Okay, the Memorial Day weekend in the USA. The traditional start of the summer season. Gasoline prices normally rise some, this is expected.

Reality check time.

How much of a crisis are we really in. I'll base this on just a couple of examples. Indianapolis 500 and the NASCAR 600 race events. These race cars hardy use gas, I think the open wheel cars use alcohol while the NASCAR uses a blended gasoline.

There are around 300,000 people at the race with several hundred RV's, hundreds of semi support vehicles, and 10's of thousands individual cars, all for this one race. NASCAR has 165,000 estimated, hundreds of semi support vehicles, along with 10 of thousands of other vehicles. Not much of a fuel crunch for these two events.

If we truly had a crisis and needed to curb our fuel appetite, would we still be cutting grass of the 10's of millions of houses, buildings, parks, and green space in general. This is several million gallons of gasoline a week to just cut grass. This fuel could be used for better purposes than just to make a weed patch look pretty.

Just a couple of thoughts, what are yours?

Another line of thought to mull over.

A year ago, a barrel of oil was around $65 to $70 a barrel and gasoline nationwide was around $3.41.

Now a barrel is around $130 and nationwide gas is around $3.90.

Not too many years ago, the price of a barrel would jump a couple of bucks and gas at the pump would raise a nickel or dime over night. Seems odd to me that the barrel price has doubled and the price of gas didn't.

This almost looks like artificial price control to keep the price of gasoline down.

Just an observation....

What exactly are you trying to say? That American indulgences like NASCAR and excessive lawn mowing are indicators of gas surpluses? Just because NASCAR and ubiquitous lawn mowing is going on does not mean the crisis is fabricated. I agree, that there is no real shortage of oil. There is no real "crisis" in that oil is gone and the worldwide energy business is about to collapse. The crisis we keep hearing about is that of high prices (prices we American have not been accustomed to for a very long time). Now I'm no economist, but I think one of the MAJOR reasons gas prices are rising in the US so much is because of the weak dollar.

[edit on 27-5-2008 by Threadfall]

there is no shortage of gas. Its like the other poster said. There is enough gas to go around its money that is short, and yes that is largely due to the collapsing dollar. Its just that its most obvious to people through gas. Food has greatly increased in price too, but most things have stayed low due to china keeping its yen pegged to the dollar. This wont last long though, and when china raises the yen the rest of our products will shoot up. Then there will be a REAL crisis.

i actually bought a new car over the weekend. traded in my 20mpg suv for a 30+mpg sedan/subcompact thing. payments are about 30 bucks more but i'll save that in gas plus some.

if nothing else i feel better about the idea that i'm a smaller supporter of big oil. yes i still rely on it, but there's no realistic way out of that yet. plus it's a lot more fun to drive a zippy little car than a hulking behemoth. =)

i live in an apartment, so we don't cut our own grass. i already thought about getting a manual non-powered mower when we get our house next year though. i also get the nice saturday morning wake up calls from leaf blowers at 8am. we had a big drought in the SE US last summer and people were still out there trying to water their lawns...

there's a lot of fat that could be trimmed in terms of resource waste.

I'll repost what I wrote in another thread.


A few things:





As you can see, the price of oil seems to follow the astronomical gains the NASDAQ experienced during the tech bubble. A new bubble?

The price climb in oil is probably due to a mix of speculative fervor and real supply and demand concerns. It surely can't be attributed to all speculation, as someone is taking physical delivery of oil at these prices.

On the other hand, that chart does show an interesting pattern that probably amounts to a bubble in prices. With Goldman Sachs and other investment banks coming out with predictions of $200/barrel prices almost daily, perhaps they are trying to find an exit for their long positions. Only now are we seeing pension funds, average investors, and others starting to pile into the oil trade.

The cheap money being lent to large banks by various FED concoctions such as the expanded TAF (which the FED takes crap credit and mortgage debt as collateral) is seeking returns and the greatest returns in the current market climate are in commodities, thus driving prices up as more and more cash is parked there. Traditional flights to quality (to equities, treasuries and commercial property) have all proven too risky for the large market players to invest heavily in, adding another reason to the appeal of commodities.





This is a reason for increasing demand. The chart shows how heavily gas and diesel prices are subsidized in China. I'm sure some have heard of the explosion of demand in foreign nations, this is part of the reason why. Low prices for them means artificially stimulating worldwide demand, once again driving prices higher. An argument for a pure supply/demand price increase might go like this:

Suppose you are a pig farmer on an island with 10 pigs. There are 10 families on the island, so assuming each family wants 1 pig, the price will remain stable at let's say, 10 dollars apiece. Another family moves onto the island, bringing the total to 11 families. Once again, assuming they want a pig as well, and there being only 10 pigs, they offer 12 dollars for a pig. The most probable outcome is the bidding for each pig will get successively higher until a family is priced out. Note that the increase in price is not 1:1 with the increase in demand. This explains why we have seen a huge increase in oil prices, but not an increase in demand that quite matches the price surge.

I've read numerous sources calling a top on oil, but that is left to be seen. One thing is for sure, demand destruction is sure to follow at least here in the United States in the wake of this credit crunch/housing crisis. Taiwan, Malaysia and Indonesia are all cutting their fuel subsidies down in the wake of rising prices, which should dampen demand a bit further (Source) . Rumors abound whether or not China will, with most thinking if it were to happen; it would be after the Olympics.



As far as making a difference in price right now, it's unlikely as investors are starting to look into future oil supplies (read: peak oil) and pricing both futures and spot prices higher.

Once again, if it is all speculation, why and who is taking physical delivery at these prices? Why don't the buyers simply short the hell out of the ES if its all speculation?

In regards to the chart projecting future oil prices. Do you know if it takes into account oil production at current levels? Russia has already passed it's peak production, for a variety of reasons other than running out of oil, Saudi Arabia will not increase it's production, some speculation there on if they can.

If we have reached the production peak and oil production plateaus at current levels or slips a little, I think the chart would be skewed with a gross underestimation of oil cost.

In regards to demand, I have heard that diesel prices are up so much due to world demand, especially in Europe. Diesel is what "drives" the cost of virtually everything else while gasoline hits the average joe in his tank. I heard that there are more diesel cars in Europe, as a whole, along with trucks, that are driving this usage.

Another heavy day of lawn mowing and leaf blowing activity here in my neighborhood. It started early this morning, then broke for an hour or so around lunch time, and then started up again after 1:30 or so just after I was starting my nap. I have the windows open to let in fresh air, but because of this exaust fumes and lots of dust is blowing in.

I can't wait for when gas tops $10 a gal. When these days finally come, people will be using manual mowers that are so much quieter and cleaner.

Surely I can't be the only one who is sick of the noise and polution on a constant basis!

The price of gas lags behind oil quite a bit actually making it kind of scary because when it catches up soon we are in for a serious surprise! I am not awear that supply is really a large part of it, because I agree we don't appear at least as of yet to be running out of gas. I believe the decreased value of the american dollar has a lot to do with the cost of oil. The other thing is that with oil priced the way it is huge profits are being made, there has to be a point where most americans can no longer afford to put gas in our cars. I think that is why the cost of gas has not risen along with the cost of a barrel of oil as well. I posted a thread a couple of days ago asking for bets on the magic # for a gallon of gas before the entire economy breaks down. I am going with 5.50$