Gasoline prices in perspective

Many reporters have been pushing the meme that:

Consumers will pay the highest Fourth of July gasoline prices in six years.

That’s true, though as the EIA noted today:

Although this is the highest average heading into the Fourth of July holiday since 2008, gasoline prices in 2014 have remained well below the spring peaks reached in each of the previous three years.


New Jersey Historical Gas Price Charts Provided by GasBuddy.com

Oil prices have actually moved lower over the last three weeks, meaning that as long as the situation in Iraq does not deteriorate further, U.S. retail gasoline prices are likely headed down, not up over the next few weeks.

But we wouldn’t want to let the facts get in the way of trying to make a story sound more interesting, would we?

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27 thoughts on “Gasoline prices in perspective

    1. BC

      Gasoline sales have collapsed 75% per capita since 1998:

      http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103400001&f=M

      Full-time, private employment per capita is at the level of 1996:

      http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=EJg

      Real per capita disposable income less debt service is at the level of 2008, which is an average annualized rate of ~0.5%/year (20-30% of the long-term rate since the 1980s-90s and likely to be the post-Peak Oil trend rate hereafter) since the onset of Peak Oil:

      https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=EJi

      The US is experiencing a Peak Oil- and demographics-induced slow-motion depression, similar to Japan since 1998, and the US has fallen off the Seneca cliff since 2008. At the current doubling time of 4-5 years for domestic oil and gas extraction and the trend rates of consumption, reserves, and exports, the US will have extracted half or more of proved reserves by no later than 2017-19, the point of no return for the end of growth of the modern, oil-based, high-tech economy and society.

      But well before the point of no return for oil and gas extraction as a share of reserves, a business cycle contraction or a period of little or no growth will occur and persist, prohibiting further build out of “renewables” and growth of extraction capacity, supply, and profits, causing extraction to peak and demand to decline further. We’re probably already there with production and an inventory build growing faster than real after-tax incomes and spending YTD.

      The Pentagon, NSC, NSA, CIA, White House, Wall St., UK, Germany, France, Saudis, Israelis, UN, Russians, Chinese, NATO, and big integrated and services all know this. We should know it, too. Economists can’t tell us because they don’t know, don’t want to know, know but can’t say, or they won’t say for obvious reasons.

      Reply
      1. Steven Kopits

        “Gasoline sales have collapsed 75% per capita since 1998″

        BC – that’s for refiner-owned retailing stations, not gasoline sales as a whole.

        Reply
        1. Nick G

          The vertically integrated companies are really selling off those gas stations, aren’t they?

          I guess the era of needing to own stations to promote sales of a newfangled product is over…

          Reply
        2. BC

          Steven, thank you, sir. I stand corrected. And thank you for taking the time to read my missive and correct for the record.

          In fact, US per capita gasoline consumption is down since the onset of Peak Oil, the coincident peak Boomer demographic drag, and “Great Stagnation”, i.e., slow-motion depression, at approximately the amount of the cumulative loss of growth of real GDP per capita, that is, ~20%, which in turn is similar to Japan in the early 2000s.

          Reply
          1. Nick G

            Yeah, it’s too bad it hasn’t declined faster. Individuals aren’t as sensitive to fuel prices as companies.

            It would be cheaper for people to get more efficient vehicles, but individuals don’t really have the time to research everything in their lives, and they don’t have as wide a set of choices of efficient vehicles as they need. Fortunately, that’s changing…

  1. 2slugbaits

    Yep. And this year I didn’t notice the usual sharp spike in gas prices as refineries switched seasonal blends. So I checked refinery capacity utilization rates and found that they are not particularly high…in the 85%-90% range rather than the 90%-95% range we typically saw pre-Great Recession.

    Reply
  2. BC

    Wages to the price of gasoline (trending at the level of the onset of Peak Oil, which is dead, of course):

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=EIP
    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=EIQ
    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=EIS

    Auto sales per capita (peaking for the cycle and about to turn negative yoy):

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=EIT
    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=EIV

    Subprime auto loan bubble being encouraged by 7-year loans (pulling sales from the future as occurred during the MEW bubble as a result of the 2000s housing bubble):

    http://fabiusmaximus.com/2014/07/02/subprime-automobile-lending-69617/
    http://time.com/money/2934108/subprime-auto-loan-bubble/
    http://www.bloomberg.com/news/2014-03-05/subprime-auto-boom-besieged-by-late-payment-jump-credit-markets.html

    How long before we see 30-year auto loans for Teslas? $20,000 down, no interest for 30 years, and a low monthly payment of just $225/month. Mr. Musk has enough money now that he can lend to us for 30 years to buy his cars, which is probably what he’ll have to do as the rate of growth of sales of Teslas and EVs peak.

