Fuel Prices Climbing

[Roadtoad]

One of the reasons gas prices are reaching stratospheric heights is the mandate by communities and states for "Designer Blends," which Pat Bedard discussed in Car and Driver. However, according to ABC News, it's more about turmoil in the Middle East and dwindling resources.

Just my own thought here: do you get the feeling that because of the actions of Environmentalists, we're going to wind up with drilling in the ANWR, anyway? I'd rather not, but it seems as though the news media has yet to really get the story right, (save for John Stossel), and public pressure might force the Government's hand.

 

[aerocontrols]

It's somewhat obvious to me that we'll end up drilling in ANWR eventually no matter what.

There is oil there.

As there becomes less and less oil in other places, and oil prices increas, how will the enviros will maintain the political strength to keep drillers out?

It doesn't seem to me to matter so much what they do or don't do. They've stopped any oil drilling for now, but eventually of course the oil there will be pumped out.

MattJ

 

[Rob Lister]

It's somewhat obvious to me that we'll end up drilling in ANWR eventually no matter what.

There is oil there.

As there becomes less and less oil in other places, and oil prices increas, how will the enviros will maintain the political strength to keep drillers out?

It doesn't seem to me to matter so much what they do or don't do. They've stopped any oil drilling for now, but eventually of course the oil there will be pumped out.

MattJ

I'm against drilling in ANWR but not for the usual reasons. I could give a rat's 4ss about the Porcupine Caribou (although I think drilling would actually increase their numbers but I digress). I'm against it because it's there and its ours and we don't need to use it at the moment. I think it is a rather good insurance policy -- a hedge against the peak-oil/oil-war/embargo/other scenero bets.

It's in the bank for a rainy day. Let's keep it that way.

I do support geological surveys to establish, to the greatest cost-effective degree, the amount that exists. I also think the results of those surveys are a matter of national security and should be classified. <---note to note that is probably already the case.

 

[kalen]

If the price of gasoline skyrocketed, I think that would be a great thing for the environment in that consumption would go down and less carbon dioxide would be released into the atmosphere.

Let's hear it for high oil prices!!

 

[priapus]

It was my understanding, from nearly everyone I've spoken with in the petroleum industry, that the rapid increase in demand and consumption by China mostly, but other countries with growing economies, was the primary reason for the rise in prices.

 

[shanek]

One of the reasons gas prices are reaching stratospheric heights

Stratospheric heights? Compared to what?

Most places in the US, gas is $2/gal or lower. $2 today is the equivalent of 83¢ in 1980. 83¢ would have been a fantastic price in 1980!

 

[Bjorn]

Re: Re: Fuel Prices Climbing

Stratospheric heights? Compared to what?

Most places in the US, gas is $2/gal or lower. $2 today is the equivalent of 83¢ in 1980. 83¢ would have been a fantastic price in 1980!

Add that a dollar isn't worth more than 2/3 of what it was five years ago ....

 

[PygmyPlaidGiraffe]

Re: Re: Fuel Prices Climbing

Stratospheric heights? Compared to what?

Most places in the US, gas is $2/gal or lower. $2 today is the equivalent of 83¢ in 1980. 83¢ would have been a fantastic price in 1980!

Correct, as you pointed out gas prices need to be put in perspective. Maybe its not good to compare to the Consumer price index, but... Generally, if inflation is assumed at 4% per annum (based on averages over 100 years of inflation for CPI), its a pretty good deal. If an item in 1987 cost $1.00, It would cost $2.00 today. Gasoline prices fluctuate so much more wildly compared to other items. At times in the early 90s gas was a bargain. On average I'd say the consumer fares pretty well over the long term, and Americans have access to relatively inexpensive gas compared to other regions of the world.

 

[shanek]

Re: Re: Re: Fuel Prices Climbing

Add that a dollar isn't worth more than 2/3 of what it was five years ago ....

Maybe not quite...going by CPI, $2 in 2004 is the equivalent of $1.76 in 1999. I filled up yesterday for $1.81, and that would have been $1.60 five years ago.

Of course, gas everywhere would be about 40¢/gal less if it weren't for Federal and state taxes.

 

[shanek]

Re: Re: Re: Fuel Prices Climbing

Correct, as you pointed out gas prices need to be put in perspective. Maybe its not good to compare to the Consumer price index,

Well, using the GDP Deflator it's not much better; around 97¢, more in line with the figure you calculated.

There's no perfect measure of inflation. Generally, if you want overall inflation you use the GDP Deflator but if you want to know how bad it impacts the pocketbook (IOW, relative to the cost of living) you use CPI. They both track pretty well together, though.

 

[Ed]

Isn't part of the problem that oil prices are not pegged to dollars anymore?

 

[Rob Lister]

Isn't part of the problem that oil prices are not pegged to dollars anymore?

I know that some opec members (and EU members as well) have talked about wanting that switch to happen but I wasn't aware it has. To my knowledge it is still pegged to the dollar.

