Gasoline Is Cheap

[vivfox]

Gasoline Is Cheap
Four dollars a gallon is outrageous! We should be paying much more.
By Robert Bryce
Posted Thursday, May 15, 2008, at 3:24 PM ET
The next time you have to take out a loan just to fill up your tank, remember this: Four-dollar-per-gallon gasoline is cheap.


There's no doubt that high fuel prices are hurting low-income consumers, and high energy costs are placing a tax on the economy that is slowing investment while sending billions of dollars overseas. It's unsurprising that presidential candidates and members of Congress issue new proposals practically every day to lower gas prices: Stop filling the Strategic Petroleum Reserve! Suspend the federal gas tax! Open ANWR to oil drilling!

These proposals are delusions, and Americans are living in a fantasy land when it comes to energy and energy prices. Over the past few years, consumers have been inundated with news stories about the soaring price of gasoline. Invariably, these stories include comments from a motorist who is outraged at the evils of a) Saudi Arabia, b) OPEC, c) Big Oil, d) all of the above.

But by almost any measure, gasoline is still cheap. In fact, it has probably been far too cheap for far too long. The recent price increases are only beginning to reflect its real value.

When measured on an inflation-adjusted basis, the current price of gasoline is only slightly higher than it was in 1922. According to the Energy Information Administration, in 1922, gasoline cost the current-day equivalent of $3.11. Today, according to the EIA, gasoline is selling for about $3.77 per gallon, only about 20 percent more than 86 years ago.

Given the ever-increasing global demand for oil products—during the first quarter of this year, China's oil consumption jumped by 16.5 percent—and the increasing costs associated with finding, producing, and refining crude oil, it makes sense that today's motorists are paying more for their motor fuel than their grandparents and great-grandparents did.

Gasoline is also a fairly minor expense when you consider the overall cost of car ownership. In 1975, gasoline made up 33.4 percent of the total cost of owning and operating a car. By 2006, according to the Bureau of Transportation Statistics, gasoline costs had declined to just 17.1 percent of the total cost of car ownership. Of course, fuel costs have risen by about $1 per gallon since 2006, but even with those increases, fuel continues to be a relatively small part of the cost of car ownership. By contrast, the fixed costs of ownership—insurance, licensing, taxes, and financing—have increased nearly fivefold since 1975. Maintenance costs have also quintupled over the same time period. Given those increases and the relatively low price of fuel, it's not surprising that Americans are opting for big vehicles with powerful engines. Considering the overall cost of owning a vehicle, fuel expenses just aren't a very big deal.

History shows that significant declines in U.S. oil consumption occur only after prolonged periods of high prices. Over the last two decades, U.S. consumers have been spoiled by low fuel prices. And those lower prices led to a buying binge that put millions of giant SUVs, pickups, and other gas guzzlers on our roads. Today's higher prices are forcing consumers to adapt. The EIA now expects U.S. gasoline consumption to decline this year—the first drop in demand in 17 years. In April, sales of small cars in the United States were up by 17 percent over the same period a year earlier while sales of SUVs, trucks, and large cars all fell by about 30 percent.

On the environmental front, people concerned about greenhouse-gas emissions should be cheering today's oil prices. Expensive motor fuel is the only thing that will lead consumers to use less oil and make the switch to hybrid vehicles, smaller cars, and public transit. Higher oil prices are convincing automakers to change their fleets. Earlier this week, Nissan Motor Company announced that it will begin selling an electric car in the United States and Japan by 2010. Carlos Ghosn, the chief executive of Nissan, made it clear that fuel prices were a factor in the company's decision to build electric cars, telling the New York Times that "the shifts coming from the markets are more powerful than what regulators are doing."

American gasoline is also dirt-cheap compared with gas in other countries. British motorists are currently paying about $8.38 per gallon for gasoline. In Norway, a major oil exporter, drivers are paying $8.73. In 2007, out of the 32 industrialized countries surveyed by the International Energy Agency, only one (Mexico) had cheaper gasoline than the United States. Last year, drivers in Turkey were paying three times as much for their gasoline as Americans were. The IEA data also show that in India—where the per capita gross domestic product is about $2,700 (about 6 percent of the per capita GDP in the United States)—drivers have been paying more for their diesel fuel and gasoline than their American counterparts.

(Gasoline is also cheap compared with other essential fuels. A Starbucks venti latte costs the equivalent of $23 per gallon, while Budweiser beer runs $11 per gallon.)

