculators put down 50% equity on their purchases. Big oil is in it to make money, just like anyother business. If you had a business would you just charge enough to barely scrape by or enough to turn a profit? And before you get mad at the speculators, alot of those speculators are people with pension plans, IRA, and 401K's. Calpers, which is california state pension fund, holds almost 30 billion dollars in commodities
The days of cheap gasoline are over. We are not entitled to it. Canada has been paying $5/gal for years. I know, I have been there.
May 24, 2008 at 11:57 a.m. ( permalink | suggest removal )
create (anonymous) says...
If they aren't gouging, then why hasn't it been this way all along for years and years?!!! Why is the dude up the street celebrating and laughing because he owns oil rights. "Let it climb," he says. Yeah, while many steal grocery money to buy gas to get to work. A profit is one thing, but windfall profits are another thing all together. This is BS!!!
May 24, 2008 at 3:37 p.m. ( permalink | suggest removal )
emporian (anonymous) says...
They are simply charging what the market will bear. After Katrina the speculators noticed something. They can raise the price, and all we will do is grumble and pay. Oil companies have a product. Is it there fault that it is worth alot more now than it was before? If you had a business that produced widgets, and someone walked in one day and said I will give you $100 a carton fro these widgets that you had been selling for $50/carton a year ago would you turn them down? The people who own stock in the widget business would then be rejoicing much like the guy down the street with oil rights. Are the oil companies supposed to say well we think thats too high?
May 24, 2008 at 4:08 p.m. ( permalink | suggest removal )
momus (anonymous) says...
Just my opinion, but it seems that the oil companies are reaping the rewards of an out-of-control commodities system. At it's inception the commodities markets stabilized the price of goods over extended periods of time and encouraged things like grain storage to ensure a stable supply of basic goods. Producers, or those that used a certain commodity, could hedge their position in the market and thus protect themselves from severe market fluctuations.
Now, the markets are what, 80-90% speculators? They (speculators) make money ONLY when the market fluctuates. Add to that the fact that a weak dollar relative to other foreign currencies means foreign dollars invested in oil are pushing commodities prices upwards relative to our dollar, and the fact that market is attempting to "build in" scenarios that would see a massive decrease in oil production/delivery and you have a recipe for what is going on right now. Maybe I'm wrong, and I'm sure some of you will let me know if I am :), but it seems like the commodities markets of the present are doing the opposite of what the were originally built to do.
May 24, 2008 at 5:29 p.m. ( permalink | suggest removal )
flexj66801 (anonymous) says...
Very well put momus.
Fact is fact, Oil companies keep turning in record profits. The dollar is weak, The economy has suffered. The consumers costs for commodities are going up because companies are passing onto us high fuel cost for transportation so we all suffer. Seems to me the only people smelling like a rose in all this is the oil companies themselves.
May 24, 2008 at 7:43 p.m. ( permalink | suggest removal )
eiggohp (anonymous) says...
The price of oil will not go down until we learn to conserve. It makes about 4+ MPG difference if we drive 60 rather than 75. Everyone would holler like H---, but we ALL need to slow down. Maybe we should go back to the 55 MPH that we had to do in the 70s. We are all in too big of a hurry anyway...take it easier on the highways and it WILL pay off in the long run. It is a supply and demand deal~
May 24, 2008 at 8:04 p.m. ( permalink | suggest removal )
Bjnemp (anonymous) says...
The devaluization of the US dollar is a major contributor to the problem. Our decadent waste of oil by driving gas-guzzling SUVs and V8 sports cars (which I dearly love), refusing to car pool or use public mass transportation is also a big factor. But perhaps the biggest fiasco we have created is letting the conservationist radicals and "green" lobby block our drilling for oil in Alaska, the Dakotas, Gulf of Mexico, and other places where huge deposits are known to eixist. We have some tough decisions we need to make, and soon. Do we cause a few polar bears and flounders to make some lifestyle changes, or do WE make some huge lifestyle changes? The choices are ours to make; and we need to make them wisely.
May 25, 2008 at 12:25 a.m. ( permalink | suggest removal )
create (anonymous) says...
Right on, Momus!
