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PF Flyer
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Pickups & News & Views Message Boards
Any predictions of gas prices on November 4th?
The demand and supply for a product sets its price. Not just it's cost. Let's say I sell widgets in 2000 for 25 cents. It's now 2004 and due to technological advances in manufacturing, my widgets are in very, VERY high demand. I've figured out a way to make more with fewer employees. I sell widgets for $1 and people still buy and I am running out. I sell them for $1.25 and I have normal inventory (say it with me, "equilibrium"). Now, why in the world would I sell 100,000 widgets for 25 cents each when I can sell them for $1.25 and still sell just as many? Why would I do this? If I wouldn't, why should oil companies? Oil companies are supposed to be divisions of the Salvation Army and United Way? Geesh.
bottgers, going back a couple pages...because I didn't get a chance to post yesterday.
"ABC's report only said that Clinton released our reserves in the past to lower prices. They didn't specify that it was done to lower heating oil prices."
And yet, you ASSUMED they meant gasoline prices. To be fair, it was probably a reasonable assumption. However, after the Dateline debacle with Chevy truck gas tanks and a Dateline story that put the industry I work for in an unfair, unfavorable light (i.e., protect the consumer, if it sounds bad, it must be, even if it's the right thing to do) I put very little credence in ANY network news. And, it would appear, that lack of credibility was well-earned in this case, since they made YOU (and probably millions of others) think that "hey, we've done this before, in this exact scenario, we should do it again". Unfortunately, that premise is wrong. Entirely.
"Sure looks like prices rose just as high and maybe even a bit higher over the winter of 2000-01 as they did the previous year. And the increase in prices happened earlier as shown by the width of the price "spike" The determining factor sure appears to be the price of crude oil and the release of the reserves didn't seem to lower the price at all. I know the INTENTION of the release was to reduce prices, but it would be a real stretch to look at the facts and say that prices were reduced at all. Perhaps prices were "moderated", but the chart sure doesn't seem to show much of that either."
Great research, Host. To be honest, as I recall, the intention actually went beyond simply lowering prices. It was a situation where refineries were running flat out and there were concerns they could not change to producing enough heating fuel (and keeping up with gasoline demand at the same time), as those inventories were quite low. Again, it does depend on my recalling correctly, but I think the bigger concern was "we might actually run out" rather than "it's too expensive". That might explain why prices held the line--without the additional supply, who knows what the prices might have been? At any rate, I believe it proves a point: SPR is for supply-related problems, not solely price-related concerns.
"When the facts about the release are brought up, the response is, "well they only said it was to lower prices"... so we seem to be in "it depends on what your definition of IS is" mode."
Perhaps. I see it as errors perpetuating errors. Program is, at best, unclear and at worst, wrong. Person reiterates the program along with a somewhat reasonable assumption. It's proven the program was indeed wrong or unclear and the assumptions made were false. Seems pretty clear there is a lesson to be learned about making assumptions, especially with network news programs.
"BTW, I've said it before, and apparently I have to say it again, I simply posted what ABC said. I didn't write their article, I didn't research it, I didn't have anything to do with it, other than mentioning it in this topic. I'm just the messenger, don't stone me! If you don't agree with what they reported, take it up with ABC. It's THEIR article, not mine."
And I've said it before (and apparently have to say it again), you didn't simply post what they said. You added your own assumption about the topic and applied that assumption to today's situation. In both cases, the assumption and the application to today are incorrect. I understand that you couldn't have known that from the program, unclear as it might have been, but didn't I say from the get go, essentially "uh, I think that release was for heating fuel"? (I did). Did the host's research show that the release did not affect prices? (It did). Does that not support my (and other's) statements that the SPRs purpose is not to affect pricing, but rather supply? (I believe it does). You didn none of these things and when YOUR assumption was called on, you blamed in on bad reporting. If that's good enough for you, fine--but it's not good enough for me.
The real issue is Oil at $41 a barrel and rising.
