Solution to the high price of gas

[tonyla]

On the 27th of the month the US government says No more barges in the country all the ships at sea too bad. The oil company calls up the supplier and says sorry can't take the gas, U.S gover. says so until the 1ts of the month. Yes the supply will slow and it might have an immediate effect on the price of gas already here, but this will be short term. Back to the 27th of the month, all the gas is sitting in the ocean unpaid for, that should bring down the price. If it doesn't work make it the 25th next month and so on.

 

I am not an economics major but I do watch NUMBERS.

[Mr_Ed]

I guess I'm confused by what you've written. Are you trying to say that letting the gas sit off-shore (for a couple days or even a week) and unpaid for will in some way result in a lower price for the fuel when it reaches the pump? If so... doesn't that run against the concept of supply and demand as well as any number of additional market forces/rules?

[Paul_Burkett]

I remember back in the '70's when there was a gas shortage, people that were flying in from over seas would report seeing tanker ships stacked up off the coast waiting for orders to come in and be unloaded. All the while gas stations were running out of gas and the prices went up. Artificial gas shortages or real shortages don't make things any differant when the lines are long and the pumps go dry, or the prices hit the roof. My question is, how many ways can you spell SCAM.

[Hermes]

Having been on a (tramp) Tanker for a couple of years in an earlier life, I know that our tanker would bunker in Ras Tanura or at some major oil pumping station in the Persian Gulf and then cast off and somewhat aimlessly sail into the Indian Ocean to wait for delivery orders (from the shipping company) of the oil to whoever would pay the highest price. So, sometimes we would sail to Singapore, the Philippines Sidney or East Africa, Dar Es Salam, in other words to the highest bidder.

Projecting that concept to the current situation, one can see that as the oil prices are increasing on an hourly basis, it is in the shipping companies interest to delay delivery and to only lock into a deliver contract, when prices appear to not get any higher.

The situation can clearly result in tankers lined up offshore and waiting, if not forcing, the best possible deal, e.g. the longer they wait, the higher the demand and the higher the price.

The offset, of course is the incredibly high cost of a tanker being more or less at idle.

Thank you Exxon and BP and Shell and everybody out there creating an artificially high price for crude.

[Urban Surfer]

So the price of gasoline is related to the cost of crude oil, plus the increasing cost of all the related processes.

Why is diesel fuel more money than gasoline, when it is cheaper to produce.

Is it like a never ending Christmas eve? People are buying more of it so let's screw them.

[Boffin]

So the price of gasoline is related to the cost of crude oil, plus the increasing cost of all the related processes.

Why is diesel fuel more money than gasoline, when it is cheaper to produce.

Is it like a never ending Christmas eve? People are buying more of it so let's screw them.

 

Diesel is no longer the low-refined smokey stuff of the past. The need to produce low-sulphur, low-smoke fuel means that the production costs are at least as high as gasoline.

 

Andy

[Francois_Dumas]

Yes, diesel HAS been a lot cheaper than petrol for many decades. I think it is the new 'knowledge'(?) that it is now more dangerous than regular petrol that attracted the more complex production process... and the higher price?

 

I still think we are getting scammed by our respective governments who are raking in disgusting profits in terms of taxes, sometimes even on purpose to 'get us off the roads'. (Which isn't working of course.... everybody just spends less money on other things).

[velomoto]

So the price of gasoline is related to the cost of crude oil, plus the increasing cost of all the related processes.

Why is diesel fuel more money than gasoline, when it is cheaper to produce.

Is it like a never ending Christmas eve? People are buying more of it so let's screw them.

It's not that complicated: supply-demand. The world as a whole is rapidly demanding more. The world wide crude supply (production) isn't changing so prices are climbing. Add political and economic upheaval to create turbulence in the commodity markets and you've got an opportunity for large swings in crude prices.

 

Fear not, at some point the prices for crude will stabilize once people and companies rein in their use of energy... but some analysts believe crude will hit $200 before this occurs.

 

Instead of focusing on the added cost of fuel I prefer to focus on the positive effects - the rural roads have been much less busy. In particular I've seen far fewer RV's, SUV's and pickups.

