Experts expect gas to top $4 a gallon shortly

True... but Since after WW2, the oil reserves have always existed in case of a nuclear confrontation. Those were always a case for national security... unless the cost of gas became so grossly inflated that the cost of transporting goods becomes outrageous. But none of us are yet starving because the goods can't get to where they need to be.

Remember '78? The cost of fuel limited the amount of goods that could get to markets and therefore caused shortages everywhere else.

I don't think that hitting our reserves now is a good idea... it's a band-aid on a gaping wound.

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Originally Posted by Treibenschnell

I don't think that hitting our reserves now is a good idea... it's a band-aid on a gaping wound.

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Actually on the WB33 News at 9 tonight, they talked about the fact the Fed is opening up it's reserves to help keep gas prices from spiking.

CNN Link = http://money.cnn.com/2005/08/31/news/spr/

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Originally Posted by sammm

That part that pisses me off the most is this is all pure speculation. There are oil reserves in case of a shortage that they are just now 'talking' about releasing.

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Unfortunately, you can't put oil in your gas tank, and Katrina wiped out a good bit of US domestic refinery capacity as well. Without excess refinery capacity, all of the oil in the Strategic Petroleum Reserve won't do a damn bit of good, 'cause we can't refine it into unleaded gasoline fast enough to meet current demand.

Interestingly, I heard on the news that there were a number of refineries out of commission not because of Katrina, but because they were offline for maintenance. Hmm... anyone remember rolling blackouts in California a few years back, and the suspicious timing of electricity generation plants offline for "routine maintenance" right at the peak of power generation season? Why would anyone take a gasoline refinery offline during peak season for gasoline demand... unless they knew that tightening the spigot would allow them to justify ever increasing prices on every other drop of gas they refined. Simple Economics 101 - decrease the supply of a necessary commodity, and the equilibrium price will climb. Decrease the supply some more, and the price just goes higher. Get a better price for every unit you produce while your fixed costs remain the same, and your profit margins will soar. :evil:

Same sh!t, different day - the rich keep getting richer, while the little guy gets screwed. Dubya's been damn good business for the oil industry. I hope they paid him well. :?

As I understand, high oil and gas prices are based primarily on fear and politics. The fallacy that demand has suddenly increased and outstripped supply isn't the whole story. There's a number of factors:

1) Politics in Canada - The Canadian government were p****d at the US for certain overseas adventures, and decided to sell most of their oil to China instead of the US. Politics -> supply reduction -> higher gas prices

2) Instability in the middle East - Whilst some big oilfields in Iraq are securely in US hands, all of the others are in the hands of countries whose governments are presently friendly, but whose people most definitely are not (certain overseas adventures). This creates immense fear of a future cessation of supply from the middle east (50% of US oil??) amongst those who trade in oil futures. Fear -> high oil prices -> high gas prices

3) Instability in Nigeria - Nigeria is one of the world's larger oil producing nations, dominated by Shell. However, the immense social differential between the oil installations and the local people has created long-lasting difficulties and unreliability of the Nigerian supply. Unreliability -> fear -> high oil prices -> high gas prices.

4) Slowly increasing demand in the US due to a self-sustaining penchant for SUVs ("I want to be safe therefore I must be as big as everyone else") and complete denial that driving 10mpg vehicles has any impact on the environment, oil prices, or devastating hurricanes. This means that the system is vunerable to fluctuations in oil supply (see above and below).

5) Natural disasters (eg Katrina) whose effects we're only beginning to see.

Feel free to disagree :smile:

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Originally Posted by onething

From a friend . . .

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That's just funny and true on many levels, not just oil.

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Originally Posted by Kiliwizz

As I understand, high oil and gas prices are based primarily on fear and politics. The fallacy that demand has suddenly increased and outstripped supply isn't the whole story. There's a number of factors:

1) Politics in Canada - The Canadian government were p****d at the US for certain overseas adventures, and decided to sell most of their oil to China instead of the US. Politics -> supply reduction -> higher gas prices

2) Instability in the middle East - Whilst some big oilfields in Iraq are securely in US hands, all of the others are in the hands of countries whose governments are presently friendly, but whose people most definitely are not (certain overseas adventures). This creates immense fear of a future cessation of supply from the middle east (50% of US oil??) amongst those who trade in oil futures. Fear -> high oil prices -> high gas prices

3) Instability in Nigeria - Nigeria is one of the world's larger oil producing nations, dominated by Shell. However, the immense social differential between the oil installations and the local people has created long-lasting difficulties and unreliability of the Nigerian supply. Unreliability -> fear -> high oil prices -> high gas prices.

