The New York Times says that some experts are predicting $4 gas by the Spring.
Gasoline prices, which for months lagged the big run-up in the price of oil, are suddenly rising quickly, with some experts fearing they could hit $4 a gallon by spring. Diesel is hitting new records daily and oil closed at an all-time high on Tuesday of $100.88 a barrel.
The increases could not come at a worse time for the economy. With growth slowing, high energy prices that were once easily absorbed by consumers are now more likely to act as a drag on household budgets, leaving people with less money to spend elsewhere. These costs could exacerbate the nation’s economic woes, piling a fresh energy shock on top of the turmoil in credit and housing.
“The effect of high oil prices today could be the difference between having a recession and not having a recession,” said Kenneth S. Rogoff, a Harvard University economist.
Cheerful. Will you put up with $4 gas or will you begin carpooling, walking, and taking public transit?
Oil Hits a High; Some See $4 Gas by Spring [NYT]
(Photo:greefus groinks)
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In Europe, gas was about $6 a gallon in 1999. In 1999 dollars, which would be something like $10 in today’s money. So while this is annoying, it’s not really that crazy. Also, if anyone thinks that gas prices will suddenly improve with Obama in office, you are beyond foolish. The POTUS has nothing at all to do with this stuff.
At my other school, all I had to do was travel 5 miles in the morning and take a shuttle into the city and it dropped me right in front of the hospital. Total time 20 minutes. It was great, and cost me so little. Here, even the closest bus stop is outside of walking distance, and biking around here is not very safe (although people do it). Here everyone has ginormous vehicles, so I’ll bet my 35ish bucks a tank is nothing compared to what my neighbor with with the mini monster truck pays to fill his tank. It’s still 35 bucks more than taking that shuttle though.
@Bladefist:
$4 a gallon gas is not a scare tactic. It’s called inflation. Just like the $3 loaf of bread.
Unless you don’t believe in inflation because you don’t bother to believe either media or government.
The government has a responsibility to govern and lead. this is done primarily through the signing of bills into law. The president has a great deal of power when shaping national energy policy.
He may not have been able to do anything about crude oil prices but there was plenty he could do about the rate of US consumption and setting up alternatives, in the form of public transportation or alternative energy.
This immense of lack of vision has hurt the consumers of this country. Energy consumption is critical part of the American national infrastructure and a key element in national security.
We are a less secure as a people and less able to sustain a war without international permission, including a war of self defense.
The economy has been grossly mismanages and our national priorities are in line with national needs. The job of the president is to stop that from happening.
@ihateauditions:
You can have a conservative financial perspective without being a member of the Republican party. It’s irresponsible to call people that disagree with you “staunch GOP idiots.”
In any event, you’re right – the cost of the war in Iraq has been a substantial contribution to our national debt. It hasn’t been anywhere close to “doubling” it though, and it’s a pittance compared to our social security commitments or the Democratic candidates’ proposed health care plans.
However, think in terms of perceived ROI. 80 billion spent in Iraq has the potential to return favorable oil arrangements for America at substantial financial benefit to its people. This “the Greenspan Defense” for Iraq. 54.6 trillion in social security (NPV) has the potential to return – what, exactly? Happy old folks? I mean, it could potentially increase the spending power of their children because the kids won’t be absorbing the care costs, but c’mon! What do you honestly think the better bet is?
Also, FYI – Bladefist is an idiot trying to pick fights. Don’t waste time with people who are unwilling to be civil or, you know, make points.
As much as I hate paying so much for gas…I can’t take on a car payment and I can’t move closer to work (I work in a crap part of town, a guy got shot in the nearby shopping mall the other night), so what to do, what to do? Nothing at all. Just grit my teeth and pay for gas. Plus, even if I bought a cheap and gas-efficient car, I’m still paying more than I would driving my paid off car even with all the gas money going down the drain.
I’m proud of the fact that I’m not directly affected by fuel prices. I chooose to live in a neighborhood where I can walk and bike. I live in a city, or at least area in the city with good public transportation including rail – and long ago decided owning a smaller house in an older community would be much smarter than living in an isolated exurb.
of course we drive for weekend road trips and late at night to go to bars – but my commute to work is via bike or bus/train – and we can easily walk to grocery stores and restaurants in our community.
