As long as people are willing to pay top dollar per gallon of gas, the oil companies will continue to elevate prices.
At what point do you think the citizens of the US will finally put their foot down and say thats it…I’ll take a train, car pool or what have you? 3.00/gallon? 4.00/gallon?
Several of the airlines are going bankrupt…The airlines imo will be the force that will put sufficient pressure on the oil companies to stop the rising price of oil.
Trucking industry…airlines…will only take so much… but when will THEY say: “I’m not going to take it any more” or do they have any power to stop the rising cost of fuel? Your opinions are desired.
As long as oil companys know how to boil the frog , we gonna keep paying the coin. Only now we get a smaller slice of the big oil pie because other countrys are ramping up their oil imports, so supply and demand kicks in harder.
The industrys that you mention , will presumeably pass on the added costs to the consumer , who will futher pony up money for the goods and services.
We are in the expensive part of the cycle now , so it would be probably better for you to see if you can pass on the added expense of the fuel , to someone else.
Do you live in the US. Many, if not most of the country does not have decent public transportation. And much of the country just isn’t suited to it.
My only choice would be to move. And it would take a hell of a lot of incentive to get me out of my house. I guess I would consider a second more economical car to use in the summer months, when it makes sense to do that, I’ll look into it. I haven’t run the numbers in a while, but when you start adding in the price of the car, maintenance, insurance and licensing, we are still a ways off. And, I’d have to leave it sit unused all winter long.
That’s tough to say, because gas is still pretty cheap relative the cost of other things. $4.00/gal might be a psychological barrier that spurs action, and there are LOTS of things the average person can do to cut consumption. Even just driving slower on the freeway saves gas (65 vs 75 mph can cut fuel use by 10%). We waste gas like nobody’s busines in this country because we’re used to it being cheap.
The price of gas is driven by world demand, not what Americans say or think. As long as demand (think China and India) is greater than supply (think OPEC), the prices will continue to rise. If we cut back here, and OPEC call sell the excess oil somewhere else, they have no incentive to lower prices.
First of all, oil companies don’t just “decide what to charge”. As John Mace said, it’s based on world demand and supply.
Secondly, there’s no particular price point. It’s different for everyone. The higher prices go, the more people look at things like buying more fuel efficient cars, taking less trips, carpooling, public transportation when they can, and other conservation measures. Problem is that fuel is relatively inelestic. People need to go to work. They need to run errands. Demand stays relatively constant while the price changes.
What will happen as prices rise is that people’s standard of living will lower. They will need to pay more and more of a % of income on fuel in order to live their lives and will have less money for other stuff (which will also increase in price due to rising production and transportation costs). Not as big a deal for upper middle class SUV driving suburbanites in their McMansions but if you are just making ends meet it could be a problem.
'Course, JM, that’s a bit of a problem - demand is not outstripping supply. While the excess capacity of most oil-producing nations has essentially disappeared, I have not heard of any actual shortages in the supply of oil, here or abroad - well, excepting for certain countries such as Iraq or Myanmar, where the shortage is caused by internal political/economic foibles, not a lack of crude.
Supply/demand is all about competing for a scarce resource. But if there is, currently at least, sufficient amounts of the resource, why does the price go up?
You’re right, it is more complicated than that. But crude does not equal refined petroleum. We currently are capacity constrained by refineries, but OPEC has traditionally kept supply in check artificially even when refinery capacity isn’t a bottleneck. In the end, though, it’s their oil, and there ain’t much we can do to force them to pump more.
Additionally, political instability in the region drives up the price of oil. One can easily argue that our involvement in Iraq has had a negative effect on oil prices thus far. If you were in the oil business, would you bet on the M.E. being more stable or less stable in the next 2 - 5 years? If you answer “less stable”, then how would you price oil accordingly?
Everyone thought $1 gasoline (in the U.S.) would be a huge psychological block.
Then we thought $2 gasoline would do it.
In California, it’s now $3 per gallon.
As for the airlines, how many of them have already gone bankrupt or shut down operations entirely, compared to how many times the price of fuel has dropped and stayed down? Ditto with truckers, bus companies, etc.
I think most of us can agree that the US refinery capacity can be the bottleneck and a significant factor in the price of gasoline. But does the oil industry have any incentive to build more refineries? Let’s say if they do nothing, then gas sells for $2.50. But if they increase refinery capacity, gas might fall to $2.30. Why on earth would they spend money on something that would drive their profits down? Will we always have inadequate refinery capacity from now on?
I’m sure it has already started to happen, but it’ll be a gradual effect. I drive down to LA to go dancing sometimes, and the round trip ends up being about $20 of gas now. Back when it was about $15, I decided that it just wasn’t worth it unless there was someone else going with me to split the cost.
At $3 a gallon, it’s still cheaper for me to drive back home (Northern CA) than it is to fly, but when gas hits about $4 or $5, it’ll be cheaper to fly (assuming that the cost of the flight doesn’t go up much) or take the train.
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What I don’t understand is that the cost of crude continues to go up and I keep hearing that we are refinery-limited. Shouldn’t the lack of refinery capacity reduce demand for crude?
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My emphasis. Ummm… because they could sell more gas, and even at a lower price make more total profit. Are oil companies daggeing their feet on builidng new refineries, or are environmental regulations plus a NIMBY attitude to blame? I don’t know for sure, but I’d guess it’s the latter. There is no monopoly in oil companies nor in refinery construction. Competition drives prices down whether any given company wants lower prices or not.
I’m no economist, but it seems that a lack of refinery capacity would lower the absolute demand for crude but it wouldn’t necessarily reduce the demand relative to the supply.
FWIW, the price of petrol in the UK has just hit £1 per litre which by my calculations is $6.79 per US gallon. Anecdotally it is straining household budgets, discouraging frivolous car usage and causing some serious shifts in purchasing patters, especially of vehicles. However, it does not seem to be causing any major hardship or threats of social breakdown yet.
In the long run this is probably a very good thing, since it will encourage more efficient useage of petroleum, and increase exploration (leading to a greater total supply) and incentivise the move to newer energy sources. However in the North American economy (which is insanely energy-intensive) it will have a much greater impact on economic activity than in places like Europe. I just hope it doesn’t tip the US into a recession, since that would not be a good thing
Right now, demand is outsrtipping supply (for refined petroleum products). The market could probably absorb some more supply w/o a significant effect on price, but at some point, as supply increases the price will be driven down. I certainly don’t when we get to that point.
But keep in mind that there is more than just the current supply/demand curve that affects prices. Everyone is looking at what that curve will look like in the future, and for that they have to take into account the political situation in the M.E. So it’s very possible that supply could be more than adequate now, but fear of what will happen in the future could keep prices higher than they would be otherwise.
Unless you conclude that all the oil companies, worldwide, are colluding on keeping refinery capacity in check, I think we can assume that they are not the roadblocks to adding capacity.
Some NIMBY and Green resistance to refineries is certainly a factor. But all the companies know that if any of them increase production, then the price for all of them per gallon will drop. So they could conspire to keep supply down and I suspect they do.
Did anyone say they didn’t? As long as there are people standing in line to buy a product, it makes no economic sense to lower the price of that product. Oil is not any different from paper clips or tomatoes. Companies charge whatever the market will bear. Are you implying that they have some moral obligation to make less profit?