 

 

[Heck]

So the price of gasoline is related to the cost of crude oil, plus the increasing cost of all the related processes.

Why is diesel fuel more money than gasoline, when it is cheaper to produce.

Is it like a never ending Christmas eve? People are buying more of it so let's screw them.

 

Diesel is no longer the low-refined smokey stuff of the past. The need to produce low-sulphur, low-smoke fuel means that the production costs are at least as high as gasoline.

 

Andy

 

And, lets not forget the new production formula has less BTUs per fluid litre, causing the efficiency of everything that burns it to drop....

Higher prices- Lower mileage.. more demand.

Neat formula for excessive profit margin.

 

[motoguy128]

That oil at sea has most likely already been purchased on contract... and it therfore being shipped to the new owner. There are issues with who's going to pay for the costs associated with the vessels being delayed.

 

Yes, the price of gasoline will increase, because in a short amount of time you could have shortages as the refinieries, without their oil supply, have to cut production. It may also cause an increase in plastic resin and any other petrochemical.

 

If consumers react to the high gas prices but cutting demand (under normal S&D rules) then oil prices will drop. However, Americans have demonstrated theat we're hooked on oil like crack adicts and we have made little progress is reducing consumption since gas shot over $3 and is approaching $4 fast (likely by Memorial Day).

 

Worst of all... with human nature, if people thing their could be a shortage (like after Katrina), they will rush to gas stations and fill up creating localized and regional shortages in the supply chain. I've heard that the empty capacity of everyones gas tanks at any given moment is 2-3 times the total gasoline reserves. Consider a local gas station. I'm guessing their tanks are around 30,000 gallons total capacity. So if they are half full, as few as 1500 people filling up on average with 10 gallons will drain their capacity. I'm in a community with about 40,000 people in the surrounding area, there are 12 gas staions. More improtantly, if 100,000,000 cars all try to fill up with lets say 10 gallons, you would need 1 billion gallons of fuel. That's roughly 2-1/2 days production. More improtatnly there aren't enouhg tanker trucks to transport that sudden demand.

 

Here's an interesting article

http://auto.howstuffworks.com/question417.htm

[Fugu]

And, lets not forget the new production formula has less BTUs per fluid litre, causing the efficiency of everything that burns it to drop....

Higher prices- Lower mileage.. more demand.

Neat formula for excessive profit margin.

 

The Ultra Low Sulfur Diesel (ULSD) standard came from the mental midgets at the EPA, not from big oil. In fact big oil didn't want to switch to ULSD so I'm not seeing your argument here. Also, profit margins in terms of percentage are pretty much the same as they have always been. If you sell widgets made from unobtanium for cost +10%, and unobtanium goes up 300%, what happens to your prices (and to your gross profits if demand stays more or less constant)?

 

Don't forget that ULSD also has less lubricity so drivers of diesel powered vehicles have found the need to supplement it with fuel additives to quiet noisy injectors and fuel pumps.

 

Certain types of crude cannot be made into ULSD economically. Here's an interesting article from 2000 explaining pretty much exactly what's up right now with diesel prices.

 

Big Oil should be screaming WE TOLD YOU SO but they're too busy ducking haymakers from the media and elected boneheads trying to secure another term whining about their profits.

 

http://findarticles.com/p/articles/mi_m0CYH/is_15_4/ai_65172282

 

 

 

 

[leikam]

If consumers react to the high gas prices by cutting demand (under normal S&D rules) then oil prices will drop. However, Americans have demonstrated theat we're hooked on oil like crack adicts and we have made little progress is reducing consumption since gas shot over $3 and is approaching $4 fast (likely by Memorial Day).

 

Recent articles like this one report that gas purchases are down 7% from a year ago and that we're looking at reduced gas consumption this summer instead of the usual summer increase. Demand for gas is not infinitely inelastic. One way to look at it is if a 25% rise in gas prices barely dents demand, then maybe gas is not (yet) expensive.

