Does the second dip (recession) happens after gasoline starts crashing? I guess this is when economies of oil states start contributing to negative growth.
"Note that the most recent data from the EIA is for March. According to the EIA, gasoline prices have risen 13% since then."
That's impossible! According to the BLS , gasoline prices dropped by .2% in April. With gasoline prices falling, you would think Americans would drive more, not less.
I just want to say I love the fact that I can log in to Calculated Risk at 11PM on Saturday night and find a fresh post about gas prices and vehicle miles.
"aarlrenter writes:
That's impossible! According to the BLS , gasoline prices dropped by .2% in April. With gasoline prices falling, you would think Americans would drive more, not less."
The BLS actually said "In April,
the index for petroleum-based energy fell 1.6 percent, offsetting a 2.5
percent increase in the index for energy services." (source: CPI release on their website).
If you want to spread indignant complaints about economic data, please at least get the numbers right. You were off by a factor of 8.
Of course, you could look up what "seasonal adjustment" actually means, and how it, gosh, "adjusts" the data as the "seasons" change.
On saturday nite there isn't much on except for Wall Street Journal Report, and the first five minutes of Saturday Night Live. It is nice to turn on the old brain on here though. Maybe some tea too.
Many need to thank the FED and the US government for having to shell out devalued dollars this summer. The American people a so damn stupid to put up with this crap they deserve it.
Bye, bye, stimuli and bye, bye Bucky.
Perhaps even more stunning is the real price graph for Diesel (from the EIA). Ouch.
Tell me about it - my wife & I both drive Jetta diesels. HOWEVER at 50 mpg it isn't QUITE as bad as driving say a diesel powered monster truck getting 12 mpg.
But I am watching prices and doing the math - if diesel keeps going up and gas powered mpg vehicles keep improving then I might ditch diesel & go back to gasoline.
I haven't seen anything from the gas side of the fuel pump though come close to my needs of high mileage & rough ride - not yet. Some awesome 'light drive' gas & gas hybrid commuters out there that if I were doing start-n-stop commuting I'd buy in a heartbeat... but nothing from the gas side now that covers 'states' like I cover states for the same dollar (or carbon foot print) per mile like my diesels do.
"awgee writes:
Is there any need to force conservation of oil? It appears that as the price rises, people will cut back on usage. Amazing, huh?"
The problem with just relying on people cutting back on oil use in response to prices is that the damn prices will eventually fall, and then demand will come roaring back. As happened after the 1970s oil shocks.
This would be fine from a free markets standpoint if the oil markets were actually free. However, the world is dependent upon regimes in OPEC/Russia who are not reliable sources of supply.
There is a strong national interest in breaking free of this dependency. The markets cannot price in the true cost of keeping the supply open, for example the cost of the war in Iraq. However, I have my doubts that lawmakers could do anything intelligent about the problem at this point.
Yeah. Every week the local news will visit some gas station and ask people about the high prices. 99 times out of 100 they'll blame the oil companies. They just don't have a clue.
I spend a lot of time camping in state parks (in NY) every summer and I just can't wait for the inevitable propane cylinder explosions and other bits of first-time camping ineptitude.
And then the abandoned wet tents, not taken down, after the tenderfeet bug out after a downpour.
Oh well, at least there will be less generator noise.
There is a strong national interest in breaking free of this dependency. The markets cannot price in the true cost of keeping the supply open, for example the cost of the war in Iraq. However, I have my doubts that lawmakers could do anything intelligent about the problem at this point.
That's similar to the problem I have -- I don't see that the politicians are more forward looking than the markets right now.
Not that they can't be, but as far as I can tell the aren't (or, perhaps more likely, that are too interested in their own status to care about where the nation is headed until the nation's fate threatens their own careers, and they just assumed the economy was a "solved problem").
BTW I like how the nominal price which hasn't gone down for a sustained period since 1980 is supposed to start going down tomorrow, according to the projection.
One of many problems with the world-wide gas market is it is designed to be inelastic... many consumers don't see the rise in oil prices due to state controlled prices. India just announced they are giving in to the inevitable.
Politicians are the dinosaurs of old industries, old wealth, and old power. Unfortunately for US the current industries, current wealth and current power have changed... yet our politicians are stuck in the old way. The Internet and information technology are changing industries and the world, yet I think we've yet to see Washington catch on. If they could legislate from their home-districts, I think it would be a blow to lobbyists all over... and might save some of the gas and time wasted away from their families. When are we going to see some type of "Digital Congress"?
