Sound logic on gas prices

[longislander1]

Sorry to beat on this one, but I was right, guys. Take a look at this chart: http://oregonstate.edu/Dept/pol_sci/fac/sahr/gasol.htm and you'll see that there was virtually no gas price inflation until the early to mid-'60s. This is another bogus argument by a conservative columnist. These guys give the respectable conservatives a bad name. Next thing you know, Williams will be writing that we found WMDs in Iraq!

[limoncello]

Random thoughts:

Data point - I found a cute book for my dad (82, born in 1923). The book lists all sorts of trivia for the year 1923. It included the price of gas (11 cents/gal) and gave the average income. I did the math against our current average wage (around $35-40,000 I think, depending on where you live) and $2.50 a gallon (2 weeks ago). Gas today is one half the percentage of income that it was in 1923. Reason? Probably increased efficiency in drilling, transporting, refining, etc.

As the world grows, adding more people, more homes, and more cars - unless supply rises with the growth, then prices will go up. Simple math.

Our home and business development models are built on suburban sprawl. This takes a lot of petroleum to function. There is no short term way to alter the fact that we all have to drive a lot. If the parameters change (gas goes up) to the point of discomfort, we will change our patterns long term. On an individual level you can beat the system now: live near work, drive an efficient car, insulate your attic.

Last thought: If we built nuclear plants in the 1950's and 60's that are still on line, surely we could build better, safer plants today. South Carolina has a couple of nuclear plants in a relatively small state - electric prices are 12% below national average and there is a good energy supply to attract new industry.

Theory aside, $3 gas bites. (Near term reaction).

[longislander1]

Now that's some sound logic on gas prices! Limoncello, I hope you're finding an adequate supply. I heard things were running short in SC.

[tqtran]

Originally Posted by limoncello

Data point - I found a cute book for my dad (82, born in 1923). The book lists all sorts of trivia for the year 1923. It included the price of gas (11 cents/gal) and gave the average income. I did the math against our current average wage (around $35-40,000 I think, depending on where you live) and $2.50 a gallon (2 weeks ago). Gas today is one half the percentage of income that it was in 1923. Reason? Probably increased efficiency in drilling, transporting, refining, etc.
(Near term reaction).

limoncello - Good point but sorry to say that you can not use your data. Anything $$$ wise pre June 5, 1933 is irrelevant.

longislander1 's data starting @1950 is good.

[limoncello]

Sorry for the stale data.
SC gas supply - had lines yesterday, seems better this morning. Saw one station raising the price from $2.45 to $2.99 for regular.
Aside from gas, if you'd like a good example of a supply and demand market, watch the prices on plywood, lumber and shingles in the next 6 months. It could also affect the money market, if enough people borrow money to repair/replace their homes. Harder to guess that one, though.
Gas mileage: noted the Boxster 20-21 mpg figures in another thread. It's about what I get, except for the track. I burned almost a tank in 3 runs, but as Tom cruise once said, sometimes you just gotta say "WTF".

[Brucelee]

I think the amusing point is that the government is supposed to "do something" about the current level of gas prices.

For those of you in that crowd, what specifically do you feel the government "should do." And, in the same vein, how much SHOULD gas cost anyway? What is the magic number?

Those of us who remember the last time the government stepped in to handle prices, well, that didn't work out very well. I remember the gas lines and it was NOT fun.

I think that Williams credentials as an economist are substantial. He is not apologizing for anyone, simply saying that there are some very fundamental factors that COULD be worked to improve the supply of oil and refined gasoline.

I will post other respected economists who agree 100% on this. Frankly, when is the last time anyone here actually took on the "greens" when they were blocking ANYTHING that remotely looked like it could generate energy within the US.

On the point above on nuclear eneregy, yes, yes yes. However, the same Greens who fight oil drilling would have a fit if you propose to build a nuclear plant in the US.

From the GREENS point of view, we would all park our Porsches and buy a Prius. It is the "virtuous" thing to do, right?

[Brucelee]

All good points.

Thanks.

Originally Posted by limoncello

Random thoughts:

Data point - I found a cute book for my dad (82, born in 1923). The book lists all sorts of trivia for the year 1923. It included the price of gas (11 cents/gal) and gave the average income. I did the math against our current average wage (around $35-40,000 I think, depending on where you live) and $2.50 a gallon (2 weeks ago). Gas today is one half the percentage of income that it was in 1923. Reason? Probably increased efficiency in drilling, transporting, refining, etc.

