Tuesday, April 25, 2006

Just a bit about gasoline prices

The National Association of Manufacturers blog says that Gas Prices Outpaced Only by the Rhetoric (ht: Powerline). It provides a good set of links that are useful for gaining a basic familiarity with the factors that drive oil and gasoline prices. The grafs that strike me as most interesting (but I invite y'all to read the whole thing):

For all the theatrical political venom directed at the oil companies, the US-based companies represent only 13% of the world's output, a mere drop in the bucket. The real powerhouses are the state-owned operations in Russia, China, Venezuela, etc. All the finger pointing, all the speeches about price-gouging and windfall profits won't change that simple fact. And it won't alter the law of supply and demand.

At the end of the day, there are only so many solutions: drive down global demand or drive up domestic supply. If we could only harness the hot air being generated by the politicians and the media these days, we might solve the problem once and for good. In the meantime, we must conserve (manufacturers are leading the way in doing it and in inventing the newest technology) and we must search for new sources of fuel. Manufacturers there, too, are the ones who will invent and perfect it. But we also must continue to tap domestic supplies of oil, both on shore and off.

Here's a Department of Energy chart that tracks the price of gasoline (including taxes) on a weekly basis for Belgium, France, Germany, Italy, Netherlands, and the UK since 1/1/96 through 4/10/2006. The price of a gallon of gasoline has remained more than twice as expensive in all those countries over the past 10 years. If Americans think they have pump shock at pumps here they should make a point of going to Europe and purchasing a tank of petro at the pump. Standard European pricing for petro makes rental car company pricing seem sane.

Here's an MSNBC article about gas prices in other places. This article uses the same DOE source I linked above but also brings us this interesting little tidbit:

As of April 10, drivers in the Netherlands were paying the equivalent of about $6.73 a gallon at the pump. The gas itself cost $2.61; the rest — $4.12 — represented tax. That’s a 158 percent tax.
Read that and weep.

Here's a CNN Money article (a bit dated, nearly a year old) that looks at gasoline prices around the world. In Venezuela, in May of 2004, the price per gallon was only $0.14. Yes, that's fourteen cents. Anyone wanna go live in Venezuela or trade Bush for Chavez straight up? In fact, I'm pretty sure few of us want to live in the places where gasoline is less expensive than it is here in the US.

Lastly here is another old article (Oct. 2005) - High Oil Prices Met With Anger Worldwide

Rising fuel prices are stoking popular anger around the world, throwing politicians on the defensive and forcing governments to resort to price freezes, tax cuts and other measures to soothe voter resentment.

The latest example came this weekend in Nigeria, where President Olusegun Obasanjo promised in a nationally televised Independence Day speech that the cost of gasoline would not increase further until the end of 2006, no matter what happened in global oil markets. He acted after furious demonstrations shut down whole sections of major cities around the country over the past several weeks.


Update: Instapundit points to
Record Crude Oil Prices (Nominally Speaking) which, in turn, points to this Energy Bulletin article reporting on a Goldman Sachs report, which claims:

During 1980-1981, gasoline spending in the United States corresponded to an average 4.5 percent of GDP, 7.2 percent of consumer expenditures, and 6.2 percent of personal disposable income, Goldman said.

"Our new $50-$105 per bbl super spike range perhaps conservatively corresponds to gasoline spending in the United States that reaches 3.6 percent of forecasted GDP, 5.3 percent of consumer expenditures, and 5.0 percent of personal disposable income.

Goldman said that were it to assume gasoline spending needed to reach 1970s levels to destroy demand, its upside super-spike estimate would be $135 per barrel for New York crude."


Hmmm... That suggests that, compared to 1981, in 2006 the US spends 20% less as a percentage of GDP, 26% less as a percentage of comsumer expenditures, and 24% less as a percentage of disposable income. 1981, BTW, was 2 years after the inflation adjusted record price for oil.

7 comments:

Unknown said...

knucklehead:

Europeans do not drive the way we do. America is a lot bigger than Belgium. We do not have the mass transit they do and so it is like comparing apples and oranges. I live 700 miles from my brother, you could drive across several European countries covering that many miles.

I do agree that that prices are set on a world market and are effected by many things that have nothing to do with American oil companies. But that does not change the fact that it pisses people off to spend $40 bucks to fill up the car and buy gas for the lawn mower.

I heard on the radio today that Bush is going to release oil from the federal reserve.

Anonymous said...

. . . drive down global demand or drive up domestic supply.

Hey - we all put Gaia-friendly sails on our Priuses, shut off the engines and tack down the street whenever we have a wind.

(Prolly just one way traffic between stop lights though).

Unknown said...

knucklehead:

Like I said you can not compare the two, Europe is not America. I don't mean that to be critical but we have how many time zones? Think of how many Englands we could fit in Texas.

For those of us who live in rural America high gas prices really are a strain. And to them these prices are not middle of the road, they are high. If the increases had not come about in three years it might not seem so extreme, but most of the people I talk to feel like they are being robbed.

Now if we all live in three or four big cities and ride a bus or a train it might be different. But many Americans [like me] do not have that option. I drive or I am unemployed. Those are my choices.

I cover three counties in my job. I don't do it for fun or enjoyment or because I get a kick out of driving, it is just the way it is.

Unknown said...

knucklehead:

I saw this at AJ's :

Last January, upon the news of historic record breaking profits in the oil industry, I called for investigations into gas prices because the oil companies had claimed the price hikes we saw post Katrina were needed to repair infrastructure. Since investment into repairs would impact profits, it did not take a rocket scientists to figure out there were lies promulgated as fact. Want to raise your prices? Fine, don’t pretend you are doing it because you need to. Well, the recent round of hikes smells just as fishy. And we do have anti-monopoly laws and laws against price fixing (I don’t want collusion in the government or national, critical industries). So I am glad to see Bush calling for an investigation, and not surprised to see the gas prices magically start dropping all of a sudden.

flenser said...

The data on the government site indicates that prices have increased in both the US and UK, but they have increased relatively more in the US.

There may well be an innocent explanation for this, but theres no harm in somebody looking into it.

Unknown said...

knucklehead:

I posted AJ's remarks to demonstrate that the questions that are being asked are not only coming from the left.

I grew up in Oklahoma, my father was a roughneck when he was young and later worked for CP, selling oil tools. I remember when they started capping wells in Oklahoma. They said back then that oil would have to hit $58 a barrel to justify uncapping them. People in Oklahoma are still waiting for the oil companies to back and uncap all those wells. There is still a lot of oil in the Anardoka basin.

I am well aware of the fact that production needs to be increased and what is more I know that it takes years to respond to stresses like these. There is no way to get these things done that quickly. Bush has been calling for increased production and the building of nuclear reactors and refineries for years but so far as I know things are not exactly on fire in response to either claim.

We have private industry in control of energy production in this country and while government can give and take away permission to drill in certain places and environmentalists can make the building of new refineries and reactors problematic to say the least...it is private industry that must actually do the investing and building and drilling and I am not sure they are all that fired up to increase production. After all, it means lower prices.

So I think it is complicated and I am not saying anyone is ripping anyone off...but any time you see price increases like this people will wonder.

Rick Ballard said...

Knuck,

That's a very informative piece. The update puts the best peerspective on pricing that I've seen. Did that chart that you posted showing the gas price/popularity correlation have a historical series?