But I am watching prices and doing the math - if diesel keeps going up and gas powered mpg vehicles keep improving then I might ditch diesel & go back to gasoline.
You can start cutting your Diesel with recycled cooking oil or goto a 2 tank conversion.
Diesel engines were designed to run on more then one type of fuel.
Two things,
1. Maxine Waters is going to take care of all of this for us-http://blog.metro-real-estate.com/?p=459-see the clip at the bottom of the article.
2. The crude price issue is a function of Fed's low interest rate policy and the consequent decline of the dollar-http://blog.metro-real-estate.com/?p=460.
It would be way cool to see (total miles)(average price/gal)(ave mile/gal) over the same 30 or 40 year period. In principle that should tell us how well americans respond to changes in actual out of pocket expense, not just price.
These prices are exactly what this country needs to make people quit driving 10mpg SUVs. It sucks when I fill my tank but I only live 4 miles from work so a tank of gas lasts 2-3 weeks.
I live in a touristic area of Colorado and went to one of the popular State Parks today. There were only a handfull of out of state tags there. Normally on Memorial Day weekend there would be at least 20-30% out of state tags.
Also I hardly ever see a land yaught anymore. When I moved here in 2000 you could hardly drive for the damn things.
These charts need context. Cars, in general, are much more fuel efficient than in the '73 or '81. (Of course, if you're an
1) idiot
2) rich
3) HELOC rich
4) indifferent
5) contrarian geezer who buys big old cars for cash out of pocket, runs them into the ground and never gives a damn about gas milage. Repeat as needed.(geezer sub-class: consumer capitalists made to cry allatime)
Or you could be driving something that goes 4 or more times as far as almost anything available circa 1980. As I recall, people who driving Celica's in 1980 were pretty happy. If you were to put a finger on Detroit lost their way, it was their plodding response to Toyota right then. On mileage, as per this conversation, and on how well the bits and pieces fit together. Later,
in 1989, Toyota would make the Lexus.
Detroit's most profitable response was bigger guzzlers that took advantage of fuel prices that did not keep up with incomes. So now the fuel price has. Boo hoo.
If you were to put a finger on Detroit lost their way, it was their plodding response to Toyota right then.
They didn't need to respond, because the gov't saved their bacon by raising import tariffs on Japanese vehicles by $2000/car. Which made the shoddy US cars (with modest improvements in quality) price competitive.
The Big 3 should have gone BK then. Kind of like Countrywide and BS should have now.
But even the mighty Ozymandias can't defy reality forever. The thing is, when the US gov't can no longer stop the Too-Big-To-Fail from failing, it will be because it itself is BK.
As far as measuring gasoline demand, I'd prefer to use the EIA weekly inventory numbers that show how much oil products were delivered. This DOT measure is based on a very small number of road counters. The EIA data shows about a 0.5-1.0% decline in gasoline demand so far for the year.
There is serious talk of eliminating Saturday
delivery from the Postal Service. The gas savings, combined with the labor cost savings, should ensure profitability for another decade
"Does the second dip (recession) happens after gasoline starts crashing? I guess this is when economies of oil states start contributing to negative growth."
REBear,
It is well known along the louisiana and texas gulf coast that we suffer from recession lag. When the rest of the country his bottom and starts moving up we usually carsh hard.
There were occasional complaints several years ago about an "SUV loophole" in the tax code. I think it's still there, but maybe somebody else can give more details.
The funniest thing about the EIA diesel graph, which is less than 4 weeks old, is that it shows diesel topping out at just over $4 per gallon - which is hilarious when one considers that the US average is about $4.70 at present, that the price trajectory is still upwards, and will remain so for quite some time unless there is a substantial sustained decline in crude prices.
I too wanna believe Americans are reacting rationally to curb excess gas consumption and that we can measure reductions in driving. I also wanna believe that marriage vows of fidelity are ironclad. But cmon, how would any agency possibly have a solid mathematical handle on how many miles are actually driven by the 247+ million automobiles in America? Doesnt the media and/or readers ask these questions? U wanna bet this was just a statistical extrapolation from some sample and one that invariably contains some fudging? What wasnt reported was that FHWA has only 4000 automatic traffic recorders. The interstate system alone is over 46,000 miles in length. In total, the US has 5.7 million miles of paved roads highways, state roads, local avenues and boulevards, plus the dinky street from your cul-de sac to the ATM to the gas station. That's 1 recorder per every 1,425 miles.