4) Slowly increasing demand in the US due to a self-sustaining penchant for SUVs ("I want to be safe therefore I must be as big as everyone else") and complete denial that driving 10mpg vehicles has any impact on the environment, oil prices, or devastating hurricanes. This means that the system is vunerable to fluctuations in oil supply (see above and below).

5) Natural disasters (eg Katrina) whose effects we're only beginning to see.

Feel free to disagree :smile:

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Honestly this is one of the best explanations of the situation that I have seen! :thumleft:

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Originally Posted by POS Racing

Actually on the WB33 News at 9 tonight, they talked about the fact the Fed is opening up it's reserves to help keep gas prices from spiking.

CNN Link = http://money.cnn.com/2005/08/31/news/spr/

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And believe me it caused quite the debate.

Unfortunatetly for us, it's all going to be a little bit to late.

Oh, and thanks for watching! I did the second half of the newcast tonight and got to watch the train wreck in the first half hour...

Cost me $30.25 to fill up the slowcus today. That was at $2.79/gal which is by far the cheapest around here. I have around a 50 mile commute each day, and lets just say if I find the right motorcycle, the miata might just have to wait. :(

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Originally Posted by Kiliwizz

As I understand, high oil and gas prices are based primarily on fear and politics. The fallacy that demand has suddenly increased and outstripped supply isn't the whole story. Feel free to disagree :smile:

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I agree 100%. Like I said, all this new pricing is based on speculation not reality. My benchmark station is at $2.95 this morning. How can the price of gas that has already been bought and in a storage tank appreciate? :bs:

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Originally Posted by sammm

I agree 100%. Like I said, all this new pricing is based on speculation not reality. My benchmark station is at $2.95 this morning. How can the price of gas that has already been bought and in a storage tank appreciate? :bs:

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I've been thinking about that as well... Here's what I think is how it works...

The gas stations don't actually buy a whole tank of fuel at a time. They enter an agreement with their fuel distributor who agrees to keep the tank from going empty. The distributor then sets a price per gallon to the station (who will likely mark it up some). The stations report their gas sales daily back to the distributor and the station pays for that day's gas sales.

The distributor can then raise/lower it based on their greed on a daily basis and the station follows suit.

Sound (un)reasonable?

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Originally Posted by sammm

I agree 100%. Like I said, all this new pricing is based on speculation not reality. My benchmark station is at $2.95 this morning. How can the price of gas that has already been bought and in a storage tank appreciate? :bs:

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Because they have to use the revenue generated from the tank in the ground to finance the purchase of the next tank.

Killiwiz, no one is suggesting that demand has gone up - demand has stayed pretty steady, even as prices have increased. Unfortunately, the tightening is on the supply side - damage to a large percentage of the nation's gasoline refinery capacity from Katrina has squeezed the supply/demand replationship from the supply side, not the demand side.

Again, simple Econ 101 - maintain constant demand (which is what we have now - most people can't significantly decrease their demand for fuel), but decrease the available supply, and the equilibrium price increases. That's what is happening at the moment... fueled on the futures markets by rampant speculation and fear, of course.

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Originally Posted by altiain

Killiwiz, no one is suggesting that demand has gone up - demand has stayed pretty steady, even as prices have increased.

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Iain, I think you're pretty much dead on here, except for the very short term. We're starting to see people buying more fuel as they either a) are afraid that the stations will run out, or b) want to fill up with fuel before the price rises again. I think that's going to make the "spike" in gas prices much worse in the short term.

But that's just a "spike." You're right in general. In fact, I'd guess that demand will even begin to go down in the mid-term a bit as prices go up and people drive less.

Chuck

I heard last night that UPS raised its shipping rates 13% due to fuel expenses.
Everything accross the board I suspect is about to go through the roof, people can't keep doing business without charging more for shipped goods whether it be UPS or your local Grocery Store.
I wont state my personal opinions here but I will say that I know things are going to get a lot worse than they are now.
I have already lost one gig a week due to the fuel price hike, I can't imagine what its doing to the minimum wage folks out there.

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Originally Posted by sammm

How can the price of gas that has already been bought and in a storage tank appreciate? :bs:

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I have a sandwich, and you are hungry. I will sell you the sandwich. How hungry are you?