Emporian, if oil companies are going to charge what the market will bear, then they should be paying a windfall profits tax. If I sold my widgets for $100 a case, then I too should be subject to the windfall profits tax. I remember all the gouging that was going on HOURS after 9-11. I also remember seeing all the long lines of panicked people at the gas pumps that day. I'm guessing that suppliers, or people with oil rights for that matter, were not complaining about that one bit.
May 25, 2008 at 8:56 a.m. ( permalink | suggest removal )
dhcc66 (anonymous) says...
so if i go out and make 45 billion a quarter and declare record profits because i keep on raising prices and the economy suffers because of it....you all would be ok with it?? EMPORIAN?? as for what the market will bear, i guess going without a bunch of stuff just so we can get to and from work is what it will bear...and record numbers of foreclosures, and bankruptcies, and on, and on, and on....
I totally agree that we need to cut back, but somebody needs to slow the oil barons down starting with Bush and his oil wealthy family. just because somebody will bear the price for now hoping it will go back down doesn't mean it's right.
right now, the oil idiots and the republicans have ruined the market, the economy, and this country. start charging the windfall taxes that the government already has in place for the profits they are making, and i'm sure they'll slow it down a notch.
May 25, 2008 at 9:02 a.m. ( permalink | suggest removal )
wanderer (anonymous) says...
I'm surprised the GOP hasn't proposed a supply-side solution to this yet. :) If I remember right, here's how it would go:
1. Base situation = High gas prices and oil company execs making obscene profits.
2. Alter situation by lowering gas prices until oil company execs are only making amazing profits.
3. New situation = Gas prices that are lower (though probably still high) and oil company execs that are still rich. Since consumers aren't spending as much on gasoline, they have money to put into the rest of the economy, making everyone better off. Happily ever after.
Yes, I'm being a little facetious. But you know, put like that, it sounds a lot more believable for gas prices than it ever did for taxes ...
May 26, 2008 at 1:39 a.m. ( permalink | suggest removal )
edorsey (anonymous) says...
I would thoroughly enjoy it if someone told me I was making too much money...
May 26, 2008 at 3:40 p.m. ( permalink | suggest removal )
USNretired (anonymous) says...
Oil is an international commodity. So is coffee. How much do you pay for coffee? I remember bottomless cups for 10 cents. Oil has been in heavy demand for a long time and the OPEC countries don't have an endless supply. The party has to end sooner or later, so we need to get used to the idea and make our decisions accordingly. Chemist can make hydrocarbon compounds from virtually any hydrogen and any carbon source, but what is cost-effective? I personally would like my next vehicle to have a bio-diesel capable engine, the more fuels it could use, the better. When OPEC runs out of oil, North America and Africa and perhaps Antarctica would be the only sources left. What then? We are the world's breadbasket and technology center now, we, of all people, should be able to find an alternative to oil for fuel, plastics, etc.
May 26, 2008 at 4:43 p.m. ( permalink | suggest removal )
admireed (anonymous) says...
Observ...never sell this concept. Easier to bash corporation than recognize your logic.
May 26, 2008 at 9:04 p.m. ( permalink | suggest removal )
dhcc66 (anonymous) says...
observe....give away things to companies making billions in profit every quarter? bull. and don't blame the democrats for this one. gas was headed this way long before they were the majority.
last....let them drill in your backyard or favorite place to go just so you can afford things....then lets talk
May 26, 2008 at 9:48 p.m. ( permalink | suggest removal )
momus (anonymous) says...
To further some of dhcc66's comments, I'm not sure we could trust the sole development and implementation of alternative fuels to oil companies. It doesn't make much sense to compete with yourself. If oil companies could show that a significant amount of their profits were going towards a replacement for petroleum based fuels, I think it would go a long way towards insulating themselves from a windfall tax, but that is a big if.
As I alluded to before, supply is one of many factors (some artificial and some real) that make up the price of fuel. Regardless, we know the supply of oil is finite, and it behooves us to hold onto our reserves as long as possible while simultaneously encouraging our competitors to expend their resources AND seeking to change our energy standard.
The price of gas is complex. Yes, developing nations demand on this resource does contribute to price, along with an ineffective commodities system, production centers in unstable nations, system dependence, OPEC, industry concentration, lack of viable alternatives, a week dollar and many other factors that have little to do with supply or demand. Let's remember that when the Saudi's were asked about potential competition with ethanol (back when people thought it was a magic bullet), they said that they would simply increase the production and drop the price if the alternative fuel became competitive.