Hence the fudging...uh, I mean statistical extrapolations.
I googled a link to a 2008 Transportation Board study citing that On average, the error of ...volumes estimates was around 5% for less variable roads and 8-9% for roads with increasing variability. Transportation Research Information Services (TRIS)
So FHWAs margin of error exceeds and may double the reported decline in usage. Just because you can graph something does not make it accurate, despite how well it gels with our beliefs. Garbage In, Garbage Out.
Diesel one-tons are popular in my neck of the woods. Sometimes they are used to haul stock trailers, mostly my wife claims they are compensation for smallness of the male...
why most of them are lifted as well is beyond me.
I wonder how long it will take Toyota to dust off the old prints and return to the the T-100, a very useful pickup but not as fuel-hungry as the current Tondra (sp!) that only apes the Ford/Chevy/Dodge nonsense.
It would be way cool to see (total miles)(average price/gal)(ave mile/gal) over the same 30 or 40 year period. In principle that should tell us how well americans respond to changes in actual out of pocket expense, not just price.
But thanks for the great data in any event.
VoiceFromTheWilderness | 05.25.08 - 2:49 am | #
I remember reading that after the oil shock of 1975, there was a time in the 1980's when vehicle miles were up, but gasoline consumption was slightly lower than before.
No Frog Speak wrote:
These charts need context. Cars, in general, are much more fuel efficient than in the '73 or '81.
| 05.25.08 - 4:15 am | #
mock turtle chimes in
No Frog Speak: the two years you cite, yeah you are literally correct but...since the mid 80s neither cafe standards nor actual average vehicle-fleet gas mileage have improved significantly.
in other words we have made very little progress ON AVERAGE towards increased vehicle efficiency in more than 20 years ALTHOUGH some few individual vehicles produced and marketed in the past 5 years, are substantially more fuel efficient.
Gomer - I had a great sail last Sunday. Used about a pint of gas to get the boat off the dock and out of the marina to where I could get the main up.
The guys in the power boats are cringing in horror at their fill-up bills.
Every major recession a few boat/yacht manufacturers go out of business. Not just fly-by-nights, but reputable, quality manufacturers. It's a marginal business at best; most of the boat manufacturers are in it as much for love as money - and when the downturns hit, the banks start calling loans, the inventory starts piling up, and the calls to the bankruptcy attorneys start going out.
Challenger Powerboats filed a few days ago. Nichols Brothers filed last fall. Palmer Johnson failed in 2003 at the tail end of the last recession. Earlier recessions claimed WestSail and Cape Dory.
"I wonder how long it will take Toyota to dust off the old prints and return to the the T-100, a very useful pickup but not as fuel-hungry as the current Tondra (sp!) that only apes the Ford/Chevy/Dodge nonsense."
A remodeling contractor was complaining to me that Detroit had forced big engines on him.
His old full-sized Detroit pickup had a six, which was enough for him, but when it came time for a new truck he couldn't find anything in that class with less than a 5-liter V8.
BTW, I think Randall Forsyth, one of the few reasons to read Barron's, generally gets it right. And I endorse his opinion on commodities also:
The central bank's Herculean efforts to stave off a financial meltdown that would likely have followed a Bear Stearns bankruptcy in mid-March had raised hopes that the worst of the credit crisis was over.
Perhaps. But the economy is likely to suffer further repercussions from the fallout from the housing collapse. Even as foreclosures climb further, Robert Arnott of Research Affiliates points out that many of those homeowners who manage to pay their mortgages will do so by tightening their belts on other spending.
All of which suggests the Fed realizes and accepts that its measures to bolster the economy work with a lag of a minimum of six-to-nine months, and that's when the financial system is working at peak efficiency to extend credit. That's surely not the case now, which implies a prolonged period of subpar growth. Indeed, observes Komileva, the Fed doesn't expect the economy to get back to normal growth until 2010.
In that circumstance, the stock market is likely to labor. Treasuries, at best, look like they will return their paltry coupon rates in the absence of further rate cuts. The dollar no longer looks like a one-way bet to decline. Commodities, meanwhile, increasingly resemble the dot-com stocks of 1990s. Which leaves little in the way of shelters from this storm.
it's as much about the steel as the oil
Oil Equations | 05.25.08 - 2:11 am | #
Outstanding presentation. BTW - I was invited to see a technical presentation put on by ASM (Amer. Soc. Mat'ls) on corrosion. I missed it - was out of town on business (damn).
