Why are gas prices so high?

[Dr. Tyler; Captain America 0]

That's a stupid premise, economically. It would spark a price war and drive down everyone's profits.

[Guest Choken One]

Fuck their profits.

 

I want my gas back to the reasonable 1.49 again...(it's gotten that fucking bad)...

[NoCalMike 0]

I still haven't really seen a reasonable explanantion of why gas prices jump so high in suh little time. Something isn't right here.

[MarvinisaLunatic 0]

Supposedly if something like a million people participated in the No Gas thing, the gas companies would lose 1/2 billion dollars.

 

Of course then everyone buys it the next day at a higher price and they make that 1/2 billion back and then some so I don't really see the Oil Companies shivering in their boots over it.

[MarvinisaLunatic 0]

Yay for double posts.

[Stephen Joseph 0]

That's a stupid premise, economically. It would spark a price war and drive down everyone's profits.

Tyler,

 

You hit the nail on the head with that one.

 

To Choken: Companies are smart. They know that if they engage in true price competition, they'll drive price down to marginal cost (Bertrand). So they compete elsewhere (announce quantities, its what OPEC does), compete on that, and get profits.

 

To Marvin: Yup. You got it too. Temporary changes in demand don't affect Long Run issues.

 

To NoCalMike: Prices jumped for a number of reasons. OPEC is still a cartel, and they did announce cutbacks on quantity. The dollar weakened relative to the rest of the world, making foreign goods we import more expensive for us. We lost Iraq's main oil pipeline for awhile, and the disruptions there. Levels of uncertainty have changed as well, that tends to jack up prices. I hope that helps

[Guest Wildbomb 4:20]

People also need to realize: we get our gas dirt cheap compared to the rest of the world. Four dollars a LITER overseas. I remember being in Ireland and seeing some gas at six euros a liter. I nearly choked on my Guinness. So when it climbs to two bucks a gallon here, yeah, it fucking blows. But our prices seem to finally be catching up with those of the rest of the world. However, from what I understand, this is being forced via OPEC; most overseas high prices come due to the extremely high tax rate on gasoline. Stephen, feel free to correct me if I've got this screwed up somewhere.

[Stephen Joseph 0]

People also need to realize: we get our gas dirt cheap compared to the rest of the world. Four dollars a LITER overseas. I remember being in Ireland and seeing some gas at six euros a liter. I nearly choked on my Guinness. So when it climbs to two bucks a gallon here, yeah, it fucking blows. But our prices seem to finally be catching up with those of the rest of the world. However, from what I understand, this is being forced via OPEC; most overseas high prices come due to the extremely high tax rate on gasoline. Stephen, feel free to correct me if I've got this screwed up somewhere.

Stands up and APPLAUDS WildBomb for his insight on relative gas prices in foreign countries.

 

And you're right, there is the gas tax too which makes it higher. The gas tax is a neat tax, because if it worked it would fund alternative fuel research and encourage us to consume less.

 

OPEC reacted to falling profits from our weakening dollar. I would say the driving force would be world markets are stabilizing and they're worried about our debt. Foreign markets relative positive to ours rose, and OPEC's quantity reduction scheme is a way for them to bring the price they're receiving more in line with the profits they expect. They want more of our depreciating currency, and that's rational.

 

So I'd say OPEC is reacting to our exchange rate downturn relative to the rest of the world. In short, I think that means we agree.

 

But I think I just confused myself

[kkktookmybabyaway 0]

Stands up and APPLAUDS WildBomb for his insight on relative gas prices in foreign countries.

Bitch -- I could have come up with that. I even remember some mini-revolt a few years back in England over the Petrol prices.

 

Oh, well it's almost time for my noontime Mikey Moore fat reference...

[Stephen Joseph 0]

Well then KKK that begs the question why didn't you

 

You're just jealous that Wildbomb said it first.

 

So, who's fatter, Mikey Moore or the comic book guy?

[Lando Griffin 0]

Sure gas is more expensive in many countries. But it's also cheaper in some countries.

 

Here's a chart with a few selected countries, some of them way cheaper than ours.

