T Nation

Gas Prices

I was wondering what everyone thought about this. Yesterday I was listening to Rush (I know your all shocked at that) and someone called in and said that the federal government could stabalize gas prices right now if they wanted to. All they would have to do is standardize EPA regulations on fuel for every state.

You see, pretty much every state has their own standards and regulations as it relates to fuel. Hence the need for refineries to make forty different kinds of fuel. Years ago when gas prices in California skyrocketed due to an oil refinery explosion, they couldn’t buy it from a neighbor state, but had to have it trucked in from several states over. This was suposedly due to it’s neighbor states not being compatible with their EPA standards for fuel.

Point being that if refineries could make one type of fuel and neighboring states could purchase fuel from each other, prices would stabalize.

Waddaya think?

I may be mistaken, but my understanding is that they all use the same fuel, but when the states regulations on air quality with regard to vehicle emissions aren’t met, the general public pays for it at the pump in the form of a tax that is supposed to pay for the penalty of not meeting the air quality standards. Hence the price of gas being humongus in cities where they will never meet the standards of air quality testing due to sheer volume of consumption, like L.A.

Also, the stricter the standards, the stiffer the fine. So, if states eliminated the air quality penalty, that would help to reduce gas prices. But with peoples price threshhold having been pushed up, and now they’re getting used to prices being higher, I doubt that fuel retailers will bring them back down.

At least I think thats how it works. I could be wrong.

I don’t know much about it but it does seem insane how much they are charging us. Again I don’t know much about it but I believe there are only a few refineries out there and I would think that if one of them decided to charge $.50 less per gallon then the other guys then they would corner the market.

But on the bright side we’re making some f’n Arabs filthy rich.

FatSensei

[quote]fatsensei wrote:
I don’t know much about it but it does seem insane how much they are charging us. Again I don’t know much about it but I believe there are only a few refineries out there and I would think that if one of them decided to charge $.50 less per gallon then the other guys then they would corner the market.

But on the bright side we’re making some f’n Arabs filthy rich.

FatSensei[/quote]

Curiosity… What are they charging you guys now? Here, it’s about .95 a litre. I was just in Victoria, BC for a few weeks and it was sometimes $1.02 a litre. And I know it is far worse in some parts of the world…

-FC

I live within 5 miles of about 5 refineries and today I paid $2.22 a gallon.

In western Pa. it’s fluctuating at about 2.20 a gallon With 3.8 litres a gallon that would be about .57 a litre or you would be paying $3.65 a gallon. I don’t know what the currencey conversion is today, so those would be in U.S. dollars.

Here in Montreal I saw $106.4 earlier in the week.

Bigflamer is dead on about different blends of gas.

I have seen a report on The Farm Report dealing with fuel and fuel prices.

It seems that not only do states have varying laws regulating gas quality, but it could vary by region in the state. A one size fits all approach to gas manufacturing would surely stabilize prices.

Assuming only one grade and type of blend was available to everyone.

There are basically 2 blends. One for lower pollution areas, one with special additives for higher areas. That distinction is mandated by the EPA. Different weather areas also cause a problem because the gas ‘blend’ needs to be different for 30 deg 20% hum at 5000ft hum compared to 95deg and 80% hum at 300 ft or else cars may not run right.

Also all refineries are supposedly running at capacity so no one has ‘extra’ to lower the price.

About the only way to lower the price right now would be say that oil companies can only make so many cents per gallon. But most people in Congress are against that type of market manipulation.

I like to blame O.P.E.C. They regulate production to manipulate the supply. The only thing we could realy do is decrease demand, which woud probably cause an even greater leap in prices to compensate for the lack of use. Looks like a loose/loose to me.

Much of the price of crude is driven by perception and anticipation.

The perception is that a supply could be interupted due to the war or terrorism. The anticipation is that China and India will use more oil as their economies grow. Both are not really happening yet but the market has already priced it.

Additional refining capacity will drive the price down. The Saudi’s will pump more and eventually the Venezualan and Iraqi problems will get worked out. These current prices are a spike. Oil will settle around $30-40 barrel long term.

I hate the soaring gas prices as well. But locally, there is a boom of sorts in the oil exploration business.

landowners are leasing their land in droves, and wells are going up everywhere. As long as fuel prices remain high, our local economies will be booming. And that is something that this area has needed for 25 years.

It’s simple supply and demand. Prices are going up due to demand outpacing supply (Chinese economy growing, US consumption increasing, etc).

As far as high oil prices leading to economic growth, I am more worried about it leading to recession. Even if Texas is benefitting from the higher prices the US imports way more oil from other countries than Texas supplies.

It’s not “simple supply and demand”. There’s a cartel involved. Ever heard of OPEC? Supply is affected every time these guys meet. They set prices.

As far as these fuel prices leading to a recession, they’ve been on a steep upward trend for over a year, and our economy is in very good shape. As long as oil stays in the 35-45 dollar range pump prices will stablize, and There will still be an incintive for domestic exploration.