Perhaps Bush could affect it, but only temporarily. Gas prices usually go down in the fall anyway, due to reduced demand, but I'm sure some will say it's an election tactic. Can't avoid that.
The Saudi ambassador, a longtime Bush crony, has already said he'll push to increase production as the election nears. Don't discount the influence of political crap.
Saudi Arabia has announced they will increase production by another million barrels per day in July.
OPEC member promises to supply 2 million more barrels a dayThe Associated Press
Updated: 5:59 p.m. ET May 23, 2004AMSTERDAM, Netherlands - Saudi Arabia has assured the United States that it will supply up to 2 million barrels a day in additional crude oil if the market demands it, the U.S. Energy Secretary said Sunday.
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Saudi Arabia has pledged to pump an additional 600,000 barrels a day starting in June, lifting its total daily output to 9.1 million barrels..."
The increase in production starts in June and works up from there. This article posted Sunday and can be viewed at http://www.msnbc.msn.com/id/5045279/
I think I'd rather have a President who wants to drill for oil, and can manage Opec, than one who locks up all the land in national parks so you can't mine coal or drill for oil in the US. Just my self-serving opinion. YMMV.
I don't see Dubya as managing OPEC, but I am sure he has lots of oil based investments, and is making out like the robber baron that he is.
My story about a later production increase isn't as new as that linked one. Maybe with the recent news, prices will fall by October. It certainly won't impact prices as much as a supposed cut in production or increase in demand will.
I actually agree with you. But, that is an issue that's a function of the commodity markets, not Big Oil or OPEC.
"Thanks for all your posts. I printed them all and took them to our local college. I told them that I read all your posts and they decided that was good enough to award me with one full semester hour's worth of business management credit."
:-) I'm glad we can joke about this, now! Anyway, I know I can be over the top, but like you, I believe in what I'm saying, so I'll just leave it at that.
My company compiles a list of various news articles for our intranet each day and an article from today's Wall Street Journal discusses why sustained high oil prices are actually bad for Saudi Arabia (and OPEC in general). Full attribution and credit to be given the Wall Street Journal, May 27th, 2004 edition. (I'd link it, but you need to subscribe to read it on WSJs site and the public, obviously, cannot access our intranet). Here is an excerpt:
"But high oil prices pose three risks to producers.
Risk one is economic. High oil prices threaten global prosperity. Economic forecasters figure a $10-a-barrel increase in oil prices shaves 0.3 percentage point off the U.S. economic growth rate. That means $33 billion less in goods and services for Americans to share. But that probably understates the damage: Somehow high oil prices always do more harm than economists anticipate, perhaps because oil-price increases usually occur with other bad things.
SCREWING UP THE global economy definitely isn't in the Saudis' interests. "They don't want to kill the fatted calf," says Walter Cutler, a former U.S. ambassador to Saudi Arabia.
Risk two is political. Even if OPEC didn't engineer this price increase, the Saudis know American drivers who are paying $2 a gallon for gasoline will blame them -- and big oil. And the Saudis don't want to be any bigger a factor in the U.S. presidential race than they already are.
Risk three is strategic. The Saudis know the only thing that will get Americans to give up gas-gulping sport-utility vehicles, to cultivate other sources of energy and to practice conservation is high oil prices. The U.S. economy uses a lot less energy to produce $1 of output than it did 30 years ago. But, as Federal Reserve Chairman Alan Greenspan observed in a recent speech, most of that change occurred before 1985 "within a few years of the peak in the real [inflation-adjusted] price of oil." "
The point? Oil producers want a price that is as close to natural equilibrium as possible. A price not so high as to reduce demand, but not so low as to not allow a maximum profit. $40 bbl oil is not a point of equilibrium. Sustained levels like that will eventually affect demand, either through more efficient vehicles, less driving or the advancement of other energy technologies previously economically non-competetive with oil.