The simple truth is that Americans are going to have to get used to more expensive gasoline. And while they may continue grumbling at the pump, they need to accept the fact that even at $3.50 or $4 per gallon, the fuel they are buying is still a bargain.

http://www.slate.com/id/2191491/?GT1=38001

[vivfox]

I find it amusing in the second to last paragraph they list Budweiser as an essential fuel.

[Gypsy-Rhiannon]

Originally Posted by vivfox

Gasoline Is Cheap
Four dollars a gallon is outrageous! We should be paying much more.
By Robert Bryce
Posted Thursday, May 15, 2008, at 3:24 PM ET
The next time you have to take out a loan just to fill up your tank, remember this: Four-dollar-per-gallon gasoline is cheap.


There's no doubt that high fuel prices are hurting low-income consumers, and high energy costs are placing a tax on the economy that is slowing investment while sending billions of dollars overseas. It's unsurprising that presidential candidates and members of Congress issue new proposals practically every day to lower gas prices: Stop filling the Strategic Petroleum Reserve! Suspend the federal gas tax! Open ANWR to oil drilling!

These proposals are delusions, and Americans are living in a fantasy land when it comes to energy and energy prices. Over the past few years, consumers have been inundated with news stories about the soaring price of gasoline. Invariably, these stories include comments from a motorist who is outraged at the evils of a) Saudi Arabia, b) OPEC, c) Big Oil, d) all of the above.

But by almost any measure, gasoline is still cheap. In fact, it has probably been far too cheap for far too long. The recent price increases are only beginning to reflect its real value.

When measured on an inflation-adjusted basis, the current price of gasoline is only slightly higher than it was in 1922. According to the Energy Information Administration, in 1922, gasoline cost the current-day equivalent of $3.11. Today, according to the EIA, gasoline is selling for about $3.77 per gallon, only about 20 percent more than 86 years ago.

Given the ever-increasing global demand for oil products—during the first quarter of this year, China's oil consumption jumped by 16.5 percent—and the increasing costs associated with finding, producing, and refining crude oil, it makes sense that today's motorists are paying more for their motor fuel than their grandparents and great-grandparents did.

Gasoline is also a fairly minor expense when you consider the overall cost of car ownership. In 1975, gasoline made up 33.4 percent of the total cost of owning and operating a car. By 2006, according to the Bureau of Transportation Statistics, gasoline costs had declined to just 17.1 percent of the total cost of car ownership. Of course, fuel costs have risen by about $1 per gallon since 2006, but even with those increases, fuel continues to be a relatively small part of the cost of car ownership. By contrast, the fixed costs of ownership—insurance, licensing, taxes, and financing—have increased nearly fivefold since 1975. Maintenance costs have also quintupled over the same time period. Given those increases and the relatively low price of fuel, it's not surprising that Americans are opting for big vehicles with powerful engines. Considering the overall cost of owning a vehicle, fuel expenses just aren't a very big deal.

History shows that significant declines in U.S. oil consumption occur only after prolonged periods of high prices. Over the last two decades, U.S. consumers have been spoiled by low fuel prices. And those lower prices led to a buying binge that put millions of giant SUVs, pickups, and other gas guzzlers on our roads. Today's higher prices are forcing consumers to adapt. The EIA now expects U.S. gasoline consumption to decline this year—the first drop in demand in 17 years. In April, sales of small cars in the United States were up by 17 percent over the same period a year earlier while sales of SUVs, trucks, and large cars all fell by about 30 percent.

On the environmental front, people concerned about greenhouse-gas emissions should be cheering today's oil prices. Expensive motor fuel is the only thing that will lead consumers to use less oil and make the switch to hybrid vehicles, smaller cars, and public transit. Higher oil prices are convincing automakers to change their fleets. Earlier this week, Nissan Motor Company announced that it will begin selling an electric car in the United States and Japan by 2010. Carlos Ghosn, the chief executive of Nissan, made it clear that fuel prices were a factor in the company's decision to build electric cars, telling the New York Times that "the shifts coming from the markets are more powerful than what regulators are doing."

American gasoline is also dirt-cheap compared with gas in other countries. British motorists are currently paying about $8.38 per gallon for gasoline. In Norway, a major oil exporter, drivers are paying $8.73. In 2007, out of the 32 industrialized countries surveyed by the International Energy Agency, only one (Mexico) had cheaper gasoline than the United States. Last year, drivers in Turkey were paying three times as much for their gasoline as Americans were. The IEA data also show that in India—where the per capita gross domestic product is about $2,700 (about 6 percent of the per capita GDP in the United States)—drivers have been paying more for their diesel fuel and gasoline than their American counterparts.