    Nope, no bubbles anywhere. No credit risk. No risk of recession. All risk is contained. The Chair has it covered. It’s all good. If not, we could not have foreseen any risks. How could we have known that “exogenous” shocks would occur?

    Reply
  3. PeakTrader

    This deep, and long, depression is completely unnecessary. We needed more pro-growth policies and fewer anti-growth policies.

    One anti-growth policy is in energy, including maintaining expensive environmental standards, imposing new and higher standards, sharply reducing domestic coal production, preventing more oil production in the Gulf of Mexico, California, Alaska, etc..

    Putting the economy back on track should’ve been the top priority, to generate much more tax revenue, along with much less spending on the unemployed, to be able to afford environmental standards and energy technology.

    Instead, we’ve had one foot on the accelerator and the other foot on the brake, resulting in an expensive “recovery,” that’s making the masses poorer.

    Reply
    1. Nick G

      One anti-growth policy is in energy, including maintaining expensive environmental standards

      Not being able to breathe is also expensive.
      U.S. Health Burden Caused by Particulate Pollution from Fossil-Fueled Power Plants Illness
      Mean Number of Cases Asthma (hospital admissions) 3,020
      Pneumonia (hospital admissions) 4,040
      Asthma (emergency room visits) 7,160
      Cardiovascular ills (hospital admissions) 9,720
      Chronic bronchitis 18,600
      Premature deaths 30,100
      Acute bronchitis 59,000
      Asthma attacks 603,000
      Lower respiratory ills 630,000
      Upper respiratory ills 679,000
      Lost workdays 5.13 million
      Minor restricted-activity days 26.3 million

      sharply reducing domestic coal production

      If only that were true. In fact, most of the reduction in coal consumption has been competition from cheap natural gas. Sadly, half of the reduction in consumption was counteracted by expanded exports.

      Reply
      1. PeakTrader

        You remain in denial.

        Fossil fuels raised living standards and life expectancies. And, are up to 99% cleaner than the 1970s.

        And, why do we need additional expensive environmental regulations in the coal industry when natural gas is replacing coal?

        You can praise fossil fuels later, when you get out of the dark.

        Reply
        1. Nick G

          remain in denial.

          The evidence is clear: fossil fuels are more expensive, dirty and risky than we knew.

          Fossil fuels raised living standards and life expectancies.

          Yes, and mercury was great for thermometers and lead was great in paint. Then we realized that they were
          more expensive, dirty and risky than we knew. And we replaced them with things that also did the job, but were safer and better.

          And, are up to 99% cleaner than the 1970s.

          Could you expand on that? Are you thinking of mercury, sulfur, nitrous oxides, particulates, ash, CO2, soot, or ozone?

          And, why do we need additional expensive environmental regulations in the coal industry when natural gas is replacing coal?

          Because the existing regs are way too weak, and NG can’t be relied on to stay cheap.

          Reply
          1. PeakTrader

            You continue to miss the point. Losing $10 for $1 of net benefit is the real waste.

            “…for thousands of years before the Industrial Revolution, there was essentially no sustained improvement in mankind’s general material standard of living, nor was there much variation from place to place around the world. The Industrial Revolution made all the difference.”–Robert Solow – Nobel Prize economist””

            “The answer lay in the use of a new source of energy. Pre-industrial societies had access only to very limited energy supplies. As long as mechanical energy came principally from human or animal muscle and heat energy from wood, the maximum attainable level of productivity was bound to be low. The industrial revolution transformed the productive power of societies. It did so by vastly increasing the individual productivity, thus delivering whole populations from poverty – E. A. Wrigley, Cambridge Group for the History of Population – Sir Wrigley is a member and co-founder of the Cambridge Group for the History of Population and Social Structure and a former President of the British Academy.”

            “…technology has rapidly advanced to enable the growth of larger populations without compromising nature’s security. Without the use of fossil fuels, global cropland would have to increase by 150 percent to meet current food demand. If that were the case, many habitats and ecosystems would be compromised…The use of fossil fuels to create technology and transport goods and services has been the primary reason why humans have had to depend on less of nature’s resources…fossil fuels have been critical in advancing the production of knowledge and ideas. Trade and communication have flourished since the industrial revolution…Some argue that the use of fossil fuels has a net negative effect on the environment. However, there are several factors to consider. First, the use of many renewable sources is often land-intensive and would require a massive conversion of land. Second, any damage from pollution to the air or water is likely reversible and can be curbed with future technological advances whereas land cultivation is irreversible – Indur M. Goklany is a science and technology policy analyst for the United States Department of the Interior, where he holds the position of Assistant Director of Programs, Science and Technology Policy – Goklany holds undergraduate and graduate degrees in electrical engineering. His B.Tech degree is from the Indian Institutes of Technology and his M.S. and PhD are from Michigan State University – Goklany has spoken against the use of biofuels and ethanol as he believes it drives the price of food beyond the reach of the poor. He wrote, “Ironically, much of the hysteria over global warming is itself fueled by concerns that it may drive numerous species to extinction and increase hunger worldwide, especially in developing countries. Yet the biofuel solution would only make bad matters worse on both counts.””

