RK ARCHIVE - Gasoline Price Poll

I suspect this price pessimism is Americans steeling themselves to the fact that they will be paying more at the pumps. Rather than adjust driving habits and consume less, the majority of Americans are simply preparing themselves for paying more and are going to bitch about it.

The short article also points out that we're almost at an inflation adjusted all-time high for gasoline prices: $3.07 today vs. $3.13(inflation adjusted) in 1981.

In short, no. But it may change the types of cars we buy.
In 1981 there was a push for smaller and more fuel efficient cars. We do have a similar effect underway with hybrids becoming more popular and SUV manufacturers taking record losses (although I'm sure not all due to SUVs). I expect the obvious here - that the demand for hybrids will continue to increase while gasoline remains high.

If hybrids prove to be worthy alternatives to their gas guzzling counterparts this will be a huge step forward in terms of building a more fuel efficient, lower polluting, fleet of automobiles in this country. People will accept hybrids as the type of car that they are comfortable owning and will feel no need to return to gas guzzlers, regardless of the price of gasoline.

However, if the hybrids end up being the equivalent of the small cars of the 80's (remember the Sentra, Tercel, etc) they will be pushed to the back of the line once gasoline prices drop again. If gasoline prices are reasonable, not many people will be interested in buying a "runt". Those small cars of the mid-80s were definitely runts. At this point I do believe hybrids are here to stay, but if they are not seen as equals to the gas guzzlers, interest will drop significantly if gasoline prices drop.

The way I see it, it's not a question of what's going to happen in the future with gasoline prices, but more a question of whether hybrids can compete with gas guzzlers for the hearts and minds of the American driver. Prices tend to be cyclical so it's to be expected that gasoline prices will drop significantly some time in the future. But if hybrids take advantage of the opportunity they have right now, the gas guzzlers may never return. And that'll be a good thing. A very good thing.

Comments

All talk, no action (TheGreenMiles - 5/7/2007 3:11:26 PM)

Oil companies will keep the price of gas where they always have -- at a level that maximizes profit, consumption, or both.

Consumers and the faux-populist media will continue to do what they always have -- bleat about high prices without changing behavior.

I don't often agree with George Will, but he was right on the money in this column ...
http://www.washingto...

I would point out that the same oil companies (Lowell - 5/7/2007 3:21:06 PM)

sell gasoline at $3 per gallon in the US and $7 per gallon Europe. The difference? Taxes. In Europe, tax makes up something like 80% of the price at the pump. In the United States it's more like 15%-20%.

Interesting thing about European prices... (Eric - 5/7/2007 3:36:47 PM)

Even at more than twice the price of our gasoline, the Europeans still manage to get around. And there are still many cars on the roads in Europe.

The fact of the matter is that Europeans not only survive, but most live in "first world" conditions. They just have somewhat different transportation habits.

Point being, we don't absolutely need cheap oil to have a strong, first-world economy. We just prefer the cheap oil option.

But we don't prefer (Lowell - 5/7/2007 3:47:08 PM)

having billions of petrodollars going to authoritarian countries that hate us. We don't prefer being sucked into Middle East wars over oil. And we don't prefer the polar ice caps melting in large part because we consume 21 million barrels per day of the stuff.

This isn't a question of whether we'd prefer to get our gasoline at low low prices, this is a question of priorities for our nation and for our planet. Do we want to be forever "addicted" (Bush's own word!) to Saudi oil or not?

Making the choice for the masses (tx2vadem - 5/7/2007 5:40:09 PM)

That is why it is necessary to make the choice for the masses via CAFE standards, gas taxes, and tax incentives for conservation/efficiency. We need dramatic demand management initiatives to reduce our dependence on foreign sources of oil and to reduce our emissions of greenhouse gases.

What are Europeans Driving (jackiehva - 5/7/2007 9:15:45 PM)

How many Hummers, Navigators, Excursions, and other gas guzzlers are seen on the streets of Europe?

Which oil companies? (tx2vadem - 5/7/2007 5:28:19 PM)

If you are talking about investor owned oil companies (like ExxonMobil, Chevron, BP, Shell, etc...), then you are promulgating a myth that they collude to set prices or that they some how control petroleum prices. I would suggest you read the following literature to disabuse you of that myth:
http://www.eia.doe.g...
http://www.api.org/a...