Doesn’t anyone else remember back before 2000 when pundits said the price would never climb above $2 a gallon? Something about oil producing companies not wanting to make it profitable for people to go searching for new oil fields.
Then in 2002 they pundits kept saying the price would be over $3 a gal. For several years they said that and it never happened.
When it finally did go over $3 a gallon you heard different pundits saying different things about how long it would stay up there.
My point is I don’t think the soothsayer’s know what is going on or how it will play out. All I know is that the price of oil is tied to the dollar. As the dollar slips in value our price for purchase goes up. The rest of the world actually fairs better with this arrangement.
@ADismalScience: The war in Iraq was a bad bet to reduce the price of oil or our national need for it. It is a bad investment and continues to be one.
Nationally subsiding the cost of the elderly has a better chance of paying off. I don’t support this, btw. By sharing the cost over a broad section of the population no particular sector is especially hard hit by the financial implications. This lets business continue as usual or very close to it as opposed to causing a sudden negative shift in the national economy.
This is the exact argument for national health care. health care costs are crippling families and most large businesses. By the government stepping in for health costs the nation gets a workforce that is able bodied and can work. It also helps business compete on the international stage and make US workers more attractive than they were before.
That is why we had subsidized education. Given out success as a nation since it’s inception I’d say it’s paid off well.
I got called in to the office today for a 30 minute Phone Conference, and 15 minutes of email Q&A. My actual commute both ways was 45 minutes.
With this news I will definitely be pushing hard to do stuff that I can do from home, at home.
@quail: The actual running gag is:
Oil prices to rise due to… [shakes magic eight ball] <Insert specious reason here>.
They know very little, but it doesn’t stop them from using wild speculation to fill up their half hour on Cable news stations.
I stopped driving last May. I get around with a combo of public transportation (not as cheap as a lot of people seem to think, but still cheaper than having a car), bicycle, and feet. Luckily I live in a clement part of the world and I live near my job; I know not everyone has that option. Still, I wish more people would carpool, if they HAVE to drive.
@Techguy1138:
From an ROI perspective, I’d probably rank it:
1.) Education
2.) Health care
3.) Iraq
497.) The elderly
Also I care more about those living in the RURAL west – like a farmer who has to drive 40 miles round trip for supplies – or someone living in a small town commuting 40 miles to another small town job – than I do for us sitting in suburban offices wasting gas idling in traffic. Those who actually need to DRIVE their cars have my sympathy. Not those who go 5 mph for 10 miles. Or drive 2 miles because they “need” to pick up their kids at school.
Also, the title of “recession watch” for this post is kind of funny. Inflation is USUALLY the result of inventory effects in the course of an economic boom. Elevated inflation pressures in the face of the negative or flat economic growth is a bit of an economic mystery – likely prompted by overindulgence in debt.
@DashTheHand: I feel your pain. I am a PM and most of the people I work with are not even in the same damn city as I am. At least let me work from home 2 or 3 days a week. Instead I am stuck with management that thinks to work hard you need to be in an office. How about just measure me by the quality of my work and if it sucks, fire me!!!
@ADismalScience:
Iraq ranks above infrastructure?
Iraq ranks above Afghanistan?
Iraq ranks above balancing the budget?
Iraq ranks above national disaster preparedness?
Iraq will never “pay off” there will never be a positive return on investment. The best we can hope for is to make it so that it stops draining resources. Which paradoxically, at this point, requires staying.
The gray wave is a real threat to American prosperity with far greater long term impact. If not handled on a national scale it will plunge sections of the country into a strong downturn. It doesn’t look so bad yet because it greatly being ignored.
I agree… time to bring our guys home. The war was a good idea from the start but the people who need freedom have got to want it and be willing to die for it. Turns out they are a bunch of ingrates.
This is why I live in a downtown area (DC) and do not drive or own a car. So rising gas prices only hurt in terms of inflation for groceries. But the truth is maybe these high gas prices will make more people consider if living in suburban sprawl and owning a car is worth it, especially since it is not a cost those of us in cities really have to deal with.
i have a 1995 gt performer (bmx bike), and it takes less than 3 mins for me to ride to: work, 24 hour kroger (grocery), 3 fast food restaurants, starbucks, blockbuster, sprint/nextel, and 3 banks.
this was not accidental. when it came to finding a place i had three words, location, location, and location. even if i had a gas guzzler (actually i do) i can get away with $10-15 per week. so actually living closer doesn’t always motivate you to walk, or ride a bike.