          2. Nick G

            Ah, I see the problem You’ve read misinformation about replacements for fossil liquid fuels: the myth that substitutes for liquid fuels also have to be liquid, and the myth that alternative liquid fuels have to come from biomass (e.g., corn ethanol).

            OK, let’s start with the myth that substitutes for liquid fuels also have to be liquid. Take the average US vehicle: it gets 22MPG. We can reduce that by 35% just by making internal combustion vehicles more efficient. We can reduce it another 25% by going hybrid. Then we can get another 30% reduction by expanding the battery a little, and plugging it in at night. The cumulative effect: an 90% reduction in fuel consumption. We see that in the Chevy Volt, for instance. It’s called an Extended Range electric vehicle (EREV), and the tech is 100 years old (e.g., diesel subs and trains). Both hybrids and EREVs are very cheap – their cost of buying and owning are at the bottom of the list of all cars.

            The remaining 15% would be most convenient from liquid fuels, but it could come from going to pure electrics if necessary. The Leaf and Tesla are both much cheaper to buy and own than their competition.

            Freight can go from truck to rail, which reduces fuel consumption by at least 2/3. Rail can be electrified: diesel trains actually use electric motors: they’re EREVs without batteries. The majority of US freight already goes by rail – paradoxically, a large percentage of rail is transporting coal and oil…

            Okay, then there’s the myth that alternative liquid fuels have to come from biofuels (e.g., corn ethanol). At the moment, biofuels are fairly cheap. If you include their environmental damage, that might change.

            So, would liquid fuels become unaffordable?

            No, because it’s not that hard to synthesize liquid fuels from clean sources. Electricity from wind, solar and nuclear could electrolyze hydrogen from water, which could be used to create methanol or other liquids. Or, we could create forms of ammonia, or several other hydrocarbon liquids. Those fuels are likely to be somewhat more expensive, but definitely less than $10 per gallon, which is comparable to fuel costs in Europe. If you use those fuels in a vehicle which only uses a gallon of liquid fuel every 200 miles, that’s mighty affordable.

            Does that help?

          3. PeakTrader

            Regulations have costs in time, effort, and money. They tend to slow economic growth. Federal regulations alone cost $2 trillion a year. The U.S. economy has been underproducing by $1 trillion a year.

            So, your solution is to pile-on more regulations in a heavily regulated economy, in a deep, and long, depression, which will hurt low-income Americans the most. You want to force Americans to ride a bike, take a bus, or take a hike.

            My solution is overhauling the federal regulatory regime to reduce the costs, temporarily, and spur economic growth.

            Then, when an actual recovery is underway, tax revenue will rise sharply and spending on the unemployed and poor will fall sharply. So, we can afford to pay for environmental regulations and energy technology.

            And, it should be noted, renewable energy has costs. It makes no sense losing $10 of income for saving $2 in the environmental costs of fossil fuels and adding $1 in the environmental costs of non-fossil fuels, for a $1 net benefit.

            Unlike China, the U.S. environment is much cleaner. There was strong economic growth at the height of the U.S. Information Revolution from 1982-07. So, we could afford to improve the environment substantially, since the 1970s.

          4. Nick G

            Regulations have costs in time, effort, and money.

            I think you maybe the victim of misinformation.

            There are clues to whether something is misinformation: it tends to be vague and abstract, and not have sources or specific evidence. When a bad article says that regulations are expensive, does it give examples (e.g., particulate pollution from diesel, versus radioactive aire-borne ash from coal?). Does it give a source, and a link? Or does it just wave it’s hands? Finally, does it appeal to partisan emotions? Or is it more rational in tone?

            You want to force Americans to ride a bike, take a bus, or take a hike.

            Yeah, you’ve been reading bad sources, because this doesn’t relate to our conversation. I haven’t said anything about bikes or buses (though they certainly can be useful in the right time and place).

            In fact, energy efficiency almost always save money for consumers. Making internal combustion engines more efficient is relatively cheap: perhaps a 10 to one ratio of savings to investment.