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PF Flyer
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Pickups & News & Views Message Boards
I finance lots of gas stations - all of them can set their own gas prices. Some of them try to bring people into the stores & stations by underselling the competition. Some of them boost prices to make more on each gallon. OTOH, I've heard of operators who have said the Oil Company dictates the prices at the pump to them. May be a difference between a franchised station, and a company store with a manager, not sure. I'm sure the oil companies are making money - but if they don't, they'll quit refining oil, and that would be worse for everybody. I hope they make good profits, personally. I like gas, and lots of it.
This is why it's very difficult to blame pump prices on Big Oil or any one thing. That pump price could change for any number of reasons. A good example is in my area, gas went up 4 cents yesterday, despite a drop in the market price of oil this week on the news of Saudi Arabia getting ready to ramp up production. So why did it go up? Maybe exceptional demand is still stressing refining. Maybe that oil is from a contract 2 weeks ago. It's so complex, IMO, that yes, we don't want to say "eh, we can't figure it out, so screw it" but still, how can anyone or anything provide an accounting of every change in every market? I just can't see that.
(Just kidding....I think you're a great voice of reason and agree).
I know host has repeatedly commented about how a lot of the hysteria about the rise in gas prices is largely being riled up by the media. Every night, there's a local news story about some trucker going out of business or inane interviews at the pump of someone filling up an Excursion or whatever.
None of that adds anything to the debate of the rise in gas prices or to whether it's the calamity it's made out to be. I'm just trying to take a practical argument.
On the plus side, the last time I filled this car up was in February! And all the trips it's taken were ultra short, like to work and back (3 1/2 miles) up the street to McDonalds (2 miles), liquor store, Dominos, etc. I also used it to tow a couple of cars from my grandmother's house to my place (just across the street, but then I got one of 'em stuck in the yard, and the NYer spent a lot of time idling while I'd winch the other one out a bit, try to pull it again with the NYer, fail, winch it a little more, etc.
I don't think that car gets very good economy idling! In fact, about the only time it DOES get good mileage, is if you can get it up to about 70-75 on the highway and just hold it there, with as little variation in speed as possible. It seems happy at that speed, but the cops usually don't!
gasoline of various grades, with or without additives
lubricating oils of various weights and grades (e.g. 10W-40, 5W-30)
kerosene of various various grades
jet fuel
diesel fuel
heating oil
chemicals of various grades for making plastics and other polymers
Was nosing around a bit and found an interesting set of charts...
http://www.energy.ca.gov/gasoline/margins/
Have a great Memorial Day weekend!
PF Flyer
Host
Pickups & News & Views Message Boards
N of Seattle this morning, 87 - $2.23, 89 - $2.33, 92 - $2.43
Uga91, yeah, Domino's has been known to deliver out here from time to time, but delivery places around here always get confused. For some reason, a long time ago, when they decided to hand out address numbers, someone thought it would be cute to make them all close together. Mine is 12112, my neighbors is 12200, and the next one up is 12212. On the other side of me is 12100, and across the street is 12101, 12111, 12201, and 12211. And to make it worse, it's a rural community, with lots of trees, some houses set far back from the road, poor visibility, etc.
And for some reason, 12112 comes up alot in my neighborhood. About a mile away there's another 12112. Different street, but we get their mail sometimes. And I have a friend a few miles away who's also 12112!
Also, on the Domino's thing, I dunno if the driver would stop off at the liquor store for me ;-)
Yikes! 13 cents on a 2.32 gallon of gas! Worse, that 13 cents included the marketing and distribution costs, too. Not much margin...so how do they make record profits? Cost cutting (if you can increase one end, you reduce the other) but I suspect ever increasing demand. Might make less per gallon, but they're selling more than ever, too.
Have a happy and safe Memorial Day weekend!
PF Flyer
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Pickups & News & Views Message Boards
87 - $2.059
89 - $2.139
93 - $2.199
diesel - $1.659
kcram
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Smart Shopper and Wagons Message Boards
Every station was over $2 last weekend, I expected to see 2.20 or so. When I got in my car on Thursday morning I needed gas, and I cussed myself out for not getting it the night before because thats the day it usually jumps. But it had dropped to 1.95. I filled up again on Sunday for 1.93.