But I can believe it - the business involved with all forms of infrastructure are booming from what I can see. The bad news is this trend & resulting high commodity prices will suck discretionary spending from retail & consumer services.
But it will also provide a lot of jobs world wide. You don't replace/repair infrastructure by wishing it replaced/repaired.
It will likely lead to a period where there will be plenty of work available & good money too but the pay won't be worth a damn if measured in the basic commodities that infrastructure is being replaced in. But the discretionary items will continue t face pressure as long as the commodities draw away spending dollars.
We'll see price inflation in the commodity sectors and price deflation in the discretionary services & products. The more money the CBs pump money to help discretionary sectors the more the price inflation we'll see in the commodities. Tell me we aren't seeing that now?
Still this kind of rebalancing won't be all bad IF we can avoid the social & political disruptions usually associated with dislocations of this type. But to be honest I'm not certain how you convert mortgage bankers into wildcatters and retail clerks into pipeliners but it looks like that has to happen. Market forces & price signals are telling us that - once again.
when we start down the road of 'coal to liquids' , imagine the increased cost of steel!
were so trapped, it's fugly.
Steel Production
Global steel production is dependent on coal around 68% of total global steel production relies directly on inputs of coal. 592Mt of coking coal and Pulverised Coal Injection (PCI) coals are used in global steel production, which is 12% of total hard coal consumption worldwide (see overleaf for more information on PCI).
when we start down the road of 'coal to liquids' , imagine the increased cost of steel!
were so trapped, it's fugly.
Its not as bad as that - a lot of those rusted out hulks will be reprocessed & not require a huge increase in actual 'smelting' of new iron ore into steel (that's what uses coke & limestone). There will be a need for some new ore sources but not a lot compared the amount of work needed to be done. Most will be from remelted & realloyed & reformed (rolled, cast or extruded) 'recycled' materials.
At $600/gt and up for basic scrap - you'll see people cutting up all kinds of eye sores to sell back to the steel industry.
The real bottleneck won't be in 'materials' - it will be in the skilled labor needed to process those materials. I was only half joking when I asked above - how do we turn mortgage bankers into wildcatters?
Here in West Palm Beach most boats are staying at the dock or they are just hitting the local sand bar to park and party. Have a few friends that cancelled their annual Memorial day trip to the Bahamas. Gas for a center console 28 or open sports fisherman runs about $1000.
The price of gas is killing the marine industry. Even the rich are hurting. Hinckley Yachts has 72 Motor Yachts for sale. West Marine has same store sales down 9% for the first quarter. Americans are going to be going crazy now that their recreation options are becoming more limited. It is going to be a long hot frustrating summer
I wish I could get my hands on a brand new 1985 pick up truck. Nobody makes small pickups in the US any more. There's a bunch overseas, but we're not likely to see any of them soon.
Small engines, not a ton of power, but great mileage and easy to maintain. But that was back in the day when auto manufacturers didn't load a car up with a bunch of unnecessary features and call them "standard."
I agree there is miles of unused railroad tracks that will be torn out and reused. I think the guy at Mittal steel emphasizes the point that there are not enough steel mills in the world.
Deep oil: really, really deep oil
CHARLIE GILLIS | May 14, 2008 |
It is among the least-known feats of Cold War bravura, and if the Soviets had known what it would one day do for Big Oil in America, they probably would never have tried it. It was 1965, and a team of geologists, engineers and roughnecks had set out to drill the deepest hole on the surface of the planet. If all went well, the Kola borehole would descend through 15 km of rock in the Arctic hinterland northwest of Murmansk, eventually brushing up against the half-molten ooze known as mantle, and yielding no end of invaluable secrets about the earth's internal physics in the process.
But as with so many ideas that seem simple in principle, complications ensued. The planning dragged on, and when crews finally broke earth in 1970, they were plagued by folding and breaking pipe, as the drill string succumbed again and again to crushing pressure and temperatures topping 100° C. It took 13 years of drilling to reach the 12-km mark, by which time the hole kept plugging up with hot, shifting rock which behaved more like melting rubber than hard mineral. Crew leaders grew frustrated. Folks at the Kremlin began asking exactly what the motherland stood to gain from boring a 49,000-foot hole in the ground. In 1989, with the Soviet bloc on the brink of collapse and the team still far from its 15-km target, progress came to a halt: the rig had reached a world-record depth of 12,262 m 2,679 deeper than a gas well in Oklahoma completed 16 years before. But beyond bragging rights, the whole project seemed pointless.