 

I would rather live in America with $2 gas, than in Venezuela with $.14 gas, though.

[Nevermortal 0]

I want a water-powered car.

 

MAKE IT HAPPEN, GM!

[Gert T 0]

Dayton, OH taking the jump today from $1.89 to $2.13.

 

I guess the boycott didn't work! Or maybe it did, hence the increase in prices.

[kkktookmybabyaway 0]

Ha ha -- so anyone in that area who participated in that stupid "boycott" had to fill up with more expensive gas.

 

Idiots...

[Guest Wildbomb 4:20]

New high by my place: $2.13. Although a radio station today ran a promo: first 103 cars filled up at $1.03.

 

As a crazy thought, almost on hunger4unger levels: Why don't we raise our gas taxes in order to create more revenue, which would help then pay for our current war as well as the national debt? As stated, our gas prices are slowly catching up to levels seen elsewhere; instead of allowing all the profit to wind up in OPEC's pocket, stuff it in the US coffers. Crazy, I know.

[sfaJack 0]

Cost me $45 yesterday to fill up my tank at Kroger, and that was with the .03 a gallon I get off for using my Kroger card.

 

Interestingly enough, that same Kroger was offering 10 gallons of $0.99 gas if you bought $35 worth of groceries from them. As of Wednesday, they have put that on "suspension" for an "indefinite" period of time. Motherfuckers.

[Guest MikeSC]

New high by my place: $2.13. Although a radio station today ran a promo: first 103 cars filled up at $1.03.

 

As a crazy thought, almost on hunger4unger levels: Why don't we raise our gas taxes in order to create more revenue, which would help then pay for our current war as well as the national debt? As stated, our gas prices are slowly catching up to levels seen elsewhere; instead of allowing all the profit to wind up in OPEC's pocket, stuff it in the US coffers. Crazy, I know.

Well, it'd be political suicide for ANYBODY who suggested it, for starters...

-=Mike

..."Why are you targeting the poor with these taxes?" would be asked often

[MarvinisaLunatic 0]

The place here that had $1.79 gas was mysteriously CLOSED today. Im willing to bet they ran out of gas, but I know some people who think its some sort of bigger conspiracy.

[EdwardKnoxII 0]

http://moneycentral.msn.com/content/Saving...41.asp?GT1=3391

 

The Basics

A long, hot summer at the gas pump

 

Did that first $50 fill-up take your breath away? Get used to it. There's no reason to believe prices won't rise all summer long.

 

By Kim Khan

 

Drivers who wince every time they fill up their tanks are starving for some good news about gas prices as the summer vacation season cranks up. But they're not going to get it. According to industry analysts and executives, the pricing pain at the pump won’t ease this summer, and, if anything, will get worse.

 

Prices vary widely from state to state (Arkansas has the lowest pump prices, California the highest) and from country to country (a Venezuelan fill-up costs less than $2 for the whole tank). Across the globe, the trend is disturbingly constant: Up.

 

The big run-up in prices is “a perfect storm," economically speaking, Tom Petrie, veteran energy analyst and chief executive of the Denver investment firm Petrie Parkman & Co., told CNBC.

 

The ingredients for this perfect storm

How, exactly, did this perfect storm get brewing? Here are the ingredients:

 

Global demand. Strong demand in the economically surging United States and China is an enormous factor in the pricing dynamics. India and the Third World have piled on more demand as well.Point. Click. Pay.

 

Terrorism and war. A terrorist attack in the Middle East, especially on oil production facilities, could hurt supply. Worries about this are leading futures traders to bet on higher rather than lower oil prices ahead. Instability in Iraq also raises questions about that country's ability to add substantially to the world supply anytime soon.

 

 

OPEC. Some say the oil-producing nations simply need to pump more oil. But the members of the Organization of Petroleum Exporting Countries are already pumping at 2 million barrels a day above official supply limits. Saudi Arabia is pushing for more, but other cartel members are reluctant.

 

 

Venezuela. The situation in Venezuela also makes consumer countries nervous, especially the United States. Leftist Venezuelan President Hugo Chavez is a harsh critic of the United States and is likely unwilling to take high U.S. gas prices into account when determining production goals. Chavez told Reuters an increase in OPEC supply would send a “bad message” to the world, and he blamed high prices on the Iraq war.

