U.S. Gas Prices Continue To Fall 398
First time accepted submitter nmpost writes "Earlier this year, as gas prices hit record highs in the winter and spring for that time of year, experts warned we were headed for all time records this summer. Something strange happened before every motorists recurring nightmare happened: gas prices actually started dropping. In fact, prices have fallen over $.50 since they peaked in the spring. Experts have now flipped their projections, and believe prices will continue to tumble through the fall."
Re:Maybe (Score:3, Interesting)
Prices fall because of presidential elections. My super paranoid conspiracy theory is that oil and gas companies do not want to be the subject of discourse during the elections.
Re:Maybe (Score:3, Interesting)
My paranoid conspiracy: Incumbents have to pay exorbitant amounts to get the prices brought down. Otherwise, the prices inflate so the opposition can blame the incumbent.
Saudi Arabia (Score:5, Interesting)
Saudi Arabia is currently flooding the oil market to drive down prices in an attempt to destabilize the economies and governments of Syria and Iran and weaken their broker Russia.
More or less anything else that might be conjured up to explain this precipitous drop (aside from a worldwide recession that is driving down consumption and demand) is just nonsense. This is an odd byproduct of economic warfare. My only question is looking for the bottom so I can maximize returns after this economic war turns into a shooting one.
Re:Maybe (Score:5, Interesting)
The OPEC countries are very careful about maintaining their control over the oil supply and making sure that it isn't subject to typical market forces. One interesting consequence of this, albeit unrelated to the topic at hand, is that the United States has essentially no influence over the price of gas in their country. At least not in the long term - this is interesting, I think, because people talk sometimes about drilling in the nature preserve in Alaska or offshore drilling as a way to reduce gas prices, but doing so would have, at best, a short term effect. The OPEC countries would quickly cut their supply and stabilize the price. Since oil is a global commodity there's really no difference between "foreign oil" and "American oil" unless some major war breaks out that stops international trade.
Re:what would help keep it this way (Score:4, Interesting)
Sorry R^2 is above 0.90. Pearsons R between average gas price at the pump in the US vs Gold/oz from Jan 1976 to Feb 2012 is 0.833. And pearson's R assumes a the most simple (linear) relationship. This has likely only become stronger recently. You can look at what gold and gas prices have done recently on your own.
Re:Fall, really? (Score:5, Interesting)
Interestingly enough, most of the fluctuations in prices in the US comes from speculators gambling on the commodities markets. Occasionally we get changes because of world events, but those world events in reality only drive speculators changing their speculations. OPEC, the great evil cartel, unlike in the mid to late '70's, is almost a wall flower in the day to day, week to week, changes.
California Gas Prices (Score:5, Interesting)
California's gas prices are always a bit higher because we have about 50 cents more tax per gallon than most states - but it mostly goes to road maintenance, and otherwise it would just be built into the income tax or sales tax (which are also very high, but that's a separate problem.)
The other issue is that California requires somewhat special mixes of gasoline to reduce pollution, and that means there's less flexible supply chasing our demand, so we're likely to have higher prices and higher variability than states that let you burn anything. It's arguable how much of that is necessary - we could probably have more flexible definitions of low-pollution gas that would still keep our air clean, especially since car engines are more efficient and cleaner today than 10 or 20 years ago. (With my old telecommuter-friendly car, I also noticed that I consistently got about 10% worse mileage with winter gas than summer gas, though I'm not sure if my current car is as sensitive.)
By the way, if you're buying a new car, expect to spend about $1M / YourMPG on gas over the lifetime of the car. It'll last about 200K-250K miles, and gas will cost $4-5 much of that time, so you'll end up spending $20K if you buy a 50mpg Prius, or $50K if you buy a 20mpg car. (Your miles per year don't affect the total, just the variance - you can burn up your car in 5 years or keep it around for 20, you're still buying the same amount of gas before it dies. If you sell the car while it's still working, obviously the gas cost gets pro-rated.) I figure my current 30-33mpg car will cost me about $30-33K in gas, so $10-13K more than a Prius (which would have cost about $8K more to buy.)
and you call them experts? (Score:1, Interesting)
if it's going down, they'll say it will be lower,
Re:Maybe (Score:4, Interesting)
If the price of oil is falling then it's because they've decided that is no longer of primary importance. You could guess their reasons: maybe they want to squash all this talk of wind and solar power, maybe they're trying to do something about Syria, etc. It's hard to say for sure.
Saudi Arabia is pumping like crazy in order to balance the supply disruption from the embargo on Iran.
They're also pumping a bit more, which is causing the price of oil to go down because the Saudis are oversupplying the market.
Sooo... no need to guess their reasons.
It's because the Europeans are trying to squeeze Iran.
Re:Fall, really? (Score:5, Interesting)
LoB
Re:Fall, really? (Score:5, Interesting)
Interestingly enough, most of the fluctuations in prices in the US comes from speculators gambling on the commodities markets.
If you want to see a real world example of what happens when speculators are driven out of a market, look at silver.
The Chicago Mercantile Exchange pumped up margin prices 8 times last year and the price of silver plummeted as speculators had to get out.
They've since cut margins twice, but silver prices have not rebounded, because the gamblers have moved on to less hostile commodities.
This is a good example of how to drive out speculations, but...
A lot of traders are more or less accusing the CME of manipulating prices by fiddling with the margins
(they increased silver margins 5 times in 2 weeks) and have been claiming the whole thing is a big scam.
Re:California Gas Prices (Score:5, Interesting)
Please mod funny not insightful. Everyone knows the packs last the life of the car, guaranteed like forever, and the cost of a pack is a bit less than your rounding error above. This is a topic near and dear to my heart as my wife's Prius is nearing the end of its aesthetic life, trashed internally, dinged out externally, its really showing signs of age, and sooner or later I'll have to replace the car. Battery failures are extremely rare, so I'm not concerned about that.
Re:Is this pump price? (Score:5, Interesting)
What strikes me as particularly egregious, is that the last time the price of oil got this high, there was suddenly tremendous research into alternative fuels and particularly synthetic fuel from algae growth. Just as it became clear that algae was a viable technology and dozens of researchers were beginning to set up pilot projects to begin producing fuel, the price of oil crashed and wiped them all out.
I expect this will be a precise repeat of that exercise. It seems to me that the dog is shaking off the fleas. Perhaps its time for someone to subsidize the production of alternative fuels outside of the price of oil, until we have a product that is capable of competing with oil under any circumstance. Adding to the fact that we can slowly swap synfuel into the economy by taxing regular petroleum, and ultimately have a completely green fuel economy. Of course this presumes having federal legislators that don't own knee-pads or have the ability to whistle Dixie while tying a cherry stem in a knot with their tongues. Too much to ask for?