Wondering whether these prices and their apparent impact on demand (at least short term) might resurrect discussions about 1) putting a floor under the oil price (i.e., taxing the increment above a set cost) to nix that strategy (per Bond guy) for suppliers interested in slowing development of alternatives, and 2) given the impact on demand at these levels, the potential for a revenue neutral gas tax increase/payroll tax reduction (or something like that) to keep the incentive without sending all the gravy to the producers etc.
Anything out there?
I agree there is miles of unused railroad tracks that will be torn out and reused. I think the guy at Mittal steel emphasizes the point that there are not enough steel mills in the world.
Tim | 05.25.08 - 3:39 pm | #
Better yet would be to put those unused railways back into operation. We need to move back to a far more RR based trasport system, esp for freight. keep trucks for last 50 miles, stack intermodal containers on trains for the long haul stuff.
Hi. I'm from Portugal, in Europe, and just want to thank you for this post.
In my country, we are facing a serious situation, because the gasoline prices are constantly growing (almost everyday).
Since the speculation entered the oil market, the gasoline prices have risen, and here in Portugal it has been catastrophic.
Although our gasoline companies buy the oil in dollars, they sell the gasoline in Euros. So, if there was a rational behaviour, the gasoline prices should have only grow up 2% instead of the 20% growth only in this year. So, basically, the portuguese people are being stolen by the gasoline companies.
Besides that, we have another problem. Almost 60% of the price of 1 gallon of gasoline reverts to the Government, because they created a tax for these kind of products. So, this means that our government is taking advantage of the growth of the gasoline price to get more money with taxes.
It's a disaster...
first?
Oh good prices are going to come down according to the eia. I was getting concerned.
Does the second dip (recession) happens after gasoline starts crashing? I guess this is when economies of oil states start contributing to negative growth.
"Note that the most recent data from the EIA is for March. According to the EIA, gasoline prices have risen 13% since then."
That's impossible! According to the BLS , gasoline prices dropped by .2% in April. With gasoline prices falling, you would think Americans would drive more, not less.
Is there any need to force conservation of oil? It appears that as the price rises, people will cut back on usage. Amazing, huh?
I just want to say I love the fact that I can log in to Calculated Risk at 11PM on Saturday night and find a fresh post about gas prices and vehicle miles.
This blog is beautiful!
"aarlrenter writes:
That's impossible! According to the BLS , gasoline prices dropped by .2% in April. With gasoline prices falling, you would think Americans would drive more, not less."
The BLS actually said "In April,
the index for petroleum-based energy fell 1.6 percent, offsetting a 2.5
percent increase in the index for energy services." (source: CPI release on their website).
If you want to spread indignant complaints about economic data, please at least get the numbers right. You were off by a factor of 8.
Of course, you could look up what "seasonal adjustment" actually means, and how it, gosh, "adjusts" the data as the "seasons" change.
On saturday nite there isn't much on except for Wall Street Journal Report, and the first five minutes of Saturday Night Live. It is nice to turn on the old brain on here though. Maybe some tea too.
AAA reports just over half of California travelers will take trips of 250 miles or less and 54 percent plan to spend $600 or less.
Many said thanks to high gas prices they will be shelling out big bucks to kick off the summer.
AAA says travel to decrease for Memorial weekend | KGET TV 17
Many need to thank the FED and the US government for having to shell out devalued dollars this summer. The American people a so damn stupid to put up with this crap they deserve it.
Bye, bye, stimuli and bye, bye Bucky.
Ministry of Truth, yeah, I believe every graph the EIA has put out for the last 5 years showed a price decline as the "projection"!
Best to all.
Speaking of diesel fuel, it was $5.09 in town today. Let me see, that's $180 to fill up the truck. Yes, that hurts...
Unfortunately, "real" is again calculated using the official CPI.
If you adjust gas prices using the dollar index it tells a different story altogether.
Perhaps even more stunning is the real price graph for Diesel (from the EIA). Ouch.
Tell me about it - my wife & I both drive Jetta diesels. HOWEVER at 50 mpg it isn't QUITE as bad as driving say a diesel powered monster truck getting 12 mpg.
But I am watching prices and doing the math - if diesel keeps going up and gas powered mpg vehicles keep improving then I might ditch diesel & go back to gasoline.