 

 

Limited refinery capacity. Nobody wants one in their back yard, so a new refinery hasn’t been built in the United States in more than 20 years. That makes it tough to boost supply.

 

 

Oil companies’ profits. Some lawmakers say the oil companies are just too greedy. "Big oil companies and refiners are getting rich and middle-class families are getting gouged," Sen. Harry Reid, D-Nevada, said in a recent Senate speech, The Associated Press reported. "It's clearly documented that refiner margins have doubled and tripled. The oil companies weren't content to make 25 cents on every gallon of gasoline. They now make 50 to 75 cents for every gallon of gasoline," Reid said.

 

 

Reluctance to tap the Strategic Petroleum Reserve. Many are calling for White House to tap the 660-million-barrel Strategic Petroleum Reserve to add supply and bring prices down. But President George Bush has said the administration “will not play politics” with the reserve. Emptying it, he said, would make the country more vulnerable.

 

How long will prices stay so high?

There’s very little chance of gas prices dropping this summer, as Americans take to the roads. And unless some of the factors keeping crude prices high ease off, a drop before the end of the year looks unlikely as well.

 

“I think it will be an extended cycle (of high oil prices),” Petrie said. “Much more like the extended cycle they had in the '70s than anything we saw in the '80s or '90s.”

 

Another contributor to high gas prices: Americans simply aren’t letting higher costs keep them off the road. A record 30.9 million Americans are expected to drive 50 miles or more during the Memorial Day holiday, which kicks off the unofficial summer driving season, AAA said. That’s up from 29.9 million a year ago.

 

“Our tight gasoline supply becomes more acute as we move into the warmer summer months, and that’s the way it’s set up,” Trilby Lundberg, publisher of the Lundberg gas survey, told CNBC this week.

 

“Demand would be rising even more, were it not for these prices, but our strong demand seasonally and from the expanding economy is supporting the price hikes,” Lundberg said.

 

Go South, young driver

Those driving this summer may find a trip to the South suddenly appealing. Much of the nation's cheapest gas can be found in the Southern states.

 

Throughout the country, pricing variation has a great deal to do with state and local taxes. The U.S. federal government taxes each gallon of gasoline 18.4 cents. Then, the states add on excise and sales taxes. Nationally, the tax per gallon averages 42.7 cents, slightly over 20% of the price of $2-a-gallon gasoline.

 

Gas prices and taxes by state

State Regular Taxes (in cents) State Regular Taxes (in cents)

Alaska  $2.06  39.6 Montana  $2.02  46.2

Alabama  $1.90  26.4 North Carolina  $1.92  44.1

Arkansas  $1.76  37.4 North Dakota  $2.03  39.4

Arizona  $2.13  39.9 Nebraska  $2.10  39

California  $2.32  50.8 New Hampshire  $1.98  32.9

Colorado  $1.98  40.4 New Jersey  $1.93  36.4

Connecticut  $2.07  48.5 New Mexico  $1.96  51.4

District of Columbia  $2.03  41.4 Nevada  $2.25  43

Delaware  $2.01  38.4 New York  $2.12  39.4

Florida  $1.99  48.8 Ohio  $1.99  44.4

Georgia  $1.89  31.1 Oklahoma  $1.90  35.4

Hawaii  $2.28  54.7 Oregon  $2.28  42.4

Iowa  $1.96  43.4 Pennsylvania  $2.00  45.7

Idaho  $2.06  45.1 Rhode Island  $2.07  49.4

Illinois  $2.08  41.7 South Carolina  $1.85  35.2

Indiana  $2.01  39.7 South Dakota  $1.99  42.4

Kansas  $1.99  43.4 Tennessee  $1.90  39.8

Kentucky  $1.92  34.8 Texas  $1.88  38.4

Louisiana  $1.90  38.4 Utah  $2.01  42.9

Massachusetts  $2.02  44.5 Virginia  $1.91  38.4

Maryland  $1.99  41.9 Vermont  $1.98  37.4

Maine  $2.02  41.9 Washington  $2.26  46.4

Michigan  $2.07  45.6 Wisconsin  $2.09  43.8

Minnesota  $1.99  40.4 West Virginia  $2.00  49.9

Missouri  $1.93  37.2 Wyoming  $1.90  32.4

Mississippi  $1.91  35.4 National average $2.01  42.7

 

