rising gas prices and your future

note: my charts are primarily for “illustrative purposes,” though I included some precise data below as well.


According to the US DEPT OF ENERGY, gasoline was more two times as expensive in Germany and Denmark than the US in 2008, but prices in oil-rich Venezuela were barely 3% of the US price… or about ten cents per gallon! In between the extremes, prices in Mexico have been around 20% less than in the US, and prices in Indonesia have been around 80% below US gasoline prices.

Source: http://www.eia.doe.gov/emeu/international/regularunleaded.html

Regular Unleaded Gasoline Prices in 2008
Country        US Dollar price PER LITER
United States
0.859
Denmark
2.001
Germany
2.046
Mexico
0.648
Venezuela 0.0260

Note that inflation-adjusted prices of gasoline in the US went from an all-time LOW in 1998 to a new HIGH by 2007:


source for image above: US DEPT OF ENERGY: http://www1.eere.energy.gov/vehiclesandfuels/facts/2008_fotw540.html

So, why did US prices of gasoline and oil keep dropping in the 1980s and 1990s? Obviously, the main reason was increasing oil production worldwide even as US production declined (see charts below). Another big factor was innovation in the systems used to extract oil, featuring a relatively new technology known widely as “computing.” Extraction of crude oil was much cheaper in the last few decades because of computer technology and related advances in engineering. However, in the absence of any major advances in the operating technology of the oil industry in the last decade, prices soared. Why? Perhaps because global demand for oil is still soaring, while the rate of global extraction of oil peaked in 2006 and may begin to decline at an accelerating rate as more and more oil wells are emptied faster and faster.

The decline of US oil production looks about the same whether or not we include the oil extracted from Alaska and the Gulf of Mexico (either way, about a 50% decline in the US’s output of oil from 1970 to 2010):

now, global oil production rates:

Those charts are just for oil, so now back to gasoline. Note that from the all-time low of inflation-adjusted US prices of gasoline and oil in the late 1990s, gas prices are up only about 100% so far, while oil prices rose by over 1000%! If gas prices rose that much, that would be over $16.50 per gallon of gas in the US (and around $30 per gallon for most of Europe). So, why are European economies de-stabilizing? Couldn’t gasoline prices soaring already above $6 and even $8 per gallon possibly be a MAJOR factor?

FUEL PRICES ACROSS Europe, 2001-2008: http://www1.eere.energy.gov/vehiclesandfuels/facts/2010_fotw645.html

Gasoline and Diesel Prices for Selected Countries 2001-2008 (Dollars per gallon)
France Germany Italy
Year Gasoline Diesel Gasoline Diesel Gasoline Diesel
2001 3.51 2.71 3.40 2.79 3.57 2.95
2002 3.62 2.75 3.67 3.00 3.74 3.05
2003 4.35 3.39 4.59 3.79 4.53 3.75
2004 4.99 4.16 5.24 4.41 5.29 4.41
2005 5.46 4.81 5.66 5.01 5.74 5.21
2006 5.88 5.13 6.03 5.30 6.10 5.53
2007 6.60 5.66 6.88 6.06 6.73 6.03
2008 7.51 7.03 7.75 7.37 7.63 7.43
Spain United Kingdom
Year Gasoline Diesel Gasoline Diesel
2001 2.73 2.35 4.13 4.25
2002 2.90 2.46 4.16 4.29
2003 3.49 2.97 4.70 4.82
2004 4.09 3.55 5.56 5.68
2005 4.49 4.20 5.97 6.25
2006 4.84 4.50 6.36 6.63
2007 5.36 4.96 7.15 7.34
2008 6.13 6.25 7.42 8.14
Source: Energy Information Administration, “Retail Motor Gasoline Prices in Selected Countries, 1990-2009″ and “Automotive Diesel Prices for Non-Commercial (Household) Use, Selected Countries, Recent Years.”

As demand soars, what has been happening with supply (available inventory)… and prices?


US prices of alternative fuels for 2005-2008, from: http://www1.eere.energy.gov/vehiclesandfuels/facts/2008_fotw545.html

www.fueleconomy.gov/feg/gasprices/faq.shtml

http://thinkprogress.org/economy/2012/05/24/489825/george-allen-falling-gas-prices/?mobile=nc

http://www.washingtonpost.com/blogs/on-small-business/post/rising-gas-prices-crippling-small-businesses-on-a-variety-of-levels/2012/05/09/gIQAuqIlDU_blog.html

gasbuddy.com/gb_retail_price_chart.aspx

gasbuddy.com/gb_gastemperaturemap.aspx

http://mobile.businessweek.com/finance/rising-gas-prices-not-demand-driven-02142012.html

http://www.dailykos.com/story/2012/05/09/1090117/-Fox-News-Rising-gas-prices-were-bad-Now-falling-prices-are-bad-Both-are-Obama-s-fault

http://www.nytimes.com/2012/04/01/business/gas-prices-are-out-of-any-presidents-control.html

http://www.inc.com/articles/201103/businesses-hit-by-rising-gas-prices.html

www.youtube.com/watch?v=8G70lBEAFl8

www.fueleconomy.gov/feg/gasprices/faq.shtml
gaspricesexplained.org/
http://www.smartplanet.com/blog/business-brains/rising-fuel-prices-push-businesses-to-reconsider-fleet-options/23998

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8 Responses to “rising gas prices and your future”

  1. jrfibonacci Says:

    EC wrote:
    Okay, gas prices aside. I’m pretty skeptical about the fact that oil companies are showing record profits during this so-called “crisis” in supply driving the prices allegedly up or whatever but not necessarily the case considering inflation…etc. I get that.

