$4/Gal Gas Is Here (this time I REALLY mean it)
May 9th, 2008 by rsmitty
NOW I can post this (David A corrected my use of gas v. distillates last time) . If you haven’t seen it, we truly have $4/gal gas now. The lone service station in Delaware City and the Exxon (go figure) at Mt. Pleasant/Summit (Boyd’s Corner Rd and Summit Bridge Rd) both now boast $4 + /gal for the premium grade. It will not surprise me if there are more around the state.
Has anyone else felt troubled about how investment firms (such as Goldman and Sachs) can just fling hunches out there and have it result in massive rises in these commodity prices? Earlier this week, we had reports of unexpected rises in inventory of crude and gasoline. What happened that same day? Goldman Sachs releases statements about how we are short in supply. Investors go bonkers on their news and pay no mind to the actual reports. Rapid commodity price increases that day…after a report about the unexpected RISE in inventory!!!
Energy commodities are woefully disconnected from traditional supply-and-demand pressures on a normal basis. This market is beginning to resemble the Pink Sheets anymore, where there is no due-diligence, just a barrage of press releases to pump and dump.
Any hope for consumers to stage a one-day gas strike? It would be hard, but what else do we have anymore? Waiting for our congresspeople to agree is a waste.
—(original post below - from March 13, 2008)—
I saw it on my way home tonight. At the Sunoco station in Odessa, DE. Diesel is selling for $4.04 per gallon. I apologize that I could not snap a picture of it, but I was driving at the time.
Remember, this isn’t your typical supply and demand. You would be in the right to curse your dollar. See my post from a couple of days ago about your disappearing dollar.
Related: The continuing saga of the dollar-demise.
Related: Commodities.
Diesel is not gas, but I would not be surprised to see gas follow by summer. Thank the NIMBY crowd for getting in the way of refinery expansion. As for the other component, the weak dollar, the European central bank is concerned about commodity inflation and likely won’t lower interest rates. This means the Euro will remain higher in value relative to the dollar.
Hmph. Fine.
$4/gal FUEL is here.
$4 gas is just the chickens come home to roost. I really don’t think “cheaper gas” is a worthwhile policy goal; it’s too late. Now the goal is to make sure wage inflation starts catching up with energy and commodity inflation.
And of course to start running cars on something other than gas - NOT to build more refineries or drill in more refuges.
The problem is, noman, the people that need to make it happen are more concerned about posturing in an election year. They freaking blew it when it was in an obvious building phase (stretching the rubber band, for illustration). The rubber band is either severely frayed or it done already broke! They are still posturing.
Is a one-day gas strike at all a possibility? It would be a huge effort, no doubt, but just wonder.
The bottom line that nobody wants to talk about is that we are going to have to tighten our belts.
This means that we will have to focus our incomes on necessities, and cut down our discretionary spending to the bone.
It also means that we are in a recession who knows how long. I am amazed that the stock market has held up, and the pundits are telling us that we are having a light, brief recession. Sorry, I just don’t see it.
This is a lesson we have to learn the hard way, unfortunately.
This is not a question of being pessimistic, rather, it is realistic!
As a nation and as individuals, we must stop our deficit spending, because it has weakened our dollar to the point that it is more unsupportable by our international lenders who will be moving to the stronger currencies unless we change.
Again, change means belt tightening. The time to start is now!!!
I’d rather see a one-day general strike for higher wages to afford the new gas and food prices.
noman…if wages increased across the board, do you think prices would magically remain stable? Solve the latter problem and I think you would have many people listening.
I went to the pump last night on Kirkwood Highway cause Hockessin is .30 more expensive than anywhere else. And the response from the two owners is that “they can” charge whatever they want. The sign said $3.61. Being the single working mom that I am, I thought I hit paydirt! Guess what! NO REGULAR GAS at that station to be had! I had already decided that after Memorial Day I was going to begin taking the bus to and from work. If DART raises it’s rates because of the gas prices, I’ll still ride in air-conditioning and a round trip will be cheaper than a gallon of gas. I’m buying two orders of food per month from Angel Food Ministries (a sort of food pantry that you can get meats and staples at $30.00 a pop per month). That supplements my trips to Pathmark (can’t afford the organic food market) and have you seen the price of HOT DOGS???? My mortgage rates went up (I have a fixed rate)??? Chalk that up to taxes and referendums. My car insurance went up cause someone rear-ended me; the trash company wants more money, my fiancee couldn’t get a decent paying job in Delaware as a drug/alcohol counselor, so he’s driving 100 miles r/t to Eagleville Hospital where is going to be paid the $16.00 per hour it takes to have an apartment in Delaware; my son’s medication is no longer covered by my healthcare insurance company and Walmart doesn’t have it on their $4 drug plan. It’s now $160 every 30 days. I purchase things from the Habitat For Humanity shop to fix up my house and shop at consignment and thrift stores for myself so my kids can wear timely fashions. I am looking for a second job right now because I’m not making it. Will DFS take my kids cause I’m always working? I go to work everyday, pay my bills as best I can, have NO CREDIT CARDS, seldom eat out. When is everyone gonna WAKE UP???????? I’m failing - and miserably. Vacation??? Huh??? I am a republican. I AM RESPONSIBLE. COULD SOMEONE PLEASE TAKE IT SERIOUSLY THAT WE NEED HELP OUT HERE! I’d go on a gas strike. In the 60’s they blew up the places and protested MADLY! Are we too wishy washy NOT TO TAKE A STAND?????????????????