I haven't seen anything from the gas side of the fuel pump though come close to my needs of high mileage & rough ride - not yet. Some awesome 'light drive' gas & gas hybrid commuters out there that if I were doing start-n-stop commuting I'd buy in a heartbeat... but nothing from the gas side now that covers 'states' like I cover states for the same dollar (or carbon foot print) per mile like my diesels do.
If you adjust gas prices using the dollar index it tells a different story altogether.
tj & the bear | 05.24.08 - 11:46 pm | #
That is what the dollar index is telling us - consume less oil (& other resources) and other peoples labor and produce more STUFF yourself.
It will continue to hurt either via job loss, dollar devaluation or likely some mix of both UNTIL that consumption-production imbalance is corrected.
It amazes me more folks don't get it.
It would be wonderful to see the miles driven adjusted by population (miles per capita).
I think that would be interesting.
"awgee writes:
Is there any need to force conservation of oil? It appears that as the price rises, people will cut back on usage. Amazing, huh?"
The problem with just relying on people cutting back on oil use in response to prices is that the damn prices will eventually fall, and then demand will come roaring back. As happened after the 1970s oil shocks.
This would be fine from a free markets standpoint if the oil markets were actually free. However, the world is dependent upon regimes in OPEC/Russia who are not reliable sources of supply.
There is a strong national interest in breaking free of this dependency. The markets cannot price in the true cost of keeping the supply open, for example the cost of the war in Iraq. However, I have my doubts that lawmakers could do anything intelligent about the problem at this point.
I have my doubts that lawmakers could do anything intelligent about the problem at this point.
I have absolutely no doubt that they CANNOT do anything intelligent about the problem at this point.
It amazes me more folks don't get it.
Yeah. Every week the local news will visit some gas station and ask people about the high prices. 99 times out of 100 they'll blame the oil companies. They just don't have a clue.
I spend a lot of time camping in state parks (in NY) every summer and I just can't wait for the inevitable propane cylinder explosions and other bits of first-time camping ineptitude.
And then the abandoned wet tents, not taken down, after the tenderfeet bug out after a downpour.
Oh well, at least there will be less generator noise.
(that above remark relates to reports that people are spending "one-tank" vacations on camping)
There is a strong national interest in breaking free of this dependency. The markets cannot price in the true cost of keeping the supply open, for example the cost of the war in Iraq. However, I have my doubts that lawmakers could do anything intelligent about the problem at this point.
That's similar to the problem I have -- I don't see that the politicians are more forward looking than the markets right now.
Not that they can't be, but as far as I can tell the aren't (or, perhaps more likely, that are too interested in their own status to care about where the nation is headed until the nation's fate threatens their own careers, and they just assumed the economy was a "solved problem").
BTW I like how the nominal price which hasn't gone down for a sustained period since 1980 is supposed to start going down tomorrow, according to the projection.
One of many problems with the world-wide gas market is it is designed to be inelastic... many consumers don't see the rise in oil prices due to state controlled prices. India just announced they are giving in to the inevitable.
Others like china are holding out for now
Most middle eastern countries also deeply subsidize gas, exacerbating the domestic demand that is cutting down on exports to the world market.
The u.s. energy policy is messed up on many fronts, but at least we let the price of gas float.
Is there any need to force conservation of oil? It appears that as the price rises, people will cut back on usage. Amazing, huh?
When people are forced to pay for their oil by sending their own children overseas to fight and die, usage will be cut back even more...
Politicians are the dinosaurs of old industries, old wealth, and old power. Unfortunately for US the current industries, current wealth and current power have changed... yet our politicians are stuck in the old way. The Internet and information technology are changing industries and the world, yet I think we've yet to see Washington catch on. If they could legislate from their home-districts, I think it would be a blow to lobbyists all over... and might save some of the gas and time wasted away from their families. When are we going to see some type of "Digital Congress"?
Dinosaurs, every last one of them...
dryfly writes:
But I am watching prices and doing the math - if diesel keeps going up and gas powered mpg vehicles keep improving then I might ditch diesel & go back to gasoline.
You can start cutting your Diesel with recycled cooking oil or goto a 2 tank conversion.
Diesel engines were designed to run on more then one type of fuel.
The u.s. energy policy is messed up on many fronts, but at least we let the price of gas float.
Give the guys in Washington a couple of months.
Hmm, I don't think I posted this here. So here goes. Basic math. Reserves/consumption.
Look forward. US will be sucked dry in 11 years. [b]100% dependent[b] on imports then.