Looks like Europe is coming to our rescue... interesting that I haven't seen this on the local news media

http://tinyurl.com/akdpm

And for the record... I'm glad to see it, if nothing else just for the offer of aid. We send to aid to just about any in the country in the world when it's needed. Nice to see that it's being offered back in return.

Actually, demand has gone up in some locations.

Normal, happy people buy gas on a schedule. They probably don't realize it, but they tend to drive a fairly consistent # of miles over a period of time, and tend to fill up their cars accordingly.

When there is a hint of a fuel shortage/price increase/mutant tomatoes on the run, people start filling up earlier. They may not buy a "full" tank, but in micro-economies, a rush on gas stations empties tanks. It's happened all over the rural southeast. Much as I hate to say it, local goverments should probably step in with rationing measures before the $6.00 pump prices hit.

As far as pump prices...

Gas stations may own the buildings. Gas companies do own the tanks, pumps, cash registers, credit card processing equipment and the fuel. They only sell a license to station owners to allow them to vend fuel. The gas companies dictate the price a station must pay for any gallon of gas that leaves the storage tanks. Each day, tanks are measured with a stick, and the fuel level change is reconciled against the amount of fuel flowed through the pumps. Station owners do choose the amount of profit per gallon they will collect. Right now, a lot of them are really hoping you'll pop in to buy a $0.60 soda (that they net $0.12 EBITDAR) to make up for the $0.13 they lost EBITDAR when you filled up your Suburban.

Thus, factors affecting your price at the pump include:

• How well the station negotiated the share of loss due to leakage, theft, or pump malfunction
• How well the station works to eliminate loss due to leakage, theft, or pump malfunction
• How much the station has paid in fines lately due to leakage
• How good is the station's credit (that's expensive stuff in those tanks, and they don't own it. Lot's of stations in less desirable areas are paying interest on the stuff. That means they're paying for extra deliveries, too, since they can't afford to hold on to more than a day's worth of fuel)
• How greedy is the station (possibly how stupid is the station, since they may alienate loyal customers for years after a price explosion)
• How much risk can the station take (they may create loyal customers for years after losing a few cents a sale during a price explosion)

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Originally Posted by Dave04

Looks like Europe is coming to our rescue... interesting that I haven't seen this on the local news media

http://tinyurl.com/akdpm

And for the record... I'm glad to see it, if nothing else just for the offer of aid. We send to aid to just about any in the country in the world when it's needed. Nice to see that it's being offered back in return.

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From the article:

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PARIS (Reuters) - Europe will dip into its emergency reserves of gasoline to help the United States through an energy crisis that began when Hurricane Katrina smashed into Gulf coast refiners, EU governments said on Friday.

EU members Germany, France, Spain and Italy have substantial emergency reserves. The IEA last dipped into its emergency reserves in 1991 when a U.S.-led coalition ejected Iraqi troops from Kuwait. The agency, created after the 1973-74 oil crisis to protect consumers, must hold stocks of 90 days of net imports.

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What an amazing idea - reserve supplies of refined fuel. :roll:

As I've said before, our biggest problem at the moment is the loss of refining capacity. There is no shortage of oil - instead there is a shortage of capacity to turn that oil into usable fuel.

If any good comes out of this debacle, I hope for two things:

• First, that the US government mandates a nationwide standard for gasoline formulation. If you eliminated all of the localized pockets of arcane fuel formulation requirements (differeent required additives and oxygenation rates, etc.), then economies of scale could be utilized to lower the price of gas. In addition, there would be less refinery capcity issues, when any refinery could formulate gas that would be legal for sale at any pump in the country.
  
• Second, it's about bloody time that the United States added a refined gasoline stockpile (as well as a diesel and a Jet A stockpile) to the nation's Strategic Petroleum Reserve. As Katrina has aptly demonstrated, all of the reserve crude in the world won't do you a bit of good if your refinery capability - which was already running dangerously near maximum sustainable capacity before Katrina was so much as a whisper of cloud over the high seas - gets knocked out. We've got heating oil reserves for the relatively small percentage of the population that lives in areas with bitterly cold winter climates, so perhaps it's time that one of the bubbleheads in Washington thought about stockpiling the lifeblood of the economy as well - the fuel that is used to get people to work, and goods and services to their destination.

Unfortunately, #2 won't happen until #1 does, because otherwise we'd have to stockpile - at current guesses - about 300 different gasoline formulations to meet local and state requirements. :roll:

Hi-Jacked from NTS2K board :mrgreen:

http://www.marcuccimotorsports.com/todd/gas.bmp

Very nice!!! :D