Data as of May 19. Sources: AAA and the American Petroleum Institute

 

But, oddly enough, it’s not the states with the lowest taxes that are paying the least. Arkansas residents pay higher gas taxes than drivers in nearby Alabama, but it's the Arkansans who are paying 14 cents a gallon less, on average. That’s market forces at work, with station owners charging what they believe the drivers will pay.

 

Demand is certainly high in California, and those drivers are paying the most per gallon -- even though California taxes gas at levels below Hawaii and New Mexico.

 

Is it really just demand that’s driving California prices? State lawmakers aren’t so sure, and they're launching a probe patterned after the inquiry into manipulation of the state’s energy market in 2000 and 2001, the AP has reported.

 

For some drivers, it may be just a matter of minutes to find cheaper prices. Drivers filling up in New Jersey can pay up to 20 cents per gallon less than those filling up across the Hudson River in Manhattan. (Maybe consumers just expect to pay more in the city that’s home to the $40 hamburger and the $1,000 omelet.)

 

And for those extravagant people who really want to feel they are paying as much as anywhere in world, there’s always the rental car market. Hertz at New York’s John F. Kennedy Airport will charge you a tidy $5.17 per gallon if you don’t return the car with the tank full.

 

Cheap in Venezuela, the Dutch pay much

Eye-popping as the rental-car gas price is in the United States, it's merely an average price level for many parts of the world.

 

In the Netherlands, for instance, drivers pay nearly $6 a gallon. (That certainly helps explain the preponderance of bicycles.) Generally, Western European drivers are paying the most in dollar terms. But the fall of the U.S. dollar against the euro and the British pound in the last year exacerbates that difference.

 

On the opposite side of the world -- and the gas-price equation -- is Venezuela. Because the government owns the oil production there and keeps gas prices artificially low for its citizens, drivers pay as little as 14 cents per gallon. The Venezuela experience is consistent with global patterns, as only oil-producing nations really see such low gasoline costs. (Even that trend can vary, as drivers in oil-producing United Arab Emirates must fork over more than $1 per gallon -- a high price for the Middle East.)

 

A gallon of unleaded around the world

Country Price per gallon Country  Price per gallon

Australia (Sydney) $2.68 © Japan (Tokyo) $4.25 ©

Belgium $4.87(A) Kuwait (Kuwait City) $0.65 (B)

Bolivia (La Paz) $1.60 (B) Mexico (Mexico City) $2.12 (B)

Brazil (Sao Paulo) $2.78 (B) Netherlands  $5.83 (A)

Egypt (Cairo) $0.55 (B) Norway (Stavanger) $4.78 ©

France $4.52 (A) South Africa (Capetown) $2.31 (B)

Germany $5.28 (A) UAE (Dubai) $1.10 (B)

India (New Delhi) $2.70 © United Kingdom $5.40 (A)

Italy $5.06 (A) Venezuela (Caracas) $0.14 (B)

 

Notes: (A) Surveyed in May by Energy Information Administration.

(B) City surveyed by AIR-INC in February 2004

© City surveyed by AIR-INC in November 2003

 

Remember the Carter-Reagan years?

So is there any bright spot? Well, U.S. prices still haven't reached the all-time average high -- adjusted for inflation -- seen in March 1981: $2.85 per gallon. That price point remains fairly far off in most parts of the country, but, then again, some people thought crude oil would never hit $40 per 42-gallon barrel. And historical averages are little comfort to anyone filling up an SUV.

 

“People may not remember March 1981,” Lundberg notes, but “they may remember last December, when gas prices were about 50 cents lower than they are now.”

 

The only certainty as the peak summer driving season looms is that gas will cost more.

