Tuesday, August 16, 2005

Gas Prices

I drive for a living. And I pay my own expenses. I drive about 325 miles a day. So I am more concerned than most about the price of gasoline.

Yesterday for instance, I filled my tank and the price per gallon was at $2.49. This was about 10:00 AM. Later the same day, at approximately 3:00 PM, I topped off my tank at the same gas station and the price had gone up to $2.59 a gallon. The price went up 10 cents a gallon in less than 5 hours!

There is a reason that gasoline prices are going up so rapidly. The reason given by the so-called "experts" is that the price of crude oil has gone up drastically.

Crude oil is attained by drilling deep into the Earth. From there, the oil is pumped to the surface where a pipeline pipes the crude oil to the refinery. There it is refined and transformed into gasoline.

Gasoline is not the only product made from crude oil. Here is another product that is made from crude oil:This is motor oil. At present motor oil is priced at approximately $1.08 for a quart. It has been about that price for several years.

Here is another product made from crude oil:This is transmission fluid. It currently sells for about $5.94 a gallon. Here is an interesting fact about transmission fluid. A few years ago, the price of transmission fluid was around the $8-9.00 mark. And the "experts" were blaming the high prices on the cost of crude oil.

Isn't that interesting?

There are many other products that are made from oil products and/or by-products. Did you know plastic is made from by-products of crude oil? All plastic. Everything you own that is made wholly or partially out of plastic was created from crude oil.

Now. I told you all that to make a point. The point is this:

The only product made from crude oil at this time, that the price has gone up on so drastically, is gasoline. The other products are basically the same price as they have been for the last several years. Give or take a few pennies.

That, to me, is a mystery. If the cost of crude oil is the reason for skyrocketing gasoline prices, then why aren't the other oil products and by-products prices going up accordingly? Could there be some other reason?

I think there could be.

I confess that I have no answer to that question. I don't even have a theory. I have no idea why there appears to be a paradox here.

There are those who would say that President Bush led our country into war in Iraq to steal oil from them. And somehow that drives the prices up.

I don't buy that.

The President is literally surrounded at all times by secret servicemen, advisors, cabinet members, Senators, Congressmen, and others. Given that he is in contact with so many people at all times, it is completely inconceivable, if not impossible, that he would be involved in an insidious plot of that magnitude. If any one of those people had aspirations for greatness, he couldn't ask for a better opportunity to blow the proverbial whistle. Does anyone think any of Bush's people are unambitious? I don't. In fact, they are probably among the most ambitious people in America.

No, I don't think Bush is in the war for oil. That would surely make him the most evil man in history and I just don't see that in him. I think those that do just aren't reasoning things out properly.

So, there has to be another reason why the gas prices are out of control. I just don't know what it is.


Erudite Redneck said...

One word: Demand.

MadMustard said...

Supply-demand is what pushes prices of crude oil and refined products. Any disruptions in the supply of feed-stocks such as wars, political unrest and storms can upset the bidding markets. Pressures on refining affect the price of products; refinery shutdowns, seasonal demands requiring the stockpiling of heating oil in winter as opposed to gasoline in the summer months.

Our domestic demand for gasoline has increased remarkably since the 1970’s yet we have not constructed a new refinery in this country since that time; therefore, we are now also importing refined products to bridge the gap.

The bad thing is our domestic supply is only about ¼ of our crude oil needs. Even if we could produce all of our own crude oil we would not be able to supply all of our refined product needs. We would still need to import gasoline and other refined products. It’s a world market that plays by the hard rules of supply vs. demand.

The demand for some of the products of a barrel of crude, such as lubricants, is relatively stable as compared to that of fuels. Some of these less glamorous derivatives of crude oil are not all that valuable and only ‘get in the way’ from a refiner’s viewpoint. You buy gasoline daily to fill your tank by the gallons and oil every 3 months to fill your crankcase by the quart. See what I mean?

As manufacturing has left our shores, we also import plastics and other petroleum byproducts as a finished product. That eases price pressures for domestically refined petroleum byproducts. As our manufacturing continues to die, our plastic prices should go down. Of course we will have burn $4.00/gallon gasoline to go to Wal*Mart and buy it.

Mark said...

Well, I guess that makes sense, guys. As much as I hate it when someone makes me look stupid, I can't argue. I didn't even think about that point.

What makes me mad at myself about this, I wrote this one twice. The first, which was better, got wiped out by a blogger snafu. So I had to write it again. It took me a long time to get this thing up on my blog, then ER comes along and blows the while thing with one word. I still could have said, "but that still doesn't explain..." until madmustard came along, and made me look stupid.

