Gas Prices

[THEINCREDIBLEdork]

Gas Prices have been free-falling, I'm paying about 2/3rds less than I was just two months ago at the pump. Have prices ever dropped this much proportionally in history? I can't find any news articles that say what is causing this.

Any "experts" out there want to explain to me why?

[Mr. Blonde]

I was thinking about starting a thread for this. Good initiative, ID!

Anybody else think its weird that now that they're dropping like hotcakes, nobody seems to be talking about it?

[Mr. Blonde]

from WSJ

Crude-oil prices sank below $50 a barrel, and the average cost of a gallon of gasoline at the pump hovered just above $2, a free fall in prices that is reverberating through the economy.

The sudden reversal -- the fastest and sharpest since 1980, when the government began tracking monthly gasoline prices -- is bringing relief to some and complicating business for others. Tumbling energy prices led October's 1% decline in consumer prices, deepening concerns about a long recession.
[Gas Prices Spiral Down to Near $2] Associated Press

A customer pumps gas at the Speedway convenience store on State Route 4 in Monroe, Ohio.

Earlier this year, skyrocketing oil prices pulled gasoline to its highest inflation-adjusted level ever, surpassing prices reached during the oil crisis in the early 1980s. The jump, arriving in tandem with soaring food prices, hit consumers hard and stoked fears of inflation.

The price shock began to change Americans' behavior. Cost-conscious drivers gave up solo commutes to ride buses and trains, made fewer trips to stores and restaurants, and started buying smaller cars.

But the global economy, roiled by a spreading credit crisis and falling demand for goods and services, has worked to deflate energy prices even faster than they rocketed upward early this year. In July, crude oil settled, at a peak of $145.29 a barrel and retail gasoline peaked at an average of $4.114 a regular gallon. Now, prices are less than half those levels.

The price for crude-oil futures dropped $4, or 7.5%, to $49.62 a barrel Thursday on the New York Mercantile Exchange, the lowest settlement level since May 23, 2005. Gasoline-futures prices fell to their lowest level in their traded history, shedding 10 cents a gallon to $1.007. And at the pump, the average national gasoline price dropped to $2.02 a regular gallon, according to auto club AAA. In 23 states, gasoline already is selling for less than $2 a gallon, and is down to $1.72 a gallon in Missouri.

The last time consumers paid less than $2 at the pump was March 2005, when a regular gallon cost an average $1.99, based on AAA data.

Some government officials and environmentalists are worried the plummeting prices are reversing any energy-conservation gains realized in the past year, when high prices forced Americans to cut back. The economic case for investing in renewable energy, which was looking cheaper, compared with soaring fossil-fuel costs, now is less compelling.
[Gasoline] Associated Press

Suddenly, public debate has shifted from trying to find ways to lower prices and give consumers a break to wondering whether federal gasoline taxes should be raised to support higher prices.

President-elect Barack Obama said this week it is even more important to curb Americans' appetite for oil now that prices are cheaper. "Oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down and suddenly we act like it's not important," he said during a television interview. "As a consequence, we never make any progress."

So far, though, the worsening economy appears to be an even stronger curb on driving as consumers hunker down and businesses contract. The U.S. Energy Information Administration expects full-year gasoline demand to fall 3% this year, which would mark the sharpest annual decline since 1980. And though gasoline prices continue to sink, forecasters expect demand to fall again next year.

Even those who can afford to drive more are holding back over fears of a prolonged recession, or the possibility that prices will ricochet upward again.

"It seems like [prices] dropped like a rock overnight," said Kristin Cartwright, as she filled up her Ford Expedition in Dallas Thursday. The 42-year-old stay-at-home mom said it worried her that she can't figure out what is causing the wild price swings. So she is keeping her driving to a minimum.

Unquestionably, the lower gasoline prices are a relief amid an otherwise grim outlook for households and businesses that consume fuel, as well as the retailers that rely on consumer spending. The drumbeat of dire economic news has sharply curtailed consumer spending as people worry about their jobs and conserve their money.

Javier Amador, a 36-year-old carpenter in Dallas, where regular gasoline is selling for about $1.85 a gallon, said spending less on gasoline will help him afford a nicer Christmas for his family. But after the holidays, one of Mr. Amador's New Year's resolutions is to save money. Although he has a steady job, talk of layoffs among other construction workers is making him nervous.

"It's like a chain: If one company doesn't have work, then there's less work for others, and it could trickle down to my company," he said.

Mark Perry, a professor of economics at the University of Michigan in Flint, sees lower energy prices as a continuing stimulus for the economy. Adjusting for inflation, consumers are paying less for gasoline now than they have paid throughout much of the past century.

He estimated that at current consumption rates, Americans save $1.38 billion a year for every penny gasoline prices drop. That is about $290 billion since gasoline prices peaked in mid-July, and more than the tax rebates Americans received in the mail earlier this year.

"Everybody is saving whenever they fill up, and this will free up additional funds and resources they can use instead of just putting gas in their car," Mr. Perry said.

Discount retailers, which have many low-income customers who cut back on purchases as gasoline prices rose, are now seeing a rebound effect. Though overall retail sales fell 2.8% in October, cheaper gasoline helped Wal-Mart Stores Inc. post a 9.8% jump in profit for the third quarter ended Oct. 31, sharply outpacing its peers.

But cheaper energy is hurting others. Refiners are getting squeezed, because gasoline prices fell faster than prices for the crude oil they use to make the fuel. In an effort to pare losses, many refiners have cut back gasoline production and are delaying expansion projects.

Ethanol producers also are suffering. Like refiners of oil-based gasoline, they face weaker demand for their products as drivers pinch on fuels.

