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23 February, 2012

The Price Of Gas Is Outrageous – And It Is Going To Go Even Higher

The Price Of Gas Is Outrageous – And It Is Going To Go Even Higher: "Does it cost you hundreds of dollars just to get to work each month? If it does, you are certainly not alone. There are millions of other Americans in the exact same boat. In recent years, the price of gas in the United States has gotten so outrageous that it has played a major factor in where millions of American families have decided to live and in what kind of vehicles they have decided to purchase. Many Americans that have very long commutes to work end up spending thousands of dollars on gas a year. So when the price of gas starts going up to record levels, people like that really start to feel it. But the price of gas doesn't just affect those that drive a lot. The truth is that the price of gas impacts each and every one of us. Almost everything that we buy has to be transported, and when the price of gasoline goes up the cost of shipping goods also rises. The U.S. economy has been structured around cheap oil. It was assumed that we would always be able to transport massive quantities of goods over vast distances very inexpensively. Once that paradigm totally breaks down, we are going to be in a huge amount of trouble. For the moment, the big concern is the stress that higher gas prices are going to put on the budgets of ordinary American families. Unfortunately, almost everyone agrees that in the short-term the price of gas is going to go even higher..."

3 comments:

  1. Virtually no goods are transported using gasoline. Shipping uses bunker oil #6 primarily. Trains and trucks use diesel. Aircraft use kerosene and jet. Sorry to burst your bubble.

    If many Americans have a long commute to work, we need to focus on safer and more livable cities. Non renewable fuels will eventually run out, irregardless of price, they are not a viable long term option.

    The USA should take high gasoline prices as a blessing. Start moving away from non-renewables now. We might be able to make a paradigm shift if the costs are spread over many years. America will fail miserably if it attempts to make a paradigm shift in just one or two years.

    ReplyDelete
  2. Not sure which planet you live on, but where I live higher gasoline prices means higher prices for diesel fuel, kerosene, etc.. If you don't believe fuel prices impact shipping costs, I would like to point your attention to this study: http://www.marad.dot.gov/documents/Modal_Shift_Study_-_Technical_Report.pdf.

    An excerpt from the above: "... the transport industry has experienced a five to eight fold increase in the price of fuel for marine and inland shipping (i.e., as a result of a price increase in crude oil from $20 to $140 per barrel). This causes a major 'dislocation' for industry that may significantly impact... goods and services. In the year 2000 fuel represented only 20 percent of transport operating costs, recently at $140 per barrel it represents over 50 percent, and were the oil price to rise to $200 a barrel, it would be over 70 percent of operating cost. Transport prices have risen by nearly 100 percent between 2002 and 2008, and could increase by almost another 300 percent if oil prices increase to $200 per barrel. A one-dollar rise in world oil prices leads to a 1 percent rise in trade transport costs. In terms of the marine and inland transport movement of a 40-foot container from Shanghai to Columbus, Ohio, the total transport cost was $3,000 when oil prices were $20 per barrel in the year 2000. Today at $140 per barrel, the cost is $8,000, and should oil prices rise to $200 per barrel transport cost would rise to $15,000... The prices of food, consumer goods... are all likely to suffer from continuing oil price shocks... with suppliers having to increase prices to pay for the increased production and transport costs..."

    Crude oil was $140/barrel at the time of that study. When it went over $150 in July 2008, there's quite a lot of evidence to suggest it helped to instigate the current economic kerfuffle we still haven't dug our way out of. It's a little better now at $109-$125/barrel (WTI vs. Brent), a 450%-525% increase over 2000. Gasoline, kerosene, and heating oil prices are way up.

    ReplyDelete
  3. Some interesting reading in the news recently:

    http://www.deseretnews.com/article/765553653/Another-oil-price-swing.html

    http://www.telegraph.co.uk/finance/comment/liamhalligan/9105796/Soaring-oil-prices-will-dwarf-the-Greek-drama.html

    From the latter of those two links: "... While the escalation of any kind of tension in the Middle East is obviously a serious matter, I don't accept that is why crude prices are high. The real reason... is... crude use is soaring, while the most important oil wells on earth are rapidly depleting.

    In 2001, the world consumed 76.6m barrels of oil a day. Last year, just a decade on, global oil use was a hefty 89.1m barrels daily, 16pc higher. In 2011, the world economy was sluggish, with global GDP growth of 3.8pc, down from 5.2pc the year before. Yet world oil use still rose almost 1pc in 2011, with crude averaging $111 a barrel, more than 40pc up on 2010... Chinese oil consumption has recently surged at an astonishing 7pc-8pc per annum and the People's Republic is now second only to the US in terms of overall oil use... Since the 1960s, the discovery rate and size of new oil and gas fields has fallen markedly. More than four-fifths of the world's major fields are beyond peak production. The output of the world's largest 580 oil fields is declining at a 5.1pc annual average. Strategic oil traders now worry aloud about falling pressure at Saudi's Ghawar, Cantarell in Mexico and other giants fields...

    While there's lots of hype about tar sands and shale fuels, these new technologies often expend more energy than they create, while causing horrendous environmental and water-supply problems. Conventionally-produced crude will remain absolutely critical, and demand for it will spiral, until mankind bans the internal combustion engine, outlaws ammonium-based fertilisers, dismantles the global pharmaceutical industry and learns to live without plastic. I can't see that happening anytime soon..."

    In case you failed to catch it, the author is talking about Peak Oil, which I've been talking about forever and just a few years ago was considered a crackpot "tinfoil hat" theory by most people. I can't tell you how many people thought I was a nutjob, only to eat their words now.

    All your talk of "more livable cities" (forget the fact that it fails to acknowledge many of us would rather suck concrete than live in any city) and it being easier to "make a paradigm shift if the costs are spread over many years" is pointless pollyanna fluffery -- the hard truth is we don't have "many years" left, at this point. Your logic needed to have been enacted long ago in order to be viable.

    ReplyDelete

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