As the world grows, adding more people, more homes, and more cars - unless supply rises with the growth, then prices will go up. Simple math.

Our home and business development models are built on suburban sprawl. This takes a lot of petroleum to function. There is no short term way to alter the fact that we all have to drive a lot. If the parameters change (gas goes up) to the point of discomfort, we will change our patterns long term. On an individual level you can beat the system now: live near work, drive an efficient car, insulate your attic.

Last thought: If we built nuclear plants in the 1950's and 60's that are still on line, surely we could build better, safer plants today. South Carolina has a couple of nuclear plants in a relatively small state - electric prices are 12% below national average and there is a good energy supply to attract new industry.

Theory aside, $3 gas bites. (Near term reaction).

[Brucelee]

More logic on gas prices!

An oil 'crisis'?
Thomas Sowell (archive)


August 23, 2005 | Print | Recommend to a friend


With oil prices passing the record-breaking $60 a barrel level and heading even higher, the word "crisis" is now being used and all sorts of political "solutions" are being proposed. Is there really a crisis?

One of the dictionary definitions of a crisis is "the point in the course of a serious disease at which a decisive change occurs, leading either to recovery or to death." Is that where we are when it comes to oil? Are we either going to solve the problem of oil or see it destroy us economically?

Political and media definitions of "crisis" are much looser than the dictionary's definition. In political semantics, the word "crisis" has come to mean any situation that someone wants to use to justify doing something that will be called a "solution." Crises are a dime a dozen by political and media definitions.

Almost as common as crises are conspiracy theories. Whenever the price of gasoline shoots up, California's Senator Barbara Boxer can be depended on to demand an investigation of the oil companies. The fact that previous investigations have found no conspiracies is no deterrent.

Why, then, are oil prices so high?

There is no esoteric reason. It is plain old supply and demand. With the economies of huge nations like China and India developing more rapidly, now that they have freed their markets from many stifling government controls, more oil is being demanded in the world market and there are few new sources of supply.

What should our government do?

We will be lucky if they do nothing. But, with Congressional elections coming up next year, that is very unlikely. Candidates for Congress next year, and politicians hoping to run for President in 2008, are virtually guaranteed to come up with all sorts of "solutions."

These "solutions" will be packaged as brilliant new ideas, courageous and far-seeing. But most will be retreads of old ideas that remain untested or which have been tested in the past and found wanting.

Price controls, arbitrary new higher gas mileage standards for cars, "alternative energy sources," and other nostrums are sure to surface once again.

The last time we had price controls on gasoline, we had long lines of cars at filling stations, these lines sometimes stretching around the block, with motorists sitting in those lines for hours.

That nonsense ended almost overnight when President Ronald Reagan, ignoring the cries of liberal politicians and the liberal media, got rid of price controls with a stroke of the pen.

What happened is what usually happens when government restrictions are ended: There was more production of oil. In fact the 1980s became known as the era of an "oil glut" and gasoline prices declined.
Today production is being held back, not by price controls, but by political hysteria whenever anyone suggests actually producing more oil ourselves. Organized nature cults go ballistic at the thought that we might drill for oil in some remote part of Alaska that 99 percent of Americans will never see, including 99 percent of the nature cultists.
People used to ask whether there is any sound if a tree falls in an empty forest. Today, there are deafening political sounds over oil-drilling in an empty wilderness.

Nor can we drill for oil offshore, or in many places on land, again for political reasons. Nor can we build enough refineries or even build hydroelectric dams as alternative sources of power.

Many of the same people who cry "No blood for oil!" also want higher gas mileage standards for cars. But higher mileage standards have meant lighter and more flimsy cars, leading to more injuries and deaths in accidents -- in other words, trading blood for oil.

Apparently the only things we can do are the things in vogue among nature cultists and the politicians that cater to them, such as windmills and electric cars. That is why we would be better off if the government did nothing and let people adjust their own energy consumption individually in their own ways as the prices of gasoline and fuel oil rise. But that is also politically unlikely.


Soaring oil prices have revived the old bogeyman that the world is running out of oil. Economics is a great field for nostalgia buffs because the same old fallacies keep coming back, like golden oldies in music.