(Gasoline is also cheap compared with other essential fuels. A Starbucks venti latte costs the equivalent of $23 per gallon, while Budweiser beer runs $11 per gallon.)

The simple truth is that Americans are going to have to get used to more expensive gasoline. And while they may continue grumbling at the pump, they need to accept the fact that even at $3.50 or $4 per gallon, the fuel they are buying is still a bargain.

http://www.slate.com/id/2191491/?GT1=38001

It's a bargain compared to what we are paying over here!

[HejiraNYC]

Originally Posted by Gypsy-Rhiannon

It's a bargain compared to what we are paying over here!

Indeed... but you guys have free universal health care and heavily subsidized universities. I think that's infinitely preferable to cheap petrol!

[HejiraNYC]

Originally Posted by vivfox

History shows that significant declines in U.S. oil consumption occur only after prolonged periods of high prices. Over the last two decades, U.S. consumers have been spoiled by low fuel prices. And those lower prices led to a buying binge that put millions of giant SUVs, pickups, and other gas guzzlers on our roads. Today's higher prices are forcing consumers to adapt. The EIA now expects U.S. gasoline consumption to decline this year—the first drop in demand in 17 years. In April, sales of small cars in the United States were up by 17 percent over the same period a year earlier while sales of SUVs, trucks, and large cars all fell by about 30 percent.

I pretty much agree with everything this article is saying, especially the part about monster SUVs. Whenever I see a Hummer or an Escalade on the road, I just have to smirk at their hubris while I mentally calculate how much they have to pay for a tank of gas- probably well over $100! Out on eastern Long Island, 93 octane is edging towards $5.

I'm looking forward to the day that wind and solar power (not coal or ethanol ) will be used indirectly to power our vehicles. I do think this is achievable via hydrogen fuel cell technology. But our leaders have been asleep at the wheel with regard to energy policy... And all of this money wasted on the so-called "Stimulus Package" and the war could have been set aside to jumpstart a green energy economy a la Roosevelt after the Depression.

[mylittledemon]

I've been aware since moving to New Zealand that were "getting off light" in terms of gas prices. I think if it gets over $5 a gallon that's a bit ridiculous. This economy is going to fold if it gets over $8. or $9.

[petep9000]

Originally Posted by HejiraNYC

I pretty much agree with everything this article is saying, especially the part about monster SUVs. Whenever I see a Hummer or an Escalade on the road, I just have to smirk at their hubris while I mentally calculate how much they have to pay for a tank of gas- probably well over $100! Out on eastern Long Island, 93 octane is edging towards $5.

I'm looking forward to the day that wind and solar power (not coal or ethanol ) will be used indirectly to power our vehicles. I do think this is achievable via hydrogen fuel cell technology. But our leaders have been asleep at the wheel with regard to energy policy... And all of this money wasted on the so-called "Stimulus Package" and the war could have been set aside to jumpstart a green energy economy a la Roosevelt after the Depression.

Some of us might remember the horrible energy crisis in the 70's? I remember my family waiting on loooooooong lines to get gas which was very high in price. And also, you could only buy it on certain days based on a license plate numbering scheme. Remembah?
then, when I finally became a driver in 1987, gas was down to about $0.95 per gallon. So that was a cycle right there- it had rose dramatically and then fell. Maybe, it will fall again?
I'd like to see more creative types of fuels too, as long as it doesn't entail knocking down forests and other environmentally sensitive lands in order to plant mega-farms of industrial corn. Here in NYC, I'd love to see more creative mass transit too, more subways, maybe monorails, more high speed ferries, tramways, things like that. Less cars, less buses. Maybe in our lifetime, we'll see alot of these things too. The trick is, to creatively generate the electricity without having to use petroleum or dirty coal.

I realize I've said the word 'creatively' several times, because this is the time for out-of-the-box solutions. No?

[Stew_Matthews]

Originally Posted by Gypsy-Rhiannon

It's a bargain compared to what we are paying over here!

Hey Pip - oil workers have got to feed their families too!

[Gypsy-Rhiannon]

Originally Posted by HejiraNYC

Indeed... but you guys have free universal health care and heavily subsidized universities. I think that's infinitely preferable to cheap petrol!