[quote]rainjack wrote:
It’s not “simple supply and demand”. There’s a cartel involved. Ever heard of OPEC? Supply is affected every time these guys meet. They set prices.[/quote]

I agree that OPEC affects supply. But demand is also rising. Can’t argue with facts:


(from: http://www.epa.gov/otaq/cert/mpg/fetrends/420s05001.htm )

(from: http://www.fhwa.dot.gov/ohim/onh00/onh2p3.htm)

Article on Chinese oil demand:
http://english.people.com.cn/200410/07/eng20041007_159213.html

Recessions don’t occur overnight. They take time.

[quote]rainjack wrote:
It’s not “simple supply and demand”. There’s a cartel involved. Ever heard of OPEC? Supply is affected every time these guys meet. They set prices.

As far as these fuel prices leading to a recession, they’ve been on a steep upward trend for over a year, and our economy is in very good shape. As long as oil stays in the 35-45 dollar range pump prices will stablize, and There will still be an incintive for domestic exploration.[/quote]

yeah and dont you know that your president is their best buddy? it really is just a matter of supply, demand and wanning natural resources… . the reason fuel is costing more is because its getting more expensive to find and get out of the ground… . the US is tapped out and most other places are declining allready…

Saudi Arabia is one of the only major exporters that you have left and it seems like they cant pump any more than they are allready doing… . theyve said they will up production several times this year and they have not met those promises because they cant. …

[quote]Gl;itch.e wrote:
rainjack wrote:
It’s not “simple supply and demand”. There’s a cartel involved. Ever heard of OPEC? Supply is affected every time these guys meet. They set prices.

As far as these fuel prices leading to a recession, they’ve been on a steep upward trend for over a year, and our economy is in very good shape. As long as oil stays in the 35-45 dollar range pump prices will stablize, and There will still be an incintive for domestic exploration.

yeah and dont you know that your president is their best buddy? it really is just a matter of supply, demand and wanning natural resources… . the reason fuel is costing more is because its getting more expensive to find and get out of the ground… . the US is tapped out and most other places are declining allready…

Saudi Arabia is one of the only major exporters that you have left and it seems like they cant pump any more than they are allready doing… . theyve said they will up production several times this year and they have not met those promises because they cant. …[/quote]

This is NOT simple supply demand economics. I was discussing this on another thread earlier and hedo hit it on the head here. This is all a speculative spike in price. Demand did not increase by almost 100% in the past 18 months. Yes there are more outside forces, but the dramatic increase is purely speculative. I don’t know that gas will settle as low as hedo predicted, that would be nice, but the price will come down.

It would, however, be nice if someone would look into increasing capacity of refineries. And no, the U.S. and everyone else but the Saudies are not running out of oil. There exists enough known oil supplies to last us 200+ years–even at expected consumption rates. There exists huge untapped reserves right to our North, and I bet vroom is sitting on them waiting to turn a tidy penny when the rush for northern oil begins.

I do think that this should be looked at as a great gouging though by those in the petro field. That is the biggest crime of this whole scenario. This could be lessened, but too much money is being made by the few powers in the industry

Glitch,

“Saudi Arabia is one of the only major exporters that you have left and it seems like they cant pump any more than they are allready doing.”

You forgot about Canada and Mexico, our two largest energy trading partners.

And, when the Canadian oil sands get moving, that will increase North American supply.

[quote]sasquatch wrote:
Gl;itch.e wrote:
rainjack wrote:
It’s not “simple supply and demand”. There’s a cartel involved. Ever heard of OPEC? Supply is affected every time these guys meet. They set prices.

As far as these fuel prices leading to a recession, they’ve been on a steep upward trend for over a year, and our economy is in very good shape. As long as oil stays in the 35-45 dollar range pump prices will stablize, and There will still be an incintive for domestic exploration.

yeah and dont you know that your president is their best buddy? it really is just a matter of supply, demand and wanning natural resources… . the reason fuel is costing more is because its getting more expensive to find and get out of the ground… . the US is tapped out and most other places are declining allready…

Saudi Arabia is one of the only major exporters that you have left and it seems like they cant pump any more than they are allready doing… . theyve said they will up production several times this year and they have not met those promises because they cant. …

This is NOT simple supply demand economics. I was discussing this on another thread earlier and hedo hit it on the head here. This is all a speculative spike in price. Demand did not increase by almost 100% in the past 18 months. Yes there are more outside forces, but the dramatic increase is purely speculative. I don’t know that gas will settle as low as hedo predicted, that would be nice, but the price will come down.

It would, however, be nice if someone would look into increasing capacity of refineries. And no, the U.S. and everyone else but the Saudies are not running out of oil. There exists enough known oil supplies to last us 200+ years–even at expected consumption rates. There exists huge untapped reserves right to our North, and I bet vroom is sitting on them waiting to turn a tidy penny when the rush for northern oil begins.

I do think that this should be looked at as a great gouging though by those in the petro field. That is the biggest crime of this whole scenario. This could be lessened, but too much money is being made by the few powers in the industry [/quote]

I personally don’t see gas prices coming down. I believe OPEC will get as much for there oil as they can. What power do we have that sway their behavior? The only one I can think of is energy conservation. I personally don’t see that happening either.

Opec Has only found real strength lately. There was times in the 90’s when Light Sweet Crude was going for 8 bucks a barrel. This was because the cartel was fractured by greed.

Now that they are all on the same page - we are paying the price for it.

I realize that the price gouging is a result of speculatory moves, but OPEC is not helping matters by bottlenecking production.