Gas prices have come down drastically since late summer/early fall. Good. Are they were they should be yet? No. But $2.19 or so is a helluva lot better than $4.19.
While thinking about it this morning, though, I tried to think of how things have changed to make prices come down so much.
Must be all that drilling we’ve started since Sarah Palin started chanting her high schoolish “Drill baby, drill” baloney. Wait, nope, that’s not it. No drilling.
Ah, it must be because we’ve opened up ANWAR for more future drilling, it just hasn’t started yet. Wait, nope, that’s not it, either.
So, it must be how our wonderful president has won the “war” (no one has yet declared anything on anyone, but I guess it’s still a “war” in neo-con speak) in Iraq, and therefore completely secured the oil fields in that country from attack. Wait, no, that’s not it.
Well then, it must be some tough talk from our compassionate administration directed at the OPEC cartel telling them “or else”, or something to that effect. Wait, nope, that’s not it.
Let’s see, let’s see, let’s see…what about the oil industry has changed SO drastically in the last month that gas prices are 1/2 what they were in September?
Try nothing. Not a damn thing. Moral of the story: Palin’s full of shit. The adminstration is full of shit. The oil companies are full of shit. Oh, and the oil companies, with the help of the administration, robbed us blind all summer long. Period.
5 responses so far ↓
1
Cory
// Nov 3, 2008 at 8:18 am
Well, there is that whole collapse of the housing market and the economy taking a giant shit. That might have something to do with it.
2
BJ Stone
// Nov 3, 2008 at 8:29 am
You missed the point by a wide margin. The point is the excuses we were given to why the prices went UP had nothing to do with the prices going up. Instead, it was a speculative market bubble that simply burst.
And oh, btw, perhaps skyrocketing oil prices this spring and summer contributed to the economy globally taking a dump? I say yes. So do many others much smarter than me.
3
Brad Carter
// Nov 21, 2008 at 5:29 pm
There are several events happening simultaneously that are minutely affecting the price of oil, some of which can be attributed to the things stated in your post. Again, MINUTELY…. except speculation.
The proof of this is when oil was at $140/barrel, one trader was re-classified as a non-commercial trader, and that the insanely shorted position that was held by (un)said trader were not for hedge purposes. Two days later once the re-classification was public knowledge, the now $147/barrel oil plunged to just under $120/barrel. Many long positions were wiped out, thereby putting more down pressure on oil near the $105/barrel level.
Then someone in the administration finally had the guts to admit America was in the midst of a recession (8 months too late) and that fear and money conservation has led to oil to the current levels.
“Gas prices have come down drastically since late summer/early fall. Good. Are they were they should be yet? No. But $2.19 or so is a helluva lot better than $4.19.” – Just some questions for you, what is you optimum price target for a gallon of regular unleaded gas? What criteria do you use to support that price?
4
bjstone
// Dec 5, 2008 at 9:59 pm
Brad, sorry so slow to respond, but here’s my attempt to answer your question:
I think a FAIR price for gas should be he cheapest possible price while still producing enough to meet demand at any given time. But I know we’ll never see a for-profit corporation interested in being “fair”, so…
I’d use an average through the years of about a 4% inflation rate, and then I use as a base starting price the average price during the longest period of steady gas prices since the “fuel shortage” of 1974 (and that would be the 1990’s, with an average price of approx. $1.20), I come up with about $1.60-$1.65 as a “fair” market price right now that I’d be “comfortable” with.
That still leaves gas companies with a healthy profit. When you factor in the actual cost of only $6 per 42-gallon barrel that is required to get it out of the ground, the 50 cent-per-gallon true cost to refine oil into gasoline, and allowing them a 15% markup right off the bat, we get about .75 to .80 cents per gallon to actually produce the fuel. My “acceptable” price is, of course, after I add taxes on the federal and state level, and give the local stations a .05 per gallon profit (which is just fine…my Grandpa made a fine living in the 1960’s and 1970’s on a 3-cent per gallon markup, and when the crunch hit, to compete, he lowered it to 1-cent per gallon and was still able to make ends meet because he made money INSIDE the store off of the customers OTHER purchases…but that’s another story), and give the middle men a few cents of profit per gallon. So to answer that question, I’m happy with today’s price of gas, but realize it won’t last long. Although even at today’s prices, the oil companies will STILL show a healthy profit, so will middle men, so will distributors, and so will well-run gas staitons/c-stores.
Always remember, too, if they WEREN’T still making money today at $1.60-$1.80 (current prices around the area), they wouldn’t be selling it for this price.
5
Brad Carter
// Dec 11, 2008 at 5:13 pm
Thank you for your in-depth response. I was actually wondering if you had factored in all the steps in the process. It is my belief that $40/bbl is about the bottom in terms of all the players being able to earn a profit.
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