If you are talking about national oil companies (like Saudi Aramco, PDVSA, Sonatrach, Petromina, KPC, etc...), then they do have some power to control price through the cabal known as OPEC or their failure to adequately invest in exploration and production.

Agreed, it's a total myth (Lowell - 5/7/2007 5:47:57 PM)

that oil companies collude to set prices. The Energy Information Administration and others have looked at this time and time again and not found "collusion." The fact is that the United States continues to have the LOWEST gasoline prices in the developed world. Also, the fact is that the price of gasoline is almost directly proportional to the price of crude, plus or minus refinery margins, seasonal fluctuations, and occasional outages at refineries like we've had in recent weeks.

You are also correct about the NOCs (National Oil Companies). By the way, you know an awful lot about this stuff...are you a professional oil analyst?

Not an oil analyst... (tx2vadem - 5/7/2007 6:10:46 PM)

No, I used to work for ExxonMobil. And let me tell you it was hard being a Democrat at ExxonMobil. They loved Senator Mary Landrieu (D-LA) though!

Well, you obviously picked up something (Lowell - 5/7/2007 7:05:34 PM)

at ExxonMobil with regard to knowledge of how the oil industry really works. Luckily, you didn't pick up their political leanings as well! :)

Choice and Responsibility (novamiddleman - 5/7/2007 4:18:08 PM)

Americans are choosing and facing the results of their choices

I made a choice this weekend

Instead of driving to DC I took the metro.

The opportunity cost of having the trip take 1.5 times longer was less painful than the financial cost of paying 1.5 times in gas/maintanence cost to drive in vs metro.

P.S.

What the heck is going on. I thought it was supposed to peak around 3 bucks. I think Lowell had a post on this last month some time.

I doubt gas prices will go much higher (Lowell - 5/7/2007 4:26:22 PM)

than $3 per gallon, barring a significant shock to world oil supplies or refinery problems (such as we've been having). Right now, the national average is $3.07 per gallon, just 7 cents above the $3 per gallon mark. See here for more on this subject.

Thanks for the link (novamiddleman - 5/7/2007 4:39:09 PM)

"The outages have been reflected in weekly government data which has shown gasoline inventories falling during a season when most analysts think they should be rising. Summer driving begins Memorial Day weekend, and analysts worry refineries won't be producing enough gasoline by then to meet demand."

Thats not very encouraging news

So much for the invisible hand (TheGreenMiles - 5/7/2007 5:10:02 PM)

OPEC will not allow US gas prices to go too low or too high. Too low? It cuts into profits so they'll close the spigots. Too high? It gets people to cut their consumption and OPEC definitely doesn't want that so they'll push more oil onto the market.

They've lost control to a degree (Eric - 5/7/2007 5:38:53 PM)

Because the additional costs recently are due to refinery capacity problems OPEC is no longer in full control. Of course they retain a high degree of power, but they can't control U.S. refineries and therefore have less influence over the current pump prices.

Although it doesn't matter that much because the oil companies, who share some of the same core incentives as OPEC, do have the ability to influence the situation. If consumption drops like a rock I'll bet the oil companies won't waste any time finding the correct refining output to get people driving again.

Do you think... (tx2vadem - 5/7/2007 6:04:47 PM)

Valero, ExxonMobil, BP, Chevron, RD Shell, Total, Amerada Hess, Citgo, Marathon, and any other refiner I might have missed, get in a room together and discuss how they are going to manipulate refining capacity? And for what purpose?

Study the history of OPEC (Lowell - 5/7/2007 7:38:51 PM)

and you'll see numerous occasions when that organization has lost control of oil prices on the "up" or "down" side. Right now, I'd argue that they're right on the edge of losing control on the upside, given their limited spare production capacity. As far as gasoline prices are concerned, OPEC does NOT directly control those, only the price of crude which is a major input into gasoline, but certainly not all of it.

gasoline (pvogel - 5/7/2007 9:25:30 PM)

Ok guys... heres an interesting fact.
the day Bush stole the 2000 election i filled up my car. I kept the receit. can you all guess the price of gas i paid here in alexandria that cold november day????????

spoiler i reveal it below

95 cents a gallon