            Keep in mind, consumers have a lot on their minds: they have to get transportation that serves a lot of needs. They can’t put fuel efficiency at the top of the list, when they need a certain capacity, a certain ride, certain features, etc. A CAFE standard increases efficiency across the board, and does it very, very cheaply. Over the lifetime of the average car, it probably gives a !000% return on investment.

            And, it should be noted, renewable energy has costs.

            And so do fossil fuels. The costs of pollution But the savings are much larger: $10 in savings for $1 in costs.

            Think of it this say: if you pay $1,000 for electrical work, but the electrician breaks a cabinet doing the work, then the project really cost $1,400, right? Well, if we’re paying $.08 per kWh for coal, but also breaking people’s health for a cost of $.18 per kWh, that’s really $.26 per kWh. Wind starts cheaper at $.07 in the US, and doesn’t have indirect health costs. So, it’s much cheaper.

            Or, if you pay $100 per barrel for oil, but you also pay $50 per barrel for military costs to protect your supply, then the real cost is $150 per barrel.

            Don’t tell your auditor that indirect costs aren’t real, or that they shouldn’t be charged back to the direct cost centers: it won’t work!

          5. Nick G

            Let me sharpen that point a little.

            Let’s say Fossil Fuel Joe, the electrician, won the bid by using untrained, cheap labor. Perhaps Windpower Bob, another electrician, bid 1,100 with better, safer labor. Fossil Fuel Jo’s price was lower, but his actual cost was higher.

            Which electrician do you want?

  4. spencer

    Energy as a share of nominal personal consumption actually fell April and May. it was 5.75 in March, 5.57% in April and 5.47% in May.
    It has been bouncing around this level for two years.

    This compares to a peak of 6.8% in the 2008 recession and a low of 4.6% just after the trough in the recession.

    This means that so far that consumer are adjusting to higher prices by reducing energy consumption and higher energy prices are not crowding out other expenditures.

    Reply
    1. PeakTrader

      And, for their next job, many of the unemployed will work for lower pay and closer to home, than their prior job.

      Reply
    2. BC

      The increase in the price of oil to the share of real disposable income after debt service has reduced residual income per capita to historical recessionary levels.

      Granted, the top 1-10% who receive 20-50% of income and who own 40-85% of financial wealth don’t notice, but the bottom 90% of consumers are “adjusting to higher prices” because they’re/we’re collectively poorer and can’t afford to consume the same amount of oil/energy per capita as 1-6 to 9 years ago.

      But as long as the top 10% receive 50% of income and can continue spending as though nothing has changed in the past 6-9 years, the economy’s price structure and net flows will continue to result in the increase in the net exergetic costs per capita (200-350+ fossil fuel “energy slaves” per capita required by the top 1-10%) for the bottom 90% to support BAU for the top 1-10%.

      Reply
      1. PeakTrader

        Also, many Americans kept their jobs, got promotions or better jobs, and/or raises.

        The U.S. economy creates and destroys many jobs:

        “In 2010, the latest full year available, employers made over 47 million hires, and there were over 46 million job separations. Of the latter, there were 21.3 million voluntary departures (quits), and 21.2 million separations.

        This happened in a labor force of 154 million…about 30 percent of all jobs turn over in a year, and the labor market in the United States is in a constant state of flux. That’s one of the strengths of the American economy, although those separated involuntarily might not see it that way.”

        http://www.realclearmarkets.com/articles/2012/01/19/the_economy_creates_and_destroys_jobs_every_year_99471.html

        Reply
        1. BC

          Yes, I look forward to the day when most jobs are destroyed by accelerating automation of paid employment and elimination of purchasing power for the vast majority of workers. The Fed can then print the equivalent in today’s private wages and salaries for an ownership share of the automated means of production of goods and services, we can eliminate all transfer programs, eliminate fractional reserve banking and debt-money, and the majority can get something for nothing the way the top 0.1-1% get from rentier and fee income from rentier activities.

          Rather than only rentier corporate-state socialism for the bankers and top 0.1-1%, everyone can become a capital income-receiving owner of the intelligent-systems economy.

          The future is bright.

          Reply
          1. PeakTrader

            Yes, I look forward to the day when one worker produces the output of 100 workers to raise living standards and free-up the other 99 workers to produce more goods & services for the masses.

          2. Nick G

            I think the question is: when do we have enough goods and services, so that people can work less?

            I don’t think we’re there yet. We have a large enough quantity of goods in the OECD, though their quality and features could be improved. The developing world needs quite a lot more.

            But services? We In the OECD need more and better healthcare, childcare, senior car, education, etc. We also have quite a lot of work to clean up the environmental damage we’ve created.

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