I think energy and commodity inflation have ramped up faster than wages, and we are due for a correction to maintain consumer buying power for gas as well as other commodities.
Increased wages would have less effect on prices than energy inflation. Yes wage inflation would provide some upward pressure on prices, but not as much pressure as energy inflation. The labor component of gas price is relatively small so wage inflation won’t affect it much.
But the best solution would be to reduce gas consumption by running cars on something else. I would like to see gas price go down because demand has gone down.
In 1981 gas peaked at $1.35 which is $3.17 in today’s dollars. So gas is high but not as high as you think.
Smitty,
You are so correct. Oil and Gas are not following traditional supply and demand, which means it is being manipulated. OPEC says they have so much oil they are looking for buyers because they cannot find enough buyers on the world market….not even China… and even our refineries have an over capacity of supply. I am not joking about either of those, because in a free market they would normally drive prices down…..but I think like I said before it is being driven by paper investments in futures and not on traditional supply/demand curve, rather limited to managed and future markets. The price discrepancy is either that or being used to compensate on investments in housing or investments in the derivative market. I am not sure which. Kissinger said this would happen back in ‘76.
My mortgage rates went up (I have a fixed rate)??? Chalk that up to taxes and referendums.
Annie, before you drive yourself crazy looking at your fixed-rate, this is probably your escrow causing your payment to go up. If you truly have a fixed-rate, your mortgage payment alone can not change. Escrow fluctuates.
To the rest of your post, I empathize with what you are dealing with. Gas prices are affecting everything in costs, whether justified or not.
My mortgage increase is due to increase in insurance, local taxes that went up (that gets paid in my mortgage). Thanks for your help. I feel like every week I’m redoing my budget!!!!
Yikes!
But the best solution would be to reduce gas consumption by running cars on something else.
We agree on that point. My preference is to see further development of the hydrogen solution. The biggest “nay” I have heard on that is some people think that will lead to a highway full of Hindenbergs. Ummm…no.
Annie…yup, that’s your escrow which is included in your payment. It is on top of your actual mortgage payment, but you make only one payment a month.
OPEC says they have so much oil they are looking for buyers because they cannot find enough buyers on the world market
I have read that and heard that on news many times the last few weeks, also. It’s really raising my “WTF?!” ire as of late.
…and even our refineries have an over capacity of supply.
That’s an interesting one. In the same news that I read/heard above, this was covered, too. Most of the refineries over-supply of crude is rooted in the horrible margins between refining and selling the final product. This is a margin that they have long enjoyed in the 30 cent-per-gallon of gas range for years only to have it shrink to single-pennies per gallon over the last couple of years. On top of that, the refineries are old and falling out of compliance in some areas. Instead of fixing them, they shut them down, probably after being citied for violations. Point is, they have no incentive to spend hundreds of thousands or millions only to take decades to recover the cost in the current economy. I am not an apologist for the industry, but that is what I have been able to put together from the news.
In my mind, our only alternative is just that - alternative. I don’t mean some blend that still includes oil/gas, either. The only energy company that I know of that has a very active program in research and development of alternative fuels is BP. There may be others, but BP is the one I am absolutely aware of.
I’m sorry…I forgot to add one more thing to the above comments:
GAS STRIKE…GAS STRIKE…GAS STRIKE!!!
I have a sinking feeling that gas will be 200$ a barrell or more soon. I hope somebody piucks up my alternative fuel proposal for housing, and works our low priced fuel cell cars….this “smashing” of the value of the dollar is getting really difficult to watch. I’d buy a cheap fuel cell car from China or the Tata nano if we were allowed to sell or buy them. I wish even more we would develop the hell out of these technologies rather than look at immediate profits. I think we need to open the market more and manage it by proxy less. If the elite of this country cannot or refuse to compete by keeping us in the oil age, it basically ensures our technology will go the way of the dinosaur and we may too.
…gas will be 200$ a barrell or more soon.
Goldman Sachs agreed with this yesterday. Same firm that looked right past the inventory reports to forecasting as if the latter were more real than the former.