Yes but our income tax is a lot higher to pay for that.... so it isn't exactly free. So we pay high income tax and high fuel tax

[Gypsy-Rhiannon]

Originally Posted by Stew_Matthews

Hey Pip - oil workers have got to feed their families too!

Indeed

[HejiraNYC]

Originally Posted by Gypsy-Rhiannon

Yes but our income tax is a lot higher to pay for that.... so it isn't exactly free. So we pay high income tax and high fuel tax

Um, you're talking to a taxed-up-the-wazoo New Yorker here... In my tax bracket, between federal, state and entitlements, my take home pay is barely 60%! And that doesn't include the other taxes I have to pay- sales tax, property tax, etc. I suspect that people in the UK don't have to pay that large a percentage of their income in taxes. Also, I am lucky to get health insurance through work, but I know that I would easily pay over $1000 per month if I needed to open my own individual policy with minimal coverage/high deductible.

[JWS]

Originally Posted by vivfox

I find it amusing in the second to last paragraph they list Budweiser as an essential fuel.

That really puts things into perspective. Gas is cheaper than Budweiser.

[Madness Fades]

Originally Posted by HejiraNYC

Indeed... but you guys have free universal health care and heavily subsidized universities. I think that's infinitely preferable to cheap petrol!

Exactly, What you gain on the swings you lose on the roundabouts !

[HejiraNYC]

Originally Posted by petep9000

Some of us might remember the horrible energy crisis in the 70's? I remember my family waiting on loooooooong lines to get gas which was very high in price. And also, you could only buy it on certain days based on a license plate numbering scheme. Remembah?
then, when I finally became a driver in 1987, gas was down to about $0.95 per gallon. So that was a cycle right there- it had rose dramatically and then fell. Maybe, it will fall again?
I'd like to see more creative types of fuels too, as long as it doesn't entail knocking down forests and other environmentally sensitive lands in order to plant mega-farms of industrial corn. Here in NYC, I'd love to see more creative mass transit too, more subways, maybe monorails, more high speed ferries, tramways, things like that. Less cars, less buses. Maybe in our lifetime, we'll see alot of these things too. The trick is, to creatively generate the electricity without having to use petroleum or dirty coal.

I realize I've said the word 'creatively' several times, because this is the time for out-of-the-box solutions. No?

Yes, I do remember the 70's- we were doing a road trip up to Canada that August and it was a bit scary getting up there. Still, as bad as it got, the inflation-adjusted prices were still a lot lower than what we are paying today.

I think the difference between then and now, and the reason why I don't think oil will fall significantly in the future is that we are probably at peak oil now- there is no more excess capacity that can be tapped to meet the increasing demands for oil. Combine that with a bazillion new motorists in China and India along with oil fields in the Middle East that are now showing declining output. Sure, there is supposedly 100-years worth of oil located in the tar sands of Alberta, Canada, but extraction is extremely costly/complex, energy-intensive and environmentally disastrous. Corn-based ethanol is no longer a viable long-term solution due to the lack of infrastructure to produce, store and transport ethanol, as well as the very low net energy gained vs. input.

Another thing to consider is that, in view of the dwindling worldwide supplies of "easy oil," and the inevitability of alternative energy sources, the big oil companies and OPEC are probably in cash-grab mode right now. The writing is on the wall and they need to get all they can while they can.

The beauty of hydrogen fuel cells is that, theoretically, hydrogen can be isolated with energy from renewable sources like solar and wind, and fuel cells would yield only electricity and water; no carbon. It is just such a shame that we can spend a trillion dollars on a war for oil but we can't spend a fraction of that developing new photovoltaic, geothermal and wind technology.

[Gypsy-Rhiannon]

Originally Posted by HejiraNYC

Um, you're talking to a taxed-up-the-wazoo New Yorker here... In my tax bracket, between federal, state and entitlements, my take home pay is barely 60%! And that doesn't include the other taxes I have to pay- sales tax, property tax, etc. I suspect that people in the UK don't have to pay that large a percentage of their income in taxes. Also, I am lucky to get health insurance through work, but I know that I would easily pay over $1000 per month if I needed to open my own individual policy with minimal coverage/high deductible.

I would imagine some do but I'm not totally clued up on the figures. Maybe another Brit on here is

Edit: Well I've just been informed that certain tax payers would pay much more with N.I. and that our sales tax is higher