 

"There's no educated way to get at (future gas prices)," said Steve Enger, an oil analyst at Petrie Parkman.

 

Every month, for example, the government's Energy Information Administration forecasts peak gasoline prices, but lately they've been outdated as soon as they appear. Their prediction May 11 for a peak summer price of $2.03 has already been eclipsed. Crude prices, supply and demand, local shortages, geopolitics and environmental rules make all predictions dicey at best.

 

Pump prices and the cost of crude are very much correlated, of course. If -- and it's a big if -- crude prices stayed steady, then pump prices could rise as much as 20 cents over the summer because of other factors, Enger said.

[Stephen Joseph 0]

New high by my place: $2.13. Although a radio station today ran a promo: first 103 cars filled up at $1.03.

 

As a crazy thought, almost on hunger4unger levels: Why don't we raise our gas taxes in order to create more revenue, which would help then pay for our current war as well as the national debt? As stated, our gas prices are slowly catching up to levels seen elsewhere; instead of allowing all the profit to wind up in OPEC's pocket, stuff it in the US coffers. Crazy, I know.

If we raised gas taxes, which raises the price consumers pay, they will consume less. Would the increase in price offset the decrease in demand? What if our prices were at European levels with their taxes?

 

Laffer curves do exist.

 

I'm not entirely certain government intervention is the best recourse.

The best cure for high prices...is high prices.

[EdwardKnoxII 0]

http://story.news.yahoo.com/news?tmpl=stor...recordgasprices

 

Station owners hurt, not helped, by record gas prices

 

By Barbara Hagenbaugh, USA TODAY

 

Drivers filling up this Memorial Day weekend might think station owners are making a killing from record-high gas prices.

 

They're wrong.

 

Gas stations make just a few cents on gasoline - heavy competition prevents large mark-ups. The majority of a station's profits come from candy bars, sandwiches, beer and other goods sold in the convenience stores connected to the stations. But when gas prices go higher, consumers have less money to spend inside. That means gas station owners' profits drop.

 

"When gas prices are lower, everyone wins," says Scott Jenkins, vice president of family-run Fas Gas, which runs two stations in Sikeston, Mo.

 

Bill Douglass, owner of Sherman, Texas-based Lone Star convenience stores, says he is making about 3 or 4 cents per gallon of gasoline, not including overhead costs. Sales inside his 15 stores are down as much as 18% from the same time a year ago. His best store is breaking even.

 

"When we take your money at the pump, you may not get into the store," Douglass says. "It's an absolute shock for people to put $40 or $50 on the pump for an SUV."

 

In-store gross margins in convenience stores in 2003 were 30.8% on average, vs. 8.8% at the pump. That was the lowest gas margin since 1985, the National Association of Convenience Stores says.

 

Douglass' experience shows how high energy costs can spread pain throughout the economy. Not only is Douglass making less money, he's being forced to cut his employees' hours by 6% to 15%, depending on the station. Those employees then have less money to spend, which hurts other businesses. Nationwide, 10,000 gas station jobs have been cut in 2004, according to government data.

 

Most drivers will be paying more than $2 a gallon for gasoline this weekend. That is a record, not adjusted for inflation. Adjusted for inflation, prices are the highest since fall 1985, the government says.

 

Motor club AAA expects a record 30.9 million travelers to take Memorial Day weekend trips of 50 miles or more by car.

 

"I wish it was under my control," Jenkins says. "I would have brought (prices) down a long time ago."

[Dr. Tyler; Captain America 0]

New high by my place: $2.13. Although a radio station today ran a promo: first 103 cars filled up at $1.03.

 

As a crazy thought, almost on hunger4unger levels: Why don't we raise our gas taxes in order to create more revenue, which would help then pay for our current war as well as the national debt? As stated, our gas prices are slowly catching up to levels seen elsewhere; instead of allowing all the profit to wind up in OPEC's pocket, stuff it in the US coffers. Crazy, I know.

If we raised gas taxes, which raises the price consumers pay, they will consume less. Would the increase in price offset the decrease in demand? What if our prices were at European levels with their taxes?

 

Laffer curves do exist.

 

I'm not entirely certain government intervention is the best recourse.

The best cure for high prices...is high prices.

Bullshit. There's no price, no matter how high, that people will stop consuming gas. That's the problem; it's a necessary good. Would diabetics stop buying insulin because it got too expensive?

 

Of course not.

[Firestarter 0]

Bullshit. There's no price, no matter how high, that people will stop consuming gas

You don't know what a Laffer curve is, do you Tyler? Quick, Google it!

 

...idiot.

[Dr. Tyler; Captain America 0]

I wasn't arguing the laffer curve. I was arguing the fact that letting prices get as high as they please is the solution to the problem.

 

It would be if there were a replacement for gasoline. There isn't. Thus, the price of gas isn't going to go down simply because the price gets "too high" and people stop consuming it, as is the case with most products.

 

On the other hand, are you arguing that people will simply stop driving because the price of gas rose to over $3.00 a gallon?

[Firestarter 0]

No one has argued anything so ridiculous in this thread. SJ simply said that gov't intervention would probably be a less effective price control than market forces, which is amply supported by every historical instance I can think of. The Laffer curve predicts that as prices rise usage will decline and tend to approach zero; of course it won't actually reach zero. (Even before prices began to rise traffic congestion was having precisely this effect. In the absence of gov't interference a number of new coping mechanisms have already sprung up, and they're quite effective for the most part.) European prices would theoretically make gas usage decline, but the curve would be levelled off (ie it wouldn't be as steep a drop as it might be elsewhere) by the vast cultural and land mass differences between the United States and Europe. The decline in demand caused by a rise in price would result in a greater relative supply and the price would reach an equilibrium as a result. Gov't intervention would impose artificial price controls based on what would amount to a subsidy of postulated acceptable consumption and the markets would be unable to adjust dynamically. As a result efficiency would be thrown out the window.

 

This is utterly basic econ 101. There are no serious arguments against it. None. Zip. Zilch. Nada. Your mom.

[MarvinisaLunatic 0]

What will happen to slow up demand is that some people will get rid of their gas guzzling SUVs if they keep having to spend $70 a week on gas (What a friend of mine has to pay to fill up every week). I only pay $20 about every 10 days ($60 a month) and I could probably get better fuel milage if I had my car checked.

[Guest Agent of Oblivion]

Is it a nice moped?

[Slayer 0]

What will happen to slow up demand is that some people will get rid of their gas guzzling SUVs if they keep having to spend $70 a week on gas (What a friend of mine has to pay to fill up every week). I only pay $20 about every 10 days ($60 a month) and I could probably get better fuel milage if I had my car checked.

I love my fuel efficient car

[EricMM 0]

Oh deal with it AoO, you blatently deserve to pay any high price you end up paying simply because you knew how inefficent your truck is, and the same goes towards anyone driving something with less than 20 MPG.

 

It's not like you should be suprised, you knew you'd be spending more for gas.

 

I guess they didn't mention that in the inherant price of your truck, did they?

[Dr. Tyler; Captain America 0]

I'm not arguing we should tax the fuck out of gasoline. You misunderstood the point I was arguing completely.

 

His premise--which is, of course, the basic Econ 0101 principle--is that prices will go down as demand shifts downward due to the higher prices. Except the problem is that this simply isn't happening. We're not using less gas, and few people actually see the need to buy a more fuel efficient car.

 

Would taxing gas help? Of course not, it would just be shifting more of the burden onto the consumer. But saying "it'll level out, don't worry!" and ignoring the problem isn't going to solve anything, either.

 

So, how do we fix the problem?

 

Offer a solution. Mass transit, alternative fuels, etc.

 

Let's face it, we don't have a viable alternative to gridlock in our society these days. Sure, we have subways and buses already in place; however, as you wouldn't know (given the fact that you're driven to work every day anyways) is that these modes of transportation are already busting at the seams, and to jam on another, oh... let's say 20,000 people a day would be utterly impossible.

 

Our current infrastructure is insufficient to support any potential rise in usage of mass transportation due to rising gas prices. So, what's the solution?

 

Let's stay out of it and let the market level itself out!!!!!