Back in 1960, a best-selling book titled "The Waste Makers" by Vance Packard showed that the known reserves of petroleum in the United States were only enough to last another 13 years at the current rate of usage. Yet, 13 years later, the United States had larger known reserves of petroleum than in 1960.

This has been a worldwide phenomenon. At the end of the 20th century, the known reserves of petroleum in the world were more than ten times what they were in the middle of the 20th century -- despite an ever-growing use of oil.
There is of course some finite amount of oil and of other natural resources. The big leap is in going from saying that there is a finite amount to saying that we are running out.

When John Stuart Mill was a young man, he worried that we were running out of music, since there were only 8 notes and therefore there was only a finite amount of music possible. At that point Brahms and Tchaikovsky had not yet been born nor jazz created.

No matter how many centuries' supply of oil there is on the planet, the high cost of oil exploration ensures that only the most minute fraction of that oil will be known at any given time. Thus there have long been recurring false predictions that we were running out of petroleum, as well as other natural resources.

The high cost of extracting and processing oil ensures that not even half of the oil in a known pool of oil will be brought to the surface and sent off to the refineries.

A generation ago, only about a quarter of the oil in a pool was likely to be brought to the surface. That is because the cost of extracting and processing oil from a given pool tends to increase as you drain from deeper into that pool.

Even at $60 a barrel, most of the oil that is known to exist is too costly to extract. How much will be extracted depends on how much higher the price of oil goes -- and how much new technology can recover more oil at lower costs.
What if the government did nothing about oil prices? Rising prices would lead people to reduce their use of oil and lead producers to drain some of the more costly oil out of the ground.

Many people in politics and in the media seem to be alarmed about the rising cost of gasoline and of the petroleum from which it is made. But they only seem to be. What they are really alarmed about are the prices -- and prices and costs are very different things.

Prices are what pay for costs. The government can impose price controls on gasoline or petroleum tomorrow but that will not have the slightest effect on the cost of oil exploration or the cost of extracting and processing the oil that is found.

When the costs are no longer being fully covered by prices, production is likely to be cut back, whether it is the production of oil or anything else. This is not speculation. This is what has been happening for literally thousands of years, going back to price controls in ancient Rome and Babylon.

Yet price controls have always been popular politically, despite being counterproductive economically. After all, how many votes do economists have and how many voters know economics?
Some people love to believe that prices should be kept down to a "reasonable" level, something that everyone can "afford." Yet the notion of "reasonable" prices is itself unreasonable. The costs of producing oil don't depend on what we can afford or consider "reasonable." Nor does the cost of anything else.
Someone can always invoke the image of an elderly person on a fixed pension being unable to buy enough fuel oil to keep warm in the winter. Taking care of such isolated situations would not make a dent in the massive government budget. But the real goal of such anecdotes is to justify imposing government controls on all of us.

Make no mistake about it, there are many people out there just itching to tell us what to do -- and make us do it. That is why the word "crisis" gets used so much, and not just about oil, in order to soften us up for their taking over our lives. That is a bigger problem than the so-called "oil crisis."

[Perfectlap]

seems to me people want to drive big SUV and gas hungry sportscars and
not pay allot for gas like the rest of the world.

I guess we'll just have to wait for all that Oil the pro-Iraq war people were promising Bush. It's coming soon right??

funny story I recently met a girl who lives an hour away. At
$30 for 1/2 tank, I'm having second thoughts.

[Brucelee]

Your last point is amusing and EXACTLY what happens when the price of a good is increasing. Each consumer makes decisions about the use of that resource/service and then acts. Some folks won't date the girl, some will, some will ask her to meet at the motel half way.

Others will use their motorcycle for a romantic outing.

Re: the Iraq oil, the oil is flowing. In and of itself, it won't make a large dent in price, simply not enough there.

I think the interesting issue is that we are willing to fight a war around the world to ensure oil is pumping (among other things) but we will not confront the greens in the US on getting at more of our own oil or in building Nuclear PPs here in the US.

"let the good times roll!"

Originally Posted by Perfectlap

seems to me people want to drive big SUV and gas hungry sportscars and
not pay allot for gas like the rest of the world.

I guess we'll just have to wait for all that Oil the pro-Iraq war people were promising Bush. It's coming soon right??

funny story I recently met a girl who lives an hour away. At
$30 for 1/2 tank, I'm having second thoughts.