Full disclosure: I own a small (as in one pump in Kentuky producing about 200 barrels a day) oil company. Before anyone flames me I have zero infuence on the price of oil. I take what they give me. Period. That said, I do know a thing or two about the industry. Forget about the $4 per gallon price, It will get much much much worse a lot sooner than you think. The reason is that we are finding very few new oil reserves in the world and the ones we do find are minute compared to the vast ones found in the past. [en.wikipedia.org] This means 2 things to you the consumer. Find a way to travel more efficiently. Motorcycle, Public transportation etc. Alternative fuels are sexy but trust me, if you think that you are saving the enviroment with a hybrid or electric you don’t have a clue. Unless that electricity was generated by a nuclear power plant, solar power, geo thermal or some other non greenhouse emitter then all you did was mover your carbon emmissions farther up the line where you “Cant see it” but i’ts still there. The other interesting problem with crude production dropping off is that Air travel exists solely as a result of the mass to energy ratio of hydro carbon fuels. Simply put: Planes can’t fly on anything other than hydro carbon fuels in the manner that they do now (ie commercially). More simply put. When the oil runs out, No more airlines to complain about. For the poster that asked how many gallons of fuel in a barrel of oil:
A barrel contains 42 gallons. After refining, it makes about 19.5 gallons
of gasoline in addition to numerous other products such as heating oil.
@Techguy1138:
You cannot say that conclusively. I agree with your general conceit, which seems to be that Iraq got prioritized over more worthy iniatives. My list was a representation of the order in which I valued what we discussed, not a contextualization of the entire federal budget.
I do have a job I’m supposed to be doing right now, after all.
Iraq does have the potential to be a profitable enterprise. 80 billion dollars = 800 million barrels – a few years of output – and decreasing, to say nothing of the potential noneconomic benefits. I agree with you that it has not yet produced discernable rewards, but I suppose I’m more optimistic re: the ROI
Or. People could look into less urban sprawn which would lead to alternative transportation such as buses, subways, and the good old bicycle. Heck, the good ol’ legs and feet.
@spamtasticus: excellent, post. thanks for bringing us some facts. i feel the same about hybrids. unfortunately some only care about saving money on gas. i personally think if we even give them the notion that we want hybrids, that’s as far as they’ll go with the whole cars getting away from gas. we need to boycott them, and force the industry to make a better option.
@AD8BC: I posture that they never should have went there in the first place, but agree. Enough is enough already. If we’re not going to get anything out of it (as an investment), then we should stop throwing good money after bad.
AFAIK, Iraq’s oil output is still below pre-2003 levels. It probably won’t reach that high until the insurgency is quelled, and who knows how long that will take. The only ways for the U.S. to recoup its spending there would be to take over the oil industry or to force Iraq to sell us oil at cutthroat rates, neither of which is likely.
I figured up my cost of taking the bus to work, and it added up to the equivalent of a 15% pay cut. Disadvantage of having a meatspace job.
@Bladefist: you’re an idiot. look at gas prices during clinton vs. now. look at any price difference…wages anything. republicans=big business big business as political party=fascism
@AD8BC: wow…i cant believe people even think this way….good from the start? in what way? was saddam going to tank our economy? jack out gas prices? no..it was stable predictable….fucking moron
@pinkfreud:
Are you familiar what “stable and predictable” Saddam did to the economy by invading Kuwait?
@Hawkins: Oh, dude, I’m so there. I want a Vespa SO. BAD.
On the more serious note, I’m getting a lot less cavalier about quick single errands in the car — I either stack them together or walk. I can’t ride my bike to work because I have to cross a river on a highway (motor vehicles only) bridge, even though it’s just a few miles.
I don’t drive a whole lot, live in a fairly walkable area, but just seeing the price over $3 makes me more conscious of conserving.
@pinkfreud: I respect your opinion. As well as MercuryPDX’s. I was for the war at the start, but I was truly hoping that the Iraquis could catch the ball and run with it. I’m all for freedom, including your freedom to call me a fucking moron, you dipshit.
Well, that would be fantastic. I’m barely getting by now, I can’t wait to pay like $15 more per tank.