[skinny_tom (aka boney)]

If consumers react to the high gas prices but cutting demand (under normal S&D rules) then oil prices will drop. However, Americans have demonstrated theat we're hooked on oil like crack adicts and we have made little progress is reducing consumption since gas shot over $3 and is approaching $4 fast (likely by Memorial Day).

 

If you can find gas for less than $4/gallon around here you're doing well.

 

I'm off to find alternative forms of fueling my diesel. I've already got a line on 100% recycled biofuel for more than a dollar a gallon less than going diesel.

 

Of course, using biofuels in my opinion, are only worth it if recycled stock is used rather than new oils from organic sources.

[leikam]

Here you go: http://www.efuel100.com

[skinny_tom (aka boney)]

Check this: http://www.biodieselcommunity.org/

 

[Fugu]

I'm off to find alternative forms of fueling my diesel. I've already got a line on 100% recycled biofuel for more than a dollar a gallon less than going diesel.

 

www.utahbiodieselsupply.com has a handy payback calculation spreadsheet.

 

You could buy a BioPro 190 and pay it off in 42k miles at 16mpg, assuming you don't include the value of your time in the equation and you can find a source for free used cooking oil.

 

 

[russell_bynum]

Is it legal to use DIY fuel? I mean...I've heard it's illegal to use "Farm diesel"...which is otherwise the same as what you buy at the gas station, but costs less since it doesn't include all the taxes (except of course for the usual state sales tax). Seems to me that DIY biofuel would be the same. No?

 

I realize that the probablility of getting caught is exceedingly low...I'm just wondering about the technicality.

[bakerzdosen]

Is it legal to use DIY fuel?

From http://www.biodiesel.org/resources/faqs/

 

 

Is it approved for use in the US?

Biodiesel is registered as a fuel and fuel additive with the Environmental Protection Agency (EPA) and meets clean diesel standards established by the California Air Resources Board (CARB). Neat (100 percent) biodiesel has been designated as an alternative fuel by the Department of Energy (DOE) and the US Department of Transportation (DOT).

[russell_bynum]

Is it legal to use DIY fuel?

From http://www.biodiesel.org/resources/faqs/

 

 

Is it approved for use in the US?

Biodiesel is registered as a fuel and fuel additive with the Environmental Protection Agency (EPA) and meets clean diesel standards established by the California Air Resources Board (CARB). Neat (100 percent) biodiesel has been designated as an alternative fuel by the Department of Energy (DOE) and the US Department of Transportation (DOT).

 

Right....it's legal to burn the stuff. Is it legal to make my own and burn it without paying the state and federal fuel taxes? And if so, then wehy is it illegal to burn "farm diesel" in a road car?

[Fugu]

Is it legal to use DIY fuel?

 

Bakersdozen's reply doesn't seem to include the tax issue. Namely, if fuel taxes go to roads and you aren't buying at the pump, should you be allowed to drive on the roads for free? I believe some states are starting to raise a stir about that issue.

 

See here: http://www.latimes.com/news/local/la-me-vegoil6-2008may06,0,6562739.story?track=rss

 

Same reason making ETOH at home to drink is illegal. Taxes.

 

 

 

[DiggerJim]

However, Americans have demonstrated theat we're hooked on oil like crack adicts and we have made little progress is reducing consumption since gas shot over $3 and is approaching $4 fast (likely by Memorial Day).

Already there here in CT. Any bets on $5 by Labor Day?

[velomoto]

Right....it's legal to burn the stuff. Is it legal to make my own and burn it without paying the state and federal fuel taxes? And if so, then wehy is it illegal to burn "farm diesel" in a road car?

Farmers are being given a "tax break". In some states, fuel purchased specifically for farming has a dye added. Getting caught with "colored fuel" in one's pickup or car is costly. If "cheating" becomes common I would expect to see this farm subsidy program discontinued or changed.

 

As fuel prices rise, taxes on a dollar of fuel drops. This is because the federal, and most (not all) state fuel taxes are "per gallon" and not "per dollar".

 

Don't blame the oil companies for the situation as they're just doing what companies are supposed to do - make $$$. Instead look to a federal government which has done just about nothing toward encouraging development of alternative energy sources. Also look to conservative leaders (spokes people) who in their war against left wing environments have overlooked the fact that fuel efficiency is more than an environmental issue - it's a matter of national security and hits the pocketbook of everyone.

 

One irony I found is how politicians are pushing a summer fuel "tax vacation" and in the same breath talking of "taking on big oil". Removing fuel taxes will only increase profits for oil companies as they increase their margins to consume most, if not all, of the tax break. Hurting "big oil" means cutting usage and the best way to encourage this is by raising fuel costs via higher taxes.

 

Bottom line - drive less and ride more!

[russell_bynum]

Right....it's legal to burn the stuff. Is it legal to make my own and burn it without paying the state and federal fuel taxes? And if so, then wehy is it illegal to burn "farm diesel" in a road car?

Farmers are being given a "tax break". In some states, fuel purchased specifically for farming has a dye added. Getting caught with "colored fuel" in one's pickup or car is costly. If "cheating" becomes common I would expect to see this farm subsidy program discontinued or changed.

 

As fuel prices rise, taxes on a dollar of fuel drops. This is because the federal, and most (not all) state fuel taxes are "per gallon" and not "per dollar".

 

Don't blame the oil companies for the situation as they're just doing what companies are supposed to do - make $$$. Instead look to a federal government which has done just about nothing toward encouraging development of alternative energy sources. Also look to conservative leaders (spokes people) who in their war against left wing environments have overlooked the fact that fuel efficiency is more than an environmental issue - it's a matter of national security and hits the pocketbook of everyone.

 

One irony I found is how politicians are pushing a summer fuel "tax vacation" and in the same breath talking of "taking on big oil". Removing fuel taxes will only increase profits for oil companies as they increase their margins to consume most, if not all, of the tax break. Hurting "big oil" means cutting usage and the best way to encourage this is by raising fuel costs via higher taxes.

 

Bottom line - drive less and ride more!

 

Thanks for answering a question I didn't ask.

[velomoto]

However, Americans have demonstrated theat we're hooked on oil like crack adicts and we have made little progress is reducing consumption since gas shot over $3 and is approaching $4 fast (likely by Memorial Day).

Already there here in CT. Any bets on $5 by Labor Day?

That's only 25% more than premium and 20% more than diesel are going for right now. Since I'm an optimist I'm betting we'll see $5 gas by July 4th!

[ShovelStrokeEd]

Instead look to a federal government which has done just about nothing toward encouraging development of alternative energy sources

 

You are kidding, right? I work every day with various agencies of the federal government and federally funded university research groups who are doing nothing but research into alternative fuels/energy sources. The money is well into the hundreds of millions of dollars and that is just in grants. When you add the facilities involved we are talking billions.

 

Please acquire at least a few facts before making statements like this.

 

Even in your own back yard is a little facility called NREL. National Renewable Energy Laboratory. It is in Golden.

[russell_bynum]

Ed, please don't interrupt this religious argument with logic and facts.

[sgendler]

I got your alternative fuel right here, if only people would get the hell off their asses.

 

[smiller]

If one considers the level of government investment in alternative energy sources to be substantial one has to ask... substantial compared to what? The amounts are pretty trivial relative to other expenditures related to national security (and a sound energy policy is every bit a matter of national security) or even the tax breaks given to the oil industry because of all the enormous 'risk' they take in looking for additional sources of oil. I don't think it's unreasonable for one to get the impression that the government (or the current one at least) is a good deal more interested in maintaining the status quo rather than changing it.

[leikam]

I got your alternative fuel right here, if only people would get the hell off their asses.

 

I have a friend who bikes to work regularly. She has a sticker on her bike that says "What high gas prices?"

[russell_bynum]

I got your alternative fuel right here, if only people would get the hell off their asses.

 

 

That's gonna be a bit inconvenient for my commute.

 

[Paul_Burkett]

This guy, Johnny Scheff, owns the shop I take my bikes to. Some people are getting serious about paying the price of gas and bought something that will save gas.....and probably get a lot of them killed. I hope not.

 

http://edition.cnn.com/2008/LIVING/wayoflife/05/15/scooters.gas.ap/

[ShovelStrokeEd]

If one considers the level of government investment in alternative energy sources to be substantial one has to ask... substantial compared to what? The amounts are pretty trivial relative to other expenditures related to national security (and a sound energy policy is every bit a matter of national security) or even the tax breaks given to the oil industry because of all the enormous 'risk' they take in looking for additional sources of oil. I don't think it's unreasonable for one to get the impression that the government (or the current one at least) is a good deal more interested in maintaining the status quo rather than changing it.

 

I can't argue against that. I do know for a fact that there have been massive cuts in funding on this very issue as the other stuff, war, the security pork barrel and the like take precedence. I don't consider the level to be substantial, in fact, it is pitiful compared to the others but even so, a billion here, a billion there, pretty soon you are talking about some real money.

[sgendler]

That's gonna be a bit inconvenient for my commute.

 

Only because your choice to live so far from work is a symptom of the problem. I suspect we are about to go through a reversal of the shift to suburban living that occurred in the 20th century as folks move back into urban centers in the face of $10+/gallon gasoline. I make considerable sacrifices in order to live within 10 miles of my work and all the things I like to do for entertainment. But those sacrifices are gonna be small potatoes compared to what folks such as yourself are going to go through if personal transportation becomes cost-prohibitive. Of course, the reality is that the sheer volume of people who live so far from the rest of their lives will inevitably mean that I'll be forced to subsidize their lifestyle via some form of govt intervention rather than allowing them to suffer the consequences of their decisions.

[russell_bynum]

That's gonna be a bit inconvenient for my commute.

 

Only because your choice to live so far from work is a symptom of the problem. I suspect we are about to go through a reversal of the shift to suburban living that occurred in the 20th century as folks move back into urban centers in the face of $10+/gallon gasoline. I make considerable sacrifices in order to live within 10 miles of my work and all the things I like to do for entertainment. But those sacrifices are gonna be small potatoes compared to what folks such as yourself are going to go through if personal transportation becomes cost-prohibitive.

 

Indeed, it's about choices. And the future does scare me. I'm glad your life works for you, but I couldn't handle it. Being able to ride a bike to work would kick ass. But pretty much everything else about living close to where I work would suck. Living in a shoebox sized apartment and paying more than our current mortgage payment...no thanks. I'm willing to pay a premium (in $$ and commute time) to have a little bit of space and a pleasant neighborhood.

 

It will indeed be interesting to see how this works out. I can say this much...I sure as hell hope it doesn't involve having to "Move into an urban center". Honestly, I'd rather slam my man parts in a sliding glass door. That lifestyle is just not for me.

[velomoto]

You are kidding, right? I work every day with various agencies of the federal government and federally funded university research groups who are doing nothing but research into alternative fuels/energy sources. The money is well into the hundreds of millions of dollars and that is just in grants. When you add the facilities involved we are talking billions.

 

Please acquire at least a few facts before making statements like this.

 

Even in your own back yard is a little facility called NREL. National Renewable Energy Laboratory. It is in Golden.

Sadly, no I am not kidding.

 

Here are a few facts: The FY 2008 budget request includes $2.7 billion, a 26 percent increase above the FY 2007 request of $2.1 billion, and 53 percent above FY 2006, to advance President Bush’s Advanced Energy Initiative.

linky

 

So no we're not spending "hundreds of millions" but a couple billion (and that is a significant increase from when Bush's first years in office). Having been in high tech and military for my career I've seen how far a billion $$$ in R&D goes, and these days it isn't very far. Additionally, much of the AE budget goes to programs run (directed) by the large energy companies. Or to put it another way, the large energy companies control how a large portion of the AE budget is spent. That's just how it works.

 

How much should we be spending? Well I suppose that all depends upon just how important energy is to our economy and national security. With a 2007 GDP of nearly $14 trillion, I find it amazing we only spent about $2 billion on alternative energy R&D last year and will spend less than $3B this year. But that's just one man's opinion.

[ShovelStrokeEd]

Fully 50% and maybe more of the National Labs are run for the DOE by United Technologies (not an energy company). I know cause that is who we bill for my work. These are huge facilities with research varying all over the place and costs have to be well over the 2.7 B you quoted. I also work with companies like Exxon Mobil and BP who fund a whole bunch of research both in their own facilities and in academia. There is also huge research going on in related fields such as catalysts and refinery processes, some funded in the private sector, some by the government but not specifically DOE grants. The oil companies are not evil players in this market. How much money do you think the winner of the race to discover/introduce alternate fuels is going to make?

 

I'll agree that the base funding is nearly pitiful but that is a matter of politics and until the other money hogs are removed from the playing field, we are going to have to take what we can get. I won't express my opinions on the matter here, rules is rules. I will, however, state that when the breakthrough comes, it will probably be from a place in the world where they have to import ALL their oil.

[Francois_Dumas]

 

I'll agree that the base funding is nearly pitiful but that is a matter of politics .........

 

Which is, I think, exactly the point. Politics suck and are aiming for the wrong goals largely, driven of course by 'other' interests. That's not only in the US, don't worry. ;-)

[DiggerJim]

How much money do you think the winner of the race to discover/introduce alternate fuels is going to make?

Good point that is often overlooked. Mobil is an energy company. Which do you think they'd rather do - continue to refine & sell oil/gas whilst paying our Saudi masters out the nose...or having the fundamental patents on something like fusion and controlling everything?

[smiller]

How much money do you think the winner of the race to discover/introduce alternate fuels is going to make?

Good point that is often overlooked. Mobil is an energy company. Which do you think they'd rather do - continue to refine & sell oil/gas whilst paying our Saudi masters out the nose...or having the fundamental patents on something like fusion and controlling everything?

I think they'd rather continue to refine and sell petroleum-based products (to which, incidently, they often either own or control or have profitable access to the raw materials... Shell, Exxon, Mobil, etc, are not simply refiners and distributors.)

 

Right now a relatively small number of companies control the world's primary energy supply and I doubt that they are looking forward to the end of that era. The alternative energy industry will have many players and while the current oil companies may well develop some valuable patents it's unlikley that these could ever generate the mind-boggling profits and power that they now enjoy. There just isn't much of a case to be made that there is any real economic incentive for big oil to change the status quo. That will happen when we run out of oil and not a momment before if the oil companies have anything to say about it. (Hint: They do.)

[ghaverkamp]

Fully 50% and maybe more of the National Labs are run for the DOE by United Technologies (not an energy company). I know cause that is who we bill for my work.

 

I don't know of any DOE national lab that is managed by United Technologies. I'm quite sure it's not half. Battelle is now the big player, managing four. I "bill" my work to a national laboratory, and my employer is the University of California. The UC/Bechtel/Texas A&M/Battelle partnership manages Los Alamos and Livermore now. Lockheed manages Sandia. University of Chicago manages Fermilab. Iowa State manages Ames. Stanford manages SLAC. We do have Otis elevators here...

 

That said, the $2.7B was referring only to the Advanced Energy Initiative, which is just one small program. Many of the laboratories, especially the one I work at, spend large amounts of money -- far more than $2.7B -- on energy research. That money comes from various government programs and commercial sponsors. The DOE spent over $500M last year just to keep this laboratory operating, and we're not a big and secure lab.

 

I'm all for more money, though.

[ShovelStrokeEd]

Greg,

That is UT-Battelle, the UT standing for United Technologies. I do work at 50% of the labs they manage.

[ghaverkamp]

That is UT-Battelle, the UT standing for United Technologies. I do work at 50% of the labs they manage.

 

Or, University of Tennessee.

[ShovelStrokeEd]

Could be in the case of ORNL but, at least 3 of the buildings (there are about 50 or more) at that site that I visit are clearly marked United Technologies.

 

By this time, the labs have been in existence since WWII, I doubt anyone, including the government its own self, can tell with any degree of precision where the money is coming from. The scientists spend as much time writing grant applications as they do science, maybe more. Not all the money, even at NREL, comes from DOE.