[Perfectlap]

I was just kidding about the Iraq oil. Yet I'm not so sure that it wasn't floated as a justification for a premptive (read NOT an iminent threat) in Washington. Did our oil intelligence fail as well?

We can drill every hole in the world and our fixation with cars and travel will rise with it. Ever go for a drive on the highway and count the number of SUV's, Luxury gas guzzlers, PORSCHES, and pick ups? and once in a blue moon you'll seen one of those hybrid cars.
This country doesn't take well to being told "do you really need a 4 ton automobile?"
Its easier to feed the beast than to get it on a diet. A diet that would make our dollars go longer and perhaps give our children some clean air to breathe.
Humans have been on this planet for Millions of years yet we've done more harm to this little blue planet in the last 100 years than the previous 1000.

[slogans7]

Thanks for mention of Jimmy Carter. Boy, what a mistake he made in his innagural address:

"Our material resources, great as they are, are limited. Our problems are too complex for simple slogans or for quick solutions. We cannot solve them without effort and sacrifice. Walter Lippmann once reminded us, 'You took the good things for granted. Now you must earn them again. For every right that you cherish, you have a duty which you must fulfill. For every good which you wish to preserve, you will have to sacrifice your comfort and your ease. There is nothing for nothing any longer.'"

On the other foot, in spite of being in a war, Americans are asked to sacrifice nothing. Yay W!

I fear I'm getting too political here. Apologies in advance.

[Brucelee]

The misery quotient under the Rev Carter was certainly the highest I can remember in my lifetime. The guy was an awful President and has made an even worse ex-President.

But, he is a nice man and so, he goes on.

Originally Posted by slogans7

Thanks for mention of Jimmy Carter. Boy, what a mistake he made in his innagural address:

"Our material resources, great as they are, are limited. Our problems are too complex for simple slogans or for quick solutions. We cannot solve them without effort and sacrifice. Walter Lippmann once reminded us, 'You took the good things for granted. Now you must earn them again. For every right that you cherish, you have a duty which you must fulfill. For every good which you wish to preserve, you will have to sacrifice your comfort and your ease. There is nothing for nothing any longer.'"

On the other foot, in spite of being in a war, Americans are asked to sacrifice nothing. Yay W!

I fear I'm getting too political here. Apologies in advance.

[Brucelee]

BTW- for all of you who are ready to torch your Boxster and turn over a new leaf (think of how the greens will love you!), here is a list to select your next car from!

Enjoy!

:dance:

Top 10 Passenger Cars for Fuel Economy

No organization tests every vehicle's fuel economy in real-world driving. The challenge of obtaining every vehicle early in the model year, then driving them all over a specific route under identical conditions, is insurmountable. Therefore, we have to rely on Environmental Protection Agency estimates. While you can't expect your vehicle to get the exact mpg figures supplied by the EPA, mileage estimates do let you compare vehicles.


Cars.com Top 10: Most Fuel-Efficient Passenger Cars for 2005
According to Environmental Protection Agency estimates, the following passenger cars are likely to deliver the best gas mileage. They're listed in order of anticipated fuel economy (city), starting with the most miserly.


Vehicle Name MPG (City/Hwy)* List Price
Honda Insight 61/66 TBA
Toyota Prius 60/51 $20,875
Honda Civic Hybrid 48/47 $19,800
Volkswagen Golf 38/46 $15,830 - $19,580
Volkswagen Jetta 38/46 $17,680 - $24,070
Volkswagen New Beetle 38/46 $16,570 - $25,450
Honda Civic 36/44 $13,160 - $19,800
Toyota Echo 35/42 $10,355 - $10,885
Toyota Corolla 32/41 $13,680 - $17,455
Scion xA 32/37 $12,480

[Perfectlap]

China has very low emissions standards vs. the West.
And foreign automakers are only too happy to oblige.
Imagine a country three times the US in population with cars three times more toxic to the environment? Zero effect on the planet? I don't think so.
Even conservatives from industrial backgrounds like Paul O'Neill pressured the current adminstration to do SOMETHING about global warming.
But like all other fiscal responsibilities we prefer to do nothing and continue on our merry way. We have become very short sighted. Hopefully this gas situation will change some things.
btw, I've been living up here in the Northeast my entire life and I and people much older than me can tell you we don't have winters consistently like we used to. In only 25 years things have changed from what they always used to be.