U.S. Energy Facts - Energy Explained, Your Guide To Understanding Energy
My bet? Vehicle miles will be background noise at that point.
dons tin hat
PTB saw this coming and realized demand destruction is needed to buy time.
tin hat off
playing with html. ignore screwups
Two things,
1. Maxine Waters is going to take care of all of this for us-http://blog.metro-real-estate.com/?p=459-see the clip at the bottom of the article.
2. The crude price issue is a function of Fed's low interest rate policy and the consequent decline of the dollar-http://blog.metro-real-estate.com/?p=460.
http://www.simmonsco-intl.com/files/OTC%202008.pdf
CLF
it's as much about the steel as the oil
Data request:
It would be way cool to see (total miles)(average price/gal)(ave mile/gal) over the same 30 or 40 year period. In principle that should tell us how well americans respond to changes in actual out of pocket expense, not just price.
But thanks for the great data in any event.
These prices are exactly what this country needs to make people quit driving 10mpg SUVs. It sucks when I fill my tank but I only live 4 miles from work so a tank of gas lasts 2-3 weeks.
I live in a touristic area of Colorado and went to one of the popular State Parks today. There were only a handfull of out of state tags there. Normally on Memorial Day weekend there would be at least 20-30% out of state tags.
Also I hardly ever see a land yaught anymore. When I moved here in 2000 you could hardly drive for the damn things.
These charts need context. Cars, in general, are much more fuel efficient than in the '73 or '81. (Of course, if you're an
1) idiot
2) rich
3) HELOC rich
4) indifferent
5) contrarian geezer who buys big old cars for cash out of pocket, runs them into the ground and never gives a damn about gas milage. Repeat as needed.(geezer sub-class: consumer capitalists made to cry allatime)
Or you could be driving something that goes 4 or more times as far as almost anything available circa 1980. As I recall, people who driving Celica's in 1980 were pretty happy. If you were to put a finger on Detroit lost their way, it was their plodding response to Toyota right then. On mileage, as per this conversation, and on how well the bits and pieces fit together. Later,
in 1989, Toyota would make the Lexus.
Detroit's most profitable response was bigger guzzlers that took advantage of fuel prices that did not keep up with incomes. So now the fuel price has. Boo hoo.
Some citizens are preparing for "marauding hordes."
The article requested is no longer available.
If you were to put a finger on Detroit lost their way, it was their plodding response to Toyota right then.
They didn't need to respond, because the gov't saved their bacon by raising import tariffs on Japanese vehicles by $2000/car. Which made the shoddy US cars (with modest improvements in quality) price competitive.
The Big 3 should have gone BK then. Kind of like Countrywide and BS should have now.
But even the mighty Ozymandias can't defy reality forever. The thing is, when the US gov't can no longer stop the Too-Big-To-Fail from failing, it will be because it itself is BK.
Oh, wait--that's now.
As far as measuring gasoline demand, I'd prefer to use the EIA weekly inventory numbers that show how much oil products were delivered. This DOT measure is based on a very small number of road counters. The EIA data shows about a 0.5-1.0% decline in gasoline demand so far for the year.
There is serious talk of eliminating Saturday
delivery from the Postal Service. The gas savings, combined with the labor cost savings, should ensure profitability for another decade
Out for a sail yesterday, there were scant few powerboats on the ocean, and none of them pushing big bow waves that are milage killers.
One can short the powerboat manufacturers. They are going to be toast in no time with $4 gas..
Gomer
Can't wait for those prices to fall off a cliff like that on Tuesday. I was really getting worried. Time to dust off the H2. Yee-haw
"Does the second dip (recession) happens after gasoline starts crashing? I guess this is when economies of oil states start contributing to negative growth."
REBear,
It is well known along the louisiana and texas gulf coast that we suffer from recession lag. When the rest of the country his bottom and starts moving up we usually carsh hard.
ugh,
Doesn't work like that - R/P has been lower - neither P nor R are constants, and P will continue to decline.
OE,
Hadn't seen that bit by Simmons yet, thanks for the link. Keys in on one of the issues that escapes many, that of scale (pun intended).
There were occasional complaints several years ago about an "SUV loophole" in the tax code. I think it's still there, but maybe somebody else can give more details.
James Hamilton (of Econbrowser) just published a paper:
Understanding Crude Oil Prices
I am still working through it, but it appears very interesting.
Heh.
The funniest thing about the EIA diesel graph, which is less than 4 weeks old, is that it shows diesel topping out at just over $4 per gallon - which is hilarious when one considers that the US average is about $4.70 at present, that the price trajectory is still upwards, and will remain so for quite some time unless there is a substantial sustained decline in crude prices.