Don’t forget, the NYMEX is just like any other market; for every buyer there is a seller, for every winner, there is a loser. This makes it hard to figure, but it’s hard to blame “Big Oil” when the commodities (crude, unleaded gas) are openly traded, internationally. The price is probably driven by speculation through massive program trading. I guess it would be interesting to know how many futures contracts are held by Exxon and the rest, but the bottom line is, again; for every buyer, there is a seller.
I was trying to be careful to look at the wonderment of certain houses, like Goldman Sachs, where all they need to do is sneeze out, “supply shortage” and the massive upticking commences. What sealed this deal for me was the exact same day a surprise inventory increase was reported, the market was nailed with massive price increases on the heals of my example, Goldman Sachs having that sneezing fit.
Yes, in those markets buyers are matched to sellers, in a high-level of explanation. What we get is panicked buying based on “sneezing fits” (trying to get in at lower prices based on fears that the price will not drop soon). The buyers outnumber the sellers, hence the price is lifted.
I really tried to stay away from this theory as it comes off as opportunistic bashing. However, when the example I am using here happened this week, I can’t ignore it. There is ample crude supply out there, yet the trading price is up, up, up on these PRs from trading houses.
As far as my “GAS STRIKE” is concerned, it’s rooted in the intent to really put down pressure on demand. We need a demand downturn to remove the pure speculators, even if temporary. I’m not trying to bring wingnuttery into this, but really trying to provoke something as all of the congressional people (all states) pose for pretty pictures in an election cycle while trying to pound chests louder than their counterparts.
Occasionally, I receive one of those e-mails suggesting a one-day gas strike. I believe the thinking is that the oil companies will wake up and understand that we hold the purse strings. The reason this won’t work is that they understand if you don’t stop by today, you will stop by tomorrow. Also, consider if you did have a one-day moratorium there would be higher than usual sales the day before and after the designated day.
I boycott Exxon–refuse to purchase their product although this very likely doesn’t help either. My reason is that whenever you see a corner with multiple stations around it, Exxon will usually have the highest price of any of them. I don’t know why but someone told me their suppliers charge more for the product so they have to charge a bit higher. Perhaps if everyone decided to boycott Exxon?
These attempts are futile, though because you would never get enough people to participate. We’re at their mercy.
If everybody shunned the more expensive gas stations and always bought from the cheapest place, that would force prices down. But people are willing to pay extra for convenience so that will never happen.
And you’re a Republican, Annie? Wow.
The phenomenon that is Exxon succeeding with higher prices around this region at least, is, I BELIEVE, they have one of the larger corporate account user bases around. Captive audience.
As far as my gas strike is concerned, I know the enormity of ever pulling one off. My strike isn’t so much don’t buy gas this day, but it’s more of a “leave your car at home day,” so usage also is interrupted. Still an enormous task. There is also consideration of infrastructure that won’t stop, etc., that adds to the difficulty. I know all that. Quite frankly, I have no idea how to put it in motion, but I like the image I can see if it were to work.
Yo, what’s up with the lady who advocated blowing up gas stations?!? Jesus!
LOL! I sincerely believe that Annie is NOT advocating blowing up anything. I moreso took what she said to be about the organizational-ability of protesters to actually do something that led to results back then (explosives not withstanding).
This becomes a good point, though. Our attention spans tend to be way too short these days (a by-product of the technical-age???), leading us closer to impotency when it comes to protest-movements. We (society), on the whole, just don’t have the patience to see these things through for the lasting impact that would be needed.
The investor class, led by the oil companies, has successfully engineered higher prices for all commodity products, while suppressing wages. Now it is up to labor to take back their slice of the pie that is being eaten by investors.
Inflation is not such a bad thing as long as wages keep up, because consumers can pay down their long-term debt with cheaper dollars. In fact, modest inflation is probably the most painless solution to the mortgage crisis.
Wage inflation is the key though. Employer resistance to wage inflation must be broken, to force investors to share the new profits with labor.
A new $4 entry has come to be!
That over-priced Exxon (go figure) at Mt. Pleasant/Summit (Boyd’s Corner Rd and Summit Bridge Rd) both now boast $4 + /gal for the MID-GRADE!
Get this…on that corner, they are $3.87 Reg, $4.00 Mid, $4.something Premium. Nearly adjacent to it (up the road, not on another corner) is a Valero that is $3.69, $3.83, $3.97, respectively. You would think that is crazy, right? Well, that Exxon does an OK business, despite the disparity. I’m telling you, it’s that captive audience with corporate gas cards.
oddly enough, raising the interest rate 1/2 a point may stimulate the economy by strengthening the dollar. The numbers show that we have avoided a recession. Thank you Fed. Now we need to avoid stagflation. Maybe the head of the Fed should be getting 20 million a year. What a job!