    My question is about “peak oil” and the so-called scarcity model of economics.

    I’m also a little weary about economist. I hope I don’t offend you but it’s a made up science IMHO. … But all that crap aside, I’ve also got my series 7 and 66. So I’ve also seen the incredible amount of bullshit in understanding various markets or values of hard assets and public companies.

    Needless to say, I’m a skeptic. Please help me understand the “beef” and not the just the “sizzle”….

    JR replied:
    Imagine a housing crisis after a tornado or hurricane destroys a lot of buildings but does not kill very many people. Some people “make a killing” because they have extra rooms or from selling tents. Maybe some insurance companies can’t pay out all their claims and go bankrupt. What’s so mysterious about any of it?

    In other words, why wouldn’t oil companies make record profits if people are willing to pay double for what they extract and sell? They are like someone with rental housing when there is a supply shortage from a natural disaster. Oil extraction globally is just down a few percent so far though since 2006. It’s surging demand that is “causing” (manifesting as) a buying panic, not a collapse in supply.

    But US production of oil is now down about 50% since peaking around 40 years ago. The continuing boom in US demand is how the US is de-stabilizing itself. The US economy is like a mushrooming wildfire that will suddenly disappear for lack of fuel, because it is “burning itself out.” Is that clear?

  2. jrfibonacci Says:

    EC:
    So, you’re saying there isn’t a supply crisis or there is? You are
    talking in circles. My question was “peak oil”. A) do we actually have enough; B) if so, why are profits so high; C)If there is an abundance, claim the right wingers, then are the oil companies lying?

    But if you go to AAAS or NAS, they say in so many words, f* the peak oil concern, we’ve got global warming to contend with first with CO2 omissions. What’s your take?




    JR:

    in the last few hundred years, humanity has apparently burnt a huge amount of fossil fuels. my “theory” is that burning causes heat… as in warming. clear?(in other words, with collapsing production of fossil fuels comes collapsing consumption, so emissions plummet when the fuel runs out.)

    globally, there is a “crisis” in surging demand for oil. In the EU and UK, there is very little oil left. In the US, there is much less than there was.

    profits are high for oil refiners because prices are up… because demand is rocketing while supply (globally) has plateaued. none of it is at all mysterious.

    There is truly a huge amount of oil and gas left- enough to last DECADES! You can still get gas for only $3 in the US – huge amounts without any rationing! All over Europe, there is enough gas still that a gallon is less than $10! Ask anyone from an emerging nation and they will tell you that the protests & riots in the EU are very very civilized and polite… so far.

  3. LastAmerica Says:

    Lost me comment (your labels are in teh wrong places). Anyways, oil is a cartel. Plain and simple. USA should move to electric and nuclear and let the importers pay for oil. But cannot due to plutocracy.
    Does higher gas mean it will be cheaper to produce locally rather than offshore. Let’s hope so.

    • jrfibonacci Says:

      Produce what locally?

      Cartel is a word that describes lots of human systems, as is plutocracy. Get over it. For instance, nuclear energy involves rare elements like uranium, which is distributed unequally across the planet. Of course some folks are going to organize and profit from the varying concentration of uranium in different places.

      You can focus on what the US should do according to you and even argue with millions of others who do the same. In fact, the cartels are counting on you to ignore the obvious so as to effectively create a monopoly by you choosing not to compete with the rest of us. Thank you for your business! ;)

    • J Roycroft Says:

      Good luck with the local oil. Obama proved to us already when he decided to not let the Canada line come into the U.S. that he does not care about jobs or being self reliant. More reason to open American eyes as to the real cause behind the so called environmental movement, (they own Obama) which by the way was taken over by the old communists years ago. Sounds far fetched doesn’t it? Something for those concerned and interested to do some homework over.

      • jrfibonacci Says:

        Mr. Roycroft,

        Regarding what you reference as possibly “far-fetched,” that all depends on who is making the assessment. Someone who has been showered with the propaganda models of government-regulated public schools (at least in the US) might think that the US is the eternal enemy of communism- or something to that effect.

        I am a student of propaganda, though. So, you could find many references to communist and communism on my blog:

        http://jrfibonacci.wordpress.com/?s=communist

        http://jrfibonacci.wordpress.com/?s=communism

        & last but not least

        http://jrfibonacci.wordpress.com/obama-is-he-a-hero-or-acommie-traitor/

        By the way, I am not especially interested in partisan politics generally (and the title of that last item is at least partly a parody). In other words, I am neither especially anti-communist or anti-government or anti-Obama (or even anti-propaganda). I do find it notable how easily people can be trained to get contentious about political dramas though. ;)

  4. J Roycroft Says:

    With Iran now stopping oil trade with the Brits and French we can pretty much be assured that tensions will rise. Inside the circle of people who “know” the word is that Israel may attack Iran sometime in April. If that happens the U.S. will be forced into the conflict with our allies. It’s going to be a very interesting spring for Obama and his campaign. Thanks for the link back!

  5. who predicted rising gas prices and the obvious effects? « power of language blog: partnering with reality by JR Fibonacci Says:

    […] 2009: http://jrfibonacci.wordpress.com/opportunitys-last-knock/ 2010: http://jrfibonacci.wordpress.com/2010/12/30/adapting-to-rising-gas-prices/ 2011: http://jrfibonacci.wordpress.com/2011/08/07/negativity-about-gas-prices/ […]

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