I too wanna believe Americans are reacting rationally to curb excess gas consumption and that we can measure reductions in driving. I also wanna believe that marriage vows of fidelity are ironclad. But cmon, how would any agency possibly have a solid mathematical handle on how many miles are actually driven by the 247+ million automobiles in America? Doesnt the media and/or readers ask these questions? U wanna bet this was just a statistical extrapolation from some sample and one that invariably contains some fudging? What wasnt reported was that FHWA has only 4000 automatic traffic recorders. The interstate system alone is over 46,000 miles in length. In total, the US has 5.7 million miles of paved roads highways, state roads, local avenues and boulevards, plus the dinky street from your cul-de sac to the ATM to the gas station. That's 1 recorder per every 1,425 miles.
Hence the fudging...uh, I mean statistical extrapolations.
I googled a link to a 2008 Transportation Board study citing that On average, the error of ...volumes estimates was around 5% for less variable roads and 8-9% for roads with increasing variability. Transportation Research Information Services (TRIS)
So FHWAs margin of error exceeds and may double the reported decline in usage. Just because you can graph something does not make it accurate, despite how well it gels with our beliefs. Garbage In, Garbage Out.
Diesel one-tons are popular in my neck of the woods. Sometimes they are used to haul stock trailers, mostly my wife claims they are compensation for smallness of the male...
why most of them are lifted as well is beyond me.
I wonder how long it will take Toyota to dust off the old prints and return to the the T-100, a very useful pickup but not as fuel-hungry as the current Tondra (sp!) that only apes the Ford/Chevy/Dodge nonsense.
It would be way cool to see (total miles)(average price/gal)(ave mile/gal) over the same 30 or 40 year period. In principle that should tell us how well americans respond to changes in actual out of pocket expense, not just price.
But thanks for the great data in any event.
VoiceFromTheWilderness | 05.25.08 - 2:49 am | #
I remember reading that after the oil shock of 1975, there was a time in the 1980's when vehicle miles were up, but gasoline consumption was slightly lower than before.
Highway Statistics 2001 - Vehicle Registrations, Fuel Consumption, and Vehicle Miles of Travel - Chart
So it can be done.
No Frog Speak wrote:
These charts need context. Cars, in general, are much more fuel efficient than in the '73 or '81.
| 05.25.08 - 4:15 am | #
mock turtle chimes in
No Frog Speak: the two years you cite, yeah you are literally correct but...since the mid 80s neither cafe standards nor actual average vehicle-fleet gas mileage have improved significantly.
in other words we have made very little progress ON AVERAGE towards increased vehicle efficiency in more than 20 years ALTHOUGH some few individual vehicles produced and marketed in the past 5 years, are substantially more fuel efficient.
for graphs and story see:
CAFE Standards: Gas-Sipping Etiquette for Cars : NPR
for greater look at consumption and price, tax related issues see:
BW Online | May 27, 2002 | Want to Cut Gasoline Use? Raise Taxes
Gomer - I had a great sail last Sunday. Used about a pint of gas to get the boat off the dock and out of the marina to where I could get the main up.
The guys in the power boats are cringing in horror at their fill-up bills.
Every major recession a few boat/yacht manufacturers go out of business. Not just fly-by-nights, but reputable, quality manufacturers. It's a marginal business at best; most of the boat manufacturers are in it as much for love as money - and when the downturns hit, the banks start calling loans, the inventory starts piling up, and the calls to the bankruptcy attorneys start going out.
Challenger Powerboats filed a few days ago. Nichols Brothers filed last fall. Palmer Johnson failed in 2003 at the tail end of the last recession. Earlier recessions claimed WestSail and Cape Dory.
"I wonder how long it will take Toyota to dust off the old prints and return to the the T-100, a very useful pickup but not as fuel-hungry as the current Tondra (sp!) that only apes the Ford/Chevy/Dodge nonsense."
A remodeling contractor was complaining to me that Detroit had forced big engines on him.
His old full-sized Detroit pickup had a six, which was enough for him, but when it came time for a new truck he couldn't find anything in that class with less than a 5-liter V8.
Billy -
Quick take.
Vehicles over 6000 lbs (H2) "used for business" are eligible for up to $100,000 in tax deductions.
Hybrid vehicles, whether used for business or not, are eligible for up to $4,000 in tax deductions.
Tax policy; bigger (less fuel efficient) is better.
BTW, I think Randall Forