So...has demand for gas really fallen 60%?

[NuSkoolTone]

When gas was on the rise and hit $4/gal, the general feeling was WTF. Then all of our resident "economists" decided to lecture everyone here on "supply on demand" works.

So now that the price of gas has fallen nearly 60%, has the "demand" that spurred the high prices subsided 60%????? How about worldwide? All those other countries sucking up our oil that increased the costs, did THEY cut back 60% too?

I think.................NOT!

Just wanted to take a moment to gloat :D

Now the REAL question is, how do we ensure that BS doesn't happen again? There needs to be some regulation somewhere. My bet is in the speculation markets that need to be kept in reality.

[nibus]

I'm not an expert but I highly doubt all 60% is supply and demand. Maybe half that.

I'm usually not in favor of the government getting involved in things, but I think something needs to be done to help regulate the BS that the oil companies fling at everyone.

[Zilmo]

I really liked all the doom and gloomers here saying that gas was absolutely going to hit $10 by years end.

[Dr. Tweedbucket]

Considering all the people out of work = a lot less driving :messedup

[The_Whale]

Now the REAL question is, how do we ensure that BS doesn't happen again?

High prices led to reduced consumption, less consumption led to lower prices.

Consumption has already started to rise with these low prices.

A big fat tax on gas right now will keep consumption low and keep money in the US and out of opec's hands.

[The_Whale]

I'm not an expert but I highly doubt all 60% is supply and demand. Maybe half that.


what's the other half?

[Jade]

A big fat tax on gas right now will keep consumption low and keep money in the US and out of opec's hands.

Yeah... that's a great Idea. I just dont think that the 40% of everything I make going to the Govt right now is nearly enough.

Jade

[Jay Strange]

Think it'll jump back up after the holidays??

[nibus]

what's the other half?

Fictional

[The_Whale]

Fictional

????

So 30% of the price drop never happened?

[mge80]

Why do you suppose a barrel of oil is below $45, when it was once $147?

Supply and demand? Partly. Lots of other factors at play, as well.

It is never as simple as any one factor. Is this any reason to "gloat"? I think.............NOT.

[Tonefish]

I'd expect the gas prices (price of oil) have gone down because the sheiks realized we were getting serious about getting off Arab oil again, and they realize that if they lower the prices again, the immediate gratification, non-strategic thinking Americans will forget about that....again.

[The_Whale]

Yeah... that's a great Idea. I just dont think that the 40% of everything I make going to the Govt right now is nearly enough.

Jade

there's no reason raising the tax on gas can't be enjoined with lowering other taxes (it could happen :dunno)

Higher prices on gas are the best way to reduce consumption; as proved by what happend this summer.

[Bones]

I believe the biggest factor was the speculators. Predatory capitalism at it's finest.

Still paying about $2.79 locally, while 15 miles away it's 1.89, that's gouging plain and simple.

[The_Whale]

Still paying about $2.79 locally, while 15 miles away it's 1.89, that's gouging plain and simple.

nope,

supply and demand!


:stir

[NuSkoolTone]

Why do you suppose a barrel of oil is below $45, when it was once $147?

Supply and demand? Partly. Lots of other factors at play, as well.

It is never as simple as any one factor. Is this any reason to "gloat"? I think.............NOT.

The rest of us knew there were a lot of "Factors" in the prices. However some on their high horses told the rest of us that we just didn't understand "Simple Economics". So I'm here calling them out on it.

IMO anyone who though "Supply and Demand" was the reason for the rise to $4/gal over a period of years and then fall 60% in 2 MONTHS is/was a fool. A way was found to simply increase the price at a pace people would accept and then once the speculators got hold of it there was no end in site. At least until it became OBVIOUS that this trend was unsustainable. Then they all ran screaming and the prices came tumbling down it seems.

It is yet ANOTHER bubble POPPED! It shows that while in most people's eyes capitalism and free market is "good" it just goes to show what happens when the people responsible are left without oversight and accountability.

There really needs to be a shift in what "Investing" means. I REALLY hope there is an investigation into the rise and fall in gas prices and those responsible for it are held to the fire! It's now pretty clear the whole thing was artificial and the ENTIRE world (not just the US) suffered because of it.

Hopefully we will still learn form this continuing the new paths drawn and reduce the chances of it happening again.

[mark norwine]

I believe the biggest factor was the speculators. Predatory capitalism at it's finest.

Bingo.

Gas is made from oil....oil is a commodity. Commodities rise & fall. Sometimes they spike, then fall.

Also consider that oil is traded internationally in dollars. If the dollar dives 20%, oil goes up 20%. And vice versa.

The spike settled; separately, the dollar rose. And, yes, some folks drove less.

[Bones]

I'm curious about one thing, when gas in the US went up by 3 dollars a gallon, did it also go up that much in other countries that already pay a lot more? i don't seem to remember anyone else complaining, only europeans saying 'about time for you, stop your bitching".

[Mr. Kite]

I believe that it took so long for the bubble to pop because the idiot with the needle, well..... is an idiot. Not naming names of course.

[nibus]

????

So 30% of the price drop never happened?

Don't be a smart ass, you know what I mean. The other 30% is price gauging like has already been argued in this thread.

[The_Whale]

Don't be a smart ass, you know what I mean. The other 30% is price gauging like has already been argued in this thread.

I didn't know what you meant.

price gouging (whatever that means exactly...) is an example of supply/demand.

[Bones]

I didn't know what you meant.

price gouging (whatever that means exactly...) is an example of supply/demand.


yes, it's when a retailer of a necessity demands your supply of money.

[nibus]

I didn't know what you meant.

price gouging (whatever that means exactly...) is an example of supply/demand.

Oh...

Yes, gauging can be part of supply/demand but it also has a lot to do with accessibility, like was mentioned earlier.

[Bones]

Don't be a smart ass,,

Just out of curiousity, what site did you think you were logging in to?

[The_Whale]

but it also has a lot to do with accessibility, like was mentioned earlier.

how is that different from supply/demand?

[The_Whale]

Just out of curiousity, what site did you think you were logging in to?

:agree

[nibus]

Just out of curiousity, what site did you think you were logging in to?

I thought it was TGP but lately it seems more and more like HC...

[XKnight]

If I told you the truth, you couldn't handle it. However, I will provide a one word hint. "Cabal".

[Teleplayer]

Now that it's down around $2+/- per gallon, everybody in this country can get nice and comfy again. No need to worry about it anymore.

I am going out to buy myself a Hummer H2 tomorrow. In fact, maybe I'll get something bigger that gets even worse gas mileage.

:messedup

[camitchell]

For the people who said Supply and Demand....


http://www.bloggingstocks.com/2008/05/21/oil-at-130-partly-due-to-goldman-sachs-betting-on-200-oil/


.

[nibus]

how is that different from supply/demand?

You can look at it as part of supply and demand, I guess it depends on your definition -

But honestly the accessibility factor (or whatever you want to call it) plays a big part. Regardless of whether the average gas prices are going up or down, there is always a big difference between urban and rural areas, and that was the point I was trying to make.

[shuie]

I cut my fuel consumption drastically a long time ago, but my demand for GAS has never fallen at all :)

[s2amps]

When gas was on the rise and hit $4/gal, the general feeling was WTF. Then all of our resident "economists" decided to lecture everyone here on "supply on demand" works.

So now that the price of gas has fallen nearly 60%, has the "demand" that spurred the high prices subsided 60%????? How about worldwide? All those other countries sucking up our oil that increased the costs, did THEY cut back 60% too?

I think.................NOT!

Just wanted to take a moment to gloat :D

Now the REAL question is, how do we ensure that BS doesn't happen again? There needs to be some regulation somewhere. My bet is in the speculation markets that need to be kept in reality.

Those who said it was only supply and demand were oversimplifying the drivers. Much like you are oversimplifying it now...

[scoob]

I'm with the 'cabal' guy...but strangely right when a big election is coming up the price started falling like grandma's boobs. strange indeed. Just like when all of those terror alerts would pop up at the perfect time.

[groutfulone]

i will provide a one word hint. "cabal".
opec

[Bo Faulkner]

I wish deisel would follow suit...

[jaxonmills]

the demand for driving, and therefore the demand for gasoline, is a thing called "inelastic". when the price doubles, people don't cut their driving in half. when the prices is cut in half, people don't suddenly drive twice as much. this is because most driving is done out of necessity. people don't like to waste their gas (money), regardless of its price.

the sharp, sudden decrease in gas prices is due almost entirely to the sudden decrease in the price of oil, a publicly traded commodity whose price, like many publicly trades assets, is affected heavily by speculation. its no coincidence that the price of gas fell sharply at the same time as many other assets. demand fell, not so much for gasoline at the pump, but for publicly trades shares of the commodity.

[The_Whale]

its no coincidence that the price of gas fell sharply at the same time as many other assets. demand fell, not so much for gasoline at the pump, but for publicly trades shares of the commodity.

The price is "somewhat" inelastic. Demand at the pump did go down due to higher prices this summer.

[DC1]

What this shows is how volatile the market is.

When something becomes scarce, prices can go way beyond what seems to make sense. Conversely, when it becomes plentiful, the price can drop much further than the percentage of drop in usage.

These things are not in direct proportion to the percentage of rise and drop in usage.

What this shows is that:

1 it never was a big conspiracy or this would not have happened.

2 we do not need to replace foreign oil to keep the market from going off the hook again and gas going to 5 bucks a gallon. We simply need to produce and refine enough to keep the market from getting tight again.

3 perception plays a huge role in speculation in futures. if we appear serious about drilling, refining, and alternatives, we can keep the market from kicking our butts in the future.

4 next time the prices go nuts and someone suggests fining the oil companies for "gouging" let's remind them of today and ask if we shouldn't also subsidize them when the price drops...


dc

[Greggy]

Remember also that the elasticity of demand increases over time as people have more time to adjust to higher prices by seeking out substitutes. While this may explain a part of the drop in prices, I am also interested in the impact of excessive speculation in the commodities markets. I also have noticed that OPEC once again is having difficulty policing its members regarding production cuts and reducing supply. Whenever prices rise, the rewards for circimventing cartel production quotas increase. That is another factor to consider from the supply side. As usual, prices are driven by a multitude of factors acting simultaneously. It's one big mess I say, one big stinkin mess.

[jaxonmills]

The price is "somewhat" inelastic. Demand at the pump did go down due to higher prices this summer.

inelastic = somewhat inelastic, they're the same thing unless I specified "perfectly" inelastic.

and yes, mild decreases in demand led to mild decreases in gas prices during the summer, but it wasnt comparable to what happened a few weeks ago.

[loudboy]

4 next time the prices go nuts and someone suggests fining the oil companies for "gouging" let's remind them of today and ask if we shouldn't also subsidize them when the price drops...


dc

Actually, I heard on NPR today that the Oil Co.'s profits are up. I guess they make the same markup, no matter what the base price is.

[The_Whale]

Whenever prices rise, the rewards for circimventing cartel production quotas increase.

Even more so when prices fall and quotas are cut.

[scoob]

Subsidize them!? They did all have record profits in the billions PER QUARTER this year and last, remember?
Speculation is the key...there weren't these insanely reactionary price fluctuations in the 70's and 80's every time a rainstorm blew by Mexico or N.O. This is a recent phenomenon...

[DC1]

Actually, I heard on NPR today that the Oil Co.'s profits are up. I guess they make the same markup, no matter what the base price is.

Compared to last summer? Do you have any news site that says this??

thanks

dc

[crosse79]

It's a traded commodity - demand is only a small equation of the formula that determines gas prices.

[DC1]

Subsidize them!? They did all have record profits in the billions PER QUARTER this year and last, remember?
Speculation is the key...there weren't these insanely reactionary price fluctuations in the 70's and 80's every time a rainstorm blew by Mexico or N.O. This is a recent phenomenon...


Speculation is only possible because the market is so volatile. It is volatile because we have not built a refinery in decades and do not appear serious about drilling and alternatives.

dc

[rattles]

I am going out to buy myself a Hummer H2 tomorrow. In fact, maybe I'll get something bigger that gets even worse gas mileage.

:messedup


Oh boy! While you're at it, wanna buy me one too!?!? :rolleyes:;)

[loudboy]

Compared to last summer? Do you have any news site that says this??

thanks

dc

Just a passing mention - maybe on Marketplace?

It certainly makes sense to me - they buy the crude oil at X, refine it and sell it for Y...

They're still gonna make their profit.

[The_Whale]

Remember also that the elasticity of demand increases over time as people have more time to adjust to higher prices by seeking out substitutes. While this may explain a part of the drop in prices, I am also interested in the impact of excessive speculation in the commodities markets.

People still employing less consuming habits have been a factor in the price going way down. We're still consuming like gas costs 4.00 a gallon. Let's see how long this lasts (I'm not going to hold my breath...)

It's not just the speculation in the commodities markets, there was/is excessive speculation in all parts of the business; refineries were expanded (they're losing money now...), tar sands in Canada, etc...

All that "extra" oil now must find buyers.



inelastic = somewhat inelastic, they're the same thing unless I specified "perfectly" inelastic.

and yes, mild decreases in demand led to mild decreases in gas prices during the summer, but it wasnt comparable to what happened a few weeks ago.

It wasn't mild: it was something like 6% and it's still down. If consumption starts to go up (and I think it will at these prices), the price will go up again.

Of course supply is a factor. If opec can enforce quotas the price can go up quick, but I don't think they will get serious about quotas unless prices get really low.

[DC1]

Just a passing mention - maybe on Marketplace?

It certainly makes sense to me - they buy the crude oil at X, refine it and sell it for Y...

They're still gonna make their profit.

Seems like the lower consumption and competition would shrink their profit margin at least somewhat.

That would be most interesting if true.


dc

[The Guy]

mine has. . . had to sell the car to pay the mortgage.

[The_Whale]

Actually, I heard on NPR today that the Oil Co.'s profits are up.

not for long

[semi-hollowbody]

lets not forget PROJECTED demand...the oil companies basically can change their prices at their whim...

[dankayaker]

Yeah... that's a great Idea. I just dont think that the 40% of everything I make going to the Govt right now is nearly enough.

Jade


My thoughts too. There is already a big fat gas tax on every gallon.

[The_Whale]

the oil companies basically can change their prices at their whim...

why would they lower the price from over $4 a gallon to less than $2?

[Chuck Snider]

I would venture to say it's more of a reflection of "global" economy rather than just the USA economy.. There are lots of other oil hungry countries who's dollar(or other$) is starting to fall... Hence A cheaper barrel as the US dollar starts levelling back up towards foriegn currency......
But what do I know.............................................

[BobbyFudge]

I would venture to say it's more of a reflection of "global" economy rather than just the USA economy.. There are lots of other oil hungry countries who's dollar(or other$) is starting to fall... Hence A cheaper barrel as the US dollar starts levelling back up towards foriegn currency......
But what do I know.............................................

Exactly. The dollar has been strengthening and as a result oil has been dropping...a barrel now is 41.88.

[showman(tx)]

Just a passing mention - maybe on Marketplace?

It certainly makes sense to me - they buy the crude oil at X, refine it and sell it for Y...

They're still gonna make their profit.

Sorry, but oil companies don't buy their crude at X then sell it for Y (refined or not). They have to explore, produce and transport it before refining even comes into the equation. Everyone seems to ignore the enormous cost of exploration and production, especially offshore. Crude isn't just sitting around waiting for evil oil companies to grab it and screw everyone with the price. And there are countless oil companies that only explore and produce (upstream), they have nothing to do with refining or consumer sales (downstream).

lets not forget PROJECTED demand...the oil companies basically can change their prices at their whim...

Again, crude is a commodity and oil companies don't set the price. They're set by the commodities market and oil companies can only charge what this market sets the price at (ignoring reserves values, hedging, etc). Of course they have some control over when they release their reserves and can release them when the price per barrel is advantageous.

And yes, at the risk of being run out of town :) I work for an evil oil company. And yes, our stock has fallen by over 50% in the past few months, we've had negative shareholder return for months, we're cutting back on domestic drilling and production, and reduced capital expenditures are being discussed (including reducing employee headcount). Not looking for a buyout, but when you see record profits for an ExxonMobil or BP don't paint all oil companies with the same brush ...

[mdog114]

When gas was on the rise and hit $4/gal, the general feeling was WTF. Then all of our resident "economists" decided to lecture everyone here on "supply on demand" works.

So now that the price of gas has fallen nearly 60%, has the "demand" that spurred the high prices subsided 60%????? How about worldwide? All those other countries sucking up our oil that increased the costs, did THEY cut back 60% too?

I think.................NOT!

Just wanted to take a moment to gloat :D

Now the REAL question is, how do we ensure that BS doesn't happen again? There needs to be some regulation somewhere. My bet is in the speculation markets that need to be kept in reality.

Regulation, that's very funny!

[Greggy]

It's a traded commodity - demand is only a small equation of the formula that determines gas prices.

Remember, there is a supply and demand for oil delivery contracts, and a resulting price. The price of oil is an input expense for the gas refining process, and input costs impact the supply curve for, and thus the price of, fuel including gasoline. Its an interlinked chain of markets, what happens in one impacts all others. Supply and demand pervade every aspect of our existence.