These complex problems will require painful and complex solutions. I'm not sure that asking the foxes (oil companies) to guard the hen house is the best way to evolve our energy standard. The oil companies have to maintain a strategy that benefits their company and their stock holders, and I'm not sure that benefits the consumer in any foreseeable time frame.
May 26, 2008 at 10:51 p.m. ( permalink | suggest removal )
alfalfa (anonymous) says...
It seems to me that we are entering a new era in this nation where both food and energy are going to consume much more of the average households income than ever before. It is going to take some adjustment on the part of all of us and it is going to be painful. I wish I knew the answer, and I wish it was that gas would go back below $2, but I honestly doubt I will ever see $2 gas again in my life, $3 even seems unlikely right now.
May 26, 2008 at 11:11 p.m. ( permalink | suggest removal )
create (anonymous) says...
Alfalfa, sad to say, but I'm afraid you may be right. Even if oil companies did have to pay a windfall tax as I believe they should, it still doesn't lower prices and the consumer still has to budget for increases. It seems that the only finite part of the formula is our incomes because we can only stretch so far.
May 27, 2008 at 5:15 a.m. ( permalink | suggest removal )
Pingeon (anonymous) says...
Everyone seems to be bashing on the oil companies. However, they aren't the only problem here. I drive a 1998 Chevy PU. I am looking to trade to a different one in the next year. I was out on the car lots over the weekend checking out the 2008 models. For the EXACT SAME truck that is 10 year newer, guess how much better the gas mileage is. ZERO! It gets the same mileage as the one I drive that is 10 years old! You cannot make me believe that in 10 years the technology hasn't increased enough to add even 1 mpg to a vehicle.
May 27, 2008 at 12:07 p.m. ( permalink | suggest removal )
alfalfa (anonymous) says...
It looks like we will all be forced to conserve now. I don't know about everyone else,but I think alot more about the things I need when I go to a store, to try to limit trips. It isn't just the cost of gas for my own vehicle, look at how many things have increased in price or have a fuel surcharge added to them now. Hopefully our local and state governments as well as schools will be thinking of ways to conserve as well, so we don't have higher taxes on top of everything else.
May 27, 2008 at 10:44 p.m. ( permalink | suggest removal )
sexingthecherry (anonymous) says...
Pingeon, I think you're exactly right. There are still folks in town who think that they need to drive around in Hummers to prove how much of a hotshot they are. It's a disturbing status symbol: "I have so much money that I don't have to care about gas prices OR the environment!"
Emporia, and many other places, needs reliable public transportation, and an emphasis on biking, walking, carpooling, etc.
Yes, oil companies are corrupt and shady, but it's just one (albeit large) part of the problem. If we all chip in to show the oil companies that they're not quite as important as they think they are, prices will go down.
Not to mention that there is a reason that speculators aren't too confident in oil security--the MidEast is extra-unstable since Bush et al decided to invade.
May 28, 2008 at 12:38 p.m. ( permalink | suggest removal )
Pingeon (anonymous) says...
Whoa - slow down there just a tad. I didn't say anything about someone driving around a Hummer thinking they were a hotshot. Not sure if that was a slam on me or not, but the fact is I drive one of those gas guzzling vehicles myself. I drive a full size truck, but I assure you it isn't because I think I have more money than I can spend. I own a company where I am constantly having to haul stuff. Therefore I either have a truck for a daily driver and deduct the mileage, or I have a second vehicle that is a truck. By the time I pay insurance, taxes, maintenance and take a loss on the value, it's cheaper for me to just have the truck as a daily driver.
I just don't want anyone thinking something I didn't say. If you can afford the Hummer (or truck, or SUV) and the gas, by all means drive it! However, I do not think the manufactures of those vehicles are doing anyone any favors by not upping the gas mileage. They have to have the technology (at least I believe they do), they just aren't incorporating it into the new vehicles.
May 28, 2008 at 4:52 p.m. ( permalink | suggest removal )
sexingthecherry (anonymous) says...
But I think there is a difference between driving a vehicle for real function (ie your situation) and using such vehicles as a status symbol.
Also, to be clear, I didn't mean to attribute all of my comment as something you said. Just the part about the issue being about more than just the oil companies.
May 29, 2008 at 10:42 a.m. ( permalink | suggest removal )