 

[Bjorn]

Re: Re: Re: Re: Fuel Prices Climbing

Maybe not quite...going by CPI, $2 in 2004 is the equivalent of $1.76 in 1999. I filled up yesterday for $1.81, and that would have been $1.60 five years ago.

I wasn't thinking inflation, just the fact that the dollar is worth a lot less compared to other currencies than it was five years ago. The dollar was worth 1.15 euros, compared to 0.76 euros today.

Some not-so-accurate-but-good-enough-to-show-my-point numbers:

In dollars:

Price per barrel year 2000: 30 dollars
Price per barrel year 2005: 55 dollars

However, in Euros the picture is different:

Price per barrel year 2000: 34.5 euros
Price per barrel year 2005: 41.8 euros

Originally posted by ed
Isn't part of the problem that oil prices are not pegged to dollars anymore?

Oil is still traded in dollars, but "pegged" might not be the correct word as it usually indicates a fixed rate in dollars. The fall in dollar value has no doubt been an important factor in the raise of oil prices in dollars.

Some countries are discussing swapping to euros as the world's oil currency, partly because of the poor performance of the dollar (and the US economy). It would not be nice, to put it mildly, but that's another thread.

 

[shanek]

Re: Re: Re: Re: Re: Fuel Prices Climbing

I wasn't thinking inflation, just the fact that the dollar is worth a lot less compared to other currencies than it was five years ago.

Um, that's what inflation is; the dollar is worth less. Inflation is the reduction in the real value of a currency. You're just referring to a different metric for measuring it; in this case, the exchange market index. There's also the employment cost index, the import price index, the producer price index, all sorts of ways of calculating it. But it really all boils down to the same thing.

 

[Ace_of_Sevens]

Where's all this cheap Iraqi oil? You know, the real reaosn we went to Iraq?

 

[Bjorn]

Re: Re: Re: Re: Re: Re: Fuel Prices Climbing

Um, that's what inflation is; the dollar is worth less.
Inflation is the reduction in the real value of a currency. You're just referring to a different metric for measuring it; in this case, the exchange market index. There's also the employment cost index, the import price index, the producer price index, all sorts of ways of calculating it. But it really all boils down to the same thing.

That's really stretching the definition of inflation, isn't it ? The inflation can be equal in two countries and still one of the currencies might lose compared to the other.

US inflation 2000-2005:

Inflation in the different countries within the EU ranged from 0.1% to 3.5% in 2004 (same rate or slightly higher than the US), and yet the Euro gained considerably compared to the Dollar. Overspending in the US, big deficits and a slight fear that the US might get into problems paying pack its loans, maybe?

Is there such a thing as a domestic inflation that was about zero, while the international inflation was, say, 10%?

 

[shanek]

Re: Re: Re: Re: Re: Re: Re: Fuel Prices Climbing

That's really stretching the definition of inflation, isn't it ? The inflation can be equal in two countries and still one of the currencies might lose compared to the other.

It all depends on how you measure it. Again, there's no perfect measure of inflation. And just as the price of (say) gas going up doesn't mean inflation any more than (say) the price of computers going down means deflation, but rather the overall prices (and that's not even a really good measurement there, because technoligcal advances tend to move real prices down), you can't just look at the dollar vs. the euro to see if there's overall inflation. It's really a big picture kind of thing.

Is there such a thing as a domestic inflation that was about zero, while the international inflation was, say, 10%?

In the short run, sure. In the long run, it'll balance out.

 

[Bjorn]

So what was the inflation in the US during the last five years?

Generally, if you want overall inflation you use the GDP Deflator but if you want to know how bad it impacts the pocketbook (IOW, relative to the cost of living) you use CPI. They both track pretty well together, though.

 

[shanek]

So what was the inflation in the US during the last five years?

If you go by CPI, it was about 12.9%. If you go by the GDP Deflator, 9.4%. If you go by ECI, 20.6%. If you go by MPI, 7%. If you go by PPI, about 9.6%.

Generally, the GDP Deflator is considered to be the most accurate measurement. And PPI gave us a very close result. So if we split the diff and consider 9.5% inflation over the last five years, that ends up being about 1.9% annual inflation.

However, it's usually the CPI that you feel with your pocketbook. By that measure, it's more like 2.6% annual inflation.

So, say two to two-and-a-half percent.

 

[Bjorn]

If you go by CPI, it was about 12.9%. If you go by the GDP Deflator, 9.4%. If you go by ECI, 20.6%. If you go by MPI, 7%. If you go by PPI, about 9.6%.

Generally, the GDP Deflator is considered to be the most accurate measurement. And PPI gave us a very close result. So if we split the diff and consider 9.5% inflation over the last five years, that ends up being about 1.9% annual inflation.

During the same time, dollars have declined at least 35% compared to euros, yet you say:

Um, that's what inflation is; the dollar is worth less. Inflation is the reduction in the real value of a currency.

Obviously, you are distinguishing between inflation and what the dollar is losing compared to euro?