Analysts have been slashing 2009 profit forecasts for global oil companies, as falling energy prices quickly deflate recent record-setting revenue. Oil companies will be rethinking certain high-cost development projects to see whether they still make sense at $50-a-barrel oil.

Most immediately, companies will likely cut back spending on hefty share-buyback programs. Exxon Mobil Corp., for one, has been spending about $8 billion a quarter buying up its own shares.

The companies also are expected to delay signing contracts for steel, engineering and oil-field equipment in order to push down prices that were inflated along with crude oil in the past couple of years. "The more they defer projects, the quicker they deflate these costs," says Fadel Gheit, an oil analyst at Oppenheimer & Co.

Eroding demand for fuel contributed to crude oil's fall below $50 a barrel Thursday, as U.S. crude inventories rose more than expected this week, requiring oil companies to leave millions of barrels of oil in storage.

Economists have found that, in the short run, a 10% reduction in gasoline prices boosts consumption by a slender 0.2% to 0.5%, says John Cook, director of the petroleum division at the EIA. But when hit with a 10% decline in gross domestic product -- a measure of a nation's economic health -- consumption falls a much steeper 4% to 6%.

As consumers spend less, companies see their business shrink, which also lessens demand for fuel. Lower sales mean fewer trucks are needed to transport goods across the nation.

[Ugly Bastard]

Amazing how cheap fuel has remained over the past two decades.

[Heaven Can Wait]

Certainly not a good thing for capitalism, growth!
Also, Europe gets the shaft on prices.
It's all bullshit, classic case of the rich leading the poor, prices go through the roof due to scare tactics, now the prices are low saudi are cutting export by.. 50 million barrels a day?
worst part is that there's still plenty left, so this greed won't be stopping soon.

[Ugly Bastard]

Originally Posted by Heaven Can Wait

Also, Europe gets the shaft on prices.
It's all bullshit.

That's what happens when you have a socialist government that taxes the shit out of you.

[Ironic Mustache]

Nevermind that I asked about this in the sexbox last week and was completely ignored.

I just payed $1.89 yesterday.

[Mr. Blonde]

lol @ sexbox topics lasting about 2 minutes when more than one active member is posting in it.

[SnakeInTheGrass]

Originally Posted by THEINCREDIBLEdork

Gas Prices have been free-falling, I'm paying about 2/3rds less than I was just two months ago at the pump. Have prices ever dropped this much proportionally in history? I can't find any news articles that say what is causing this.

Any "experts" out there want to explain to me why?

I am no expert, however it appears to be a mix of 12 months of over speculation followed by a reduction in consumption here in the US, and China's consumption not continuing to grow at a crazy rate.

I don't hate on the arabs for cutting production to raise prices, its a free market...they can try to use supply side econ to force the price higher, we will pay it or change to a different fuel source. When we get tired of paying so much for gas some entrepreneur will step in and make a buck with some new way of getting around.

I am all about voting with my dollars, Dont like $4 a gallon? get an electric car

[Mr. Blonde]

Originally Posted by SnakeInTheGrass

get an electric car

as soon as the volt comes out (crosses fingers) i have no doubt i will

[SnakeInTheGrass]

Originally Posted by Mr. Blonde

as soon as the volt comes out (crosses fingers) i have no doubt i will

How much to get it painted to match your old motorcycle in the now famous color "purple penis eater"

[Mr. Blonde]

i still say it was blue.

[SnakeInTheGrass]

i wish you had that bike still. we could get a spectrometer and determine the wavelength.....that would settle it once and for all

[Beebs]

Theres been a decline in demand and a return to more normal pricing after a bit of panic and idiocy caused a bubble.

[DDTempest]

Also the dollar is gaining strength because other countries feel we will be the first to emerge from the recession / depression.

[DJ FC]

Originally Posted by SnakeInTheGrass

I am no expert, however it appears to be a mix of 12 months of over speculation followed by a reduction in consumption here in the US, and China's consumption not continuing to grow at a crazy rate.

I'm not an expert either, but I do deal with these things on a daily basis (and get paid to do it so am I a professional?). I don't trade energy products, but I can tell you that the price of oil, and from oil gas, is so much more broad and complicated than you guys make it seem. Keep in mind that everytime someone buys a crude oil future: someone has to sell it to them. The price of crude oil was driven by a terrifically weak dollar, anticipations of crazy inflation, a shit economy compared to the rest of the world, and a realization that we simply aren't prepared to live without oil.

What has happened since then:

The dollar has gotten apeshit strong. Inflation worries are gone. The central banks are now worried about deflation! The US economy might be relatively stronger than the UK and Europe, while at the same time being dogshit. All of which mean the dollar price of oil has to decline.

Originally Posted by SnakeInTheGrass

I don't hate on the arabs for cutting production to raise prices, its a free market...they can try to use supply side econ to force the price higher, we will pay it or change to a different fuel source. When we get tired of paying so much for gas some entrepreneur will step in and make a buck with some new way of getting around.

What you are describing is certainly not a free market. OPEC is a cartel and under US law would be illegal. They prevent the market from being efficient...

Originally Posted by Beebs

Theres been a decline in demand and a return to more normal pricing after a bit of panic and idiocy caused a bubble.

Not idiocy. The dollar being where it was, US economy being as weak as it was, inflation being priced in where it was, and the fact that someday oil really will run out; all led to oil being priced where it was.

[Ugly Bastard]

Just bought me a little USO with what little money I have left. These prices ain't stayin this low.

[Mr. Blonde]

Originally Posted by Ugly Bastard

...with what little money I have left.

...what?

[Ugly Bastard]

Stock market + McCain bets, son.