I'm not blaming either of them for making me look stupid. My stupidity made me look stupid. Thanks guys. I'm going to go pout now.

MadMustard said...

No Mark please, that wasn’t my intention at all. I really liked the post.

Gasoline prices are a bitch, I agree. I have worked in the oil industry for about 20 years and sometimes I have my own doubts about the economics of energy. It’s a boom or bust industry and I survived some hard times while the rest of the economy was booming. Then when oil became more valuable everybody hated us because gasoline got expensive. Sometimes you just can’t win. I had to sometimes take-up for the ‘evil’ oil companies against my own family.

As far as the political angle that you talked about. I agree that there is no way that President Bush would have had the intention to ‘steal’ Iraq oil; however, every President would want to support stable oil supplies in the region. It is so vital to the world economy and security.

That is what worries me about Iraq sliding into a civil war or Saudi Arabia becoming a target for domestic Islamic terrorists. If either of those happens, it could become a much more dangerous world. If both happen… goodnight Irene!

Mark said...

Mad, you said,
"That is what worries me about Iraq sliding into a civil war or Saudi Arabia becoming a target for domestic Islamic terrorists. If either of those happens, it could become a much more dangerous world. If both happen… goodnight Irene!"

Isn't preventing that why we're there?

mlwhitt said...

I don't know. I honestly still don't believe all the science behind oil. It still hasn't been 100% proven that it does indeed come from decayed animal matter, but I digress.

Whatever the reason, demand, war or otherwise, until we consumers start standing up for ourselves by dropping our relience on the product nothing will change.

I know very few people that have actually changed their driving habits just because of the price of gas. We haven't. Heck it seems that we drive even more now that gas is high.

Daffy76 said...

No we aren't driving any less because of the oil situation, but people are very dependent on their cars these days. I'm not saying we can't learn to carpool, but there are people who are stuck trying to make enough money at work to buy the gas to get there. That really sucks. I'm also seeing quite a lot of used large trucks and SUVs for sale these days. And I've seen more drive-offs at the local gas-station than ever before. We can cut back on our driving to a degree but other businesses will suffer from it. How will the economy survive if everyone doesn't go to Walmart on Saturday? Or out to eat once in a while? If gas prices continue at this rate, we will be forced to retreat to our homes until relief comes. That will make the economy worse, not better.

Francis Lynn said...

Not building a new refinery in the US since the 70's, as well as crazy EPA regulations of new drilling, contribute to the mess. Increased demand, especially from China adds to it. Growth of plastics usage contributes. With a growing world population, demand will only increase. We are a vehicle-based nation. Public transportation as it exists now is not a valid alternative. The car-pooling, one-less-trip-to-the-market approach will not even dent demand.

Oil is finite. Not enough is being done to find alternative, competitively-priced resources. Our generation will die off with enough gas for the hearse to get us to the cemetary. It is the future generations that will have beaucoup problems with oil prices & oil depletion

Fitch said...

The answer is, behavioral modification. The eco-commies are responsible for policies being set such that conversion of crude oil into gasoline is a very, and increasingly expensive process. The aim is to lower usage, by making the product expensive. It is the exact inverse of what thepress said. The effort here is to price the average person into the public transportation (government subsidized BTW)walking, or riding a bicycle, anything but drive. The environmental movement is, at it's very core, anti-capitalist.

tugboatcapn said...

One thing that I know for sure is, Whatever the cause of the rising prices, the days of 169.9/gal gasoline are over for good.
Opec has us by the short and curleys, and they have decided to start pulling.
Domestic drilling will not completely solve the problem, neither will conservation, and the internal combustion engine will not go away, not within my lifetime.
The only answer is for industry to come up with a synthetic alternative, or a product that can be grown in the ground, that will burn in, and power gasoline engines. Until an alternative can be found, we all may as well get used to being raped at the pumps...

Erudite Redneck said...

Wait a minute, Demand is demand. Even if all the other stuff is taken into account -- government regulation to discourasge consumption, tightening of supply chains because of environmental concerns, etc. -- what remains is still demand.

So, one word, still: demand. We quit wanting gas, prices will go down. I promise. If not, then throw out the whole dadgum concept of "market."

RJay said...

"There are those who would say that President Bush led our country into war in Iraq to steal oil from them. And somehow that drives the prices up."
Those who would say that are the liberal wackos.

If President Bush wanted to "steal" oil he would just take it. Who would stop him? The U.S. could go into Saudi Arabia and tell them we are taking your oil. Who would stop us?

I live in the Palm Springs area of Southern California the price of gasoline for regular unleaded is $2.77 included in that price is about $0.80 in state and federal taxes.
So, what does all that mean? We're all getting screwed and they're not using that famous oil by-product to do it.