I noticed that gas prices jumped like 30 cents in the past 2 weeks, and like 20 cents in only a few days. It seems to me like the gas stations can’t keep up with the price changes because of the disparity between stations at times.
@Snarkysnake:
Umm, go fuck yourself. You seem to be totally OK, even snarky, with the fact that the POTUS and friends did jack shit for Katrina victims. I don’t think anyone blames Bush 2 for the fact that Katrina happened, because like you said, no one can control the weather. In fact, they (and most of the country) blame him for what he didn’t do before it to prepare and shortly afterwards to help. Seriously, fuck you and die in a fire.
And to the rest of you… I can’t understand how a pointless war in Iraq is an investment. It’s really interesting to see how casually people disregard the lives of the people involved. That investment you’re talking about? Yeah… well, I hate to break it to you (not that you give a shit you scummy pieces of crap), but your investment has cost countless lives. You religious neocons don’t have a problem with that as long as you can go to Wal-mart and buy 2 lbs of pork chops on sale, huh? I agree that there’s a chance that this “investment” will pay off for the US… a fucking dismal chance, because guess what, more people hate us now than ever. Terrorist attacks haven’t stopped, and definitely won’t. You know, I’d never call a game before it was over, especially for my own team, but when my team is losing by like 30 points, even in the first half, even if they’re the team with the greatest players ever, I still have to doubt their ability to come back and win in the long haul. Most people do the same; make judgements for the future based on experience. In my experience, the Iraq war is a total fucking disaster. Why would I project the long term, with all the bullshit spewed from our great leaders about how the short term AND long term would be an outstanding success (even though I strongly doubted it then), to be a success? Exactly, I don’t.
@ADismalScience: The only way I can see the US getting an ROI would be to take the oil wells.
The true cost to the US will be in the multiple trillions. Before the Iraq war gas was $~20 a gallon. The cost should also include the oil price increse so an roi even on your number would need to be 3-5x as much. Treating this as a business expense don’t forget the fact the war is financed on debt. The interest will also need to be factored in.
So if we didn’t drop another dime we still need approximately 2.4 – 4 billion barrels of light sweet crude to break even.
We see things in a similar fashion except I believe the costs to be far higher than you. Even taking your numbers as fact I’d find it difficult to be optimistic.
Given my pessimistic view of costs Iraq will be to the US what the Panama canal was to the French.
Either way I’m sure my Exxon stock can only rise on this news.
@ADismalScience: You have the wrong Bush there… Saddam invaded Kuwait when Bush 41 was president. You know, the one who didn’t sidestep the draft, desert his post and didn’t leave a trail of failed enterprises in his wake before becoming a politician. Bush 41 beat the crap out of the Iraqi military, drove them back within the borders of their country and largely got our troops out of the situation rather than stepping into the quicksand of “regime change.”
It’s nice to see a few people riding their bikes. I’m really surprised at the number of people that turn their noses up at bikes and don’t see it as a viable form of transportation.
$3 was the cutoff line to get me out of my car. I pulled the bike out of my garage I hadn’t ridden in probably 10 years and started riding the 23 miles each way to work.
Of course I couldn’t do it every day, I found out I was in horrible shape from all those years of sitting behind a desk, sitting behind the wheel of my car, etc.
Since then I found a new job a bit closer to my house, but it just means I ride more times per week. I probably save at least $150 a month in just gas alone (not to mention the depreciation savings from not driving my car). It generally takes me 1/2 an hour longer to get to work on my bike vs. my car, but it is still about 1/2 an hour quicker than trying to take the bus.
$3 gas was probably the best thing that ever happened to me (health-wise and money-wise). If I can do it, I’m willing to bet 99% of the people on this blog could do it too.
@Techguy1138:
You have the cost basis wrong there – billing p/bbl to Iraq is conflating all kinds of price factors. The whole approach you’ve taken is inflamed by personal politics.
@spamtasticus: chilling. peak oil coming from an oilman himself. thank you for that honest insight.
personally, i think its too bad that oil prices and consumption/pollution have become such a polarizing, political issue because of the war (see countless comments above). anger and money are distracting us from the real problem, which is of course climate change. i am just like everyone else, watching gas prices skyrocket and thinking of myself and my own bottom line… but this is about more than economics. people need to make lifestyle changes, re-arrange their living-working situations, re-consider everything. it’s major. oil’s not getting cheaper. and one day (some say in the next 25 years) it will be gone. then what?
@bizzz: oh, also – great post. inspiring.
Glad we converted our Jetta 2002 TDI to run on vegetable oil for $1000 (Greasecar.com). Now we have free fuel…well I do have to fill up my regular diesel tank every 2000miles, so I guess it’s not totally free. Thought $4/gal gas would have already happened last christmas. Oh well.
Oh waaa diesel users will be paying $4/gal next month. I’m already paying 3.60/gal now.
I’m not worried about the price of gas — I walk everywhere.
I am, however, slightly worried about the price of everything else.
@AD8BC: If you drives for her job, then the mileage is tax deductable… so yes we will bitch about it. (Assuming your marginal rate is 15%, then each mile driven is something like 7 cents off your taxes (0.15 x 48 cents / mile. My SL2 gets about 30 mpg. Assuming yours is the same (it’s 6 years newer so it should be), then that works out to about $2 per gallon discount….) (of course the 48 cents is supposed to offset maintenance and insurance, so the per gallon discount is probably significantly less, but not insiginificant).
any hoot… I’ll be overseas for a year beginning in the summer. Only travel will be 3 miles to work in company vehicle. Sooo, no paying for gas for a year!!! Then again, being away from family will suck and wife will have to drive kids to school each day.
If I was staying in the US, I’d at least start driving to the closest park and ride and take the bus into work. (Company pays for monthly bus pass). In the summer, I would ride bike to bus stop. I live approximately 20 miles from work.
Why are you surprised? It (87 octane) almost hit $4 last year (91 went over $4). Maybe you meant the national average, because Alaska residents have been paying much higher gas prices since who remembers when ($8?). Bottom line: if Republicans win, higher gas prices; if Democrats win, even higher gasoline prices. Gouging is apparently legal if you are a corporation with sexy lobbyists and genius lawyers. Now if anyone would look into OPEC’s decisions to simply cut production whenever they want, regardless of demand…
I’m not pretending to be holier than thou; I have to drive to work, too, because the last time I tried biking to work (3 days in a row), I screwed up my knees and am still paying for it more than a year after the fact… That said, I’d buy a new car (electric, hydrogen, solar, nuclear or whatever) at twice the cost of my old car if it’ll save the environment. [Arguably, Priuses cause more pre-assembled pollution than average cars due to battery mining and stuff...]
Price Breakdown:
distribution & marketing 1.5%
crude 70.6%
refineries 9%
gov’t 18.6%
(99.7% – discrepency due to rounding)
(Price from Feb 25, 2008)
Americans aren’t the ones making $ from oil.
Reference: [www.energy.ca.gov]
I already take PT as often as possible, which is probably why I fill my tank every 3-4 weeks.
I noticed yesterday that the Costco in my area, which is usually 10-20 cents cheaper than other gas stations, broke the $3 mark…that tells me things are getting bad.
@m4ximusprim3: Now hold it.. How did you manage to get a TARDIS that looks like a pregnant rollerskate?
Just kidding.. Glad you got a nice car and hope that’ll hold up until you can afford something nicer.
@AD8BC: Heh, heh. While I’m voting Democratic in the upcoming election, I like the idea of a “Common Sense” party
I’ve often wondered how hard it would be to get the centrists from both parties together in such a way (and to tell both the Greens/Nader-ites and the James Dobsons/Ralph Reeds of the world to go pound sand)
from a fellow D/FW resident.
@spamtasticus: You are conveniently ignorant for an oil salesman about the product you sell. Electric vehicles are not more fuel efficient they are more ENERGY efficient because gasoline engines are not efficient and the vast majority of energy goes to waste due to heat. When oil is being fed to the grid they use a far more efficient process (of course they do it is much larger scale and it’s all about efficiency in that field because that equals costs). It’s even better than that. It is more efficient to turn your gasoline in electricity in your hybrid using the mini generator and use it to drive the electric motor…. How crazy is that? So it takes less crude to drive a Prius mile than say a gasoline variant.
It’s interesting to look back at these comments now that gas IS $4/gallon. Lets see, Bladefist said that $4 gas is a liberal scare tactic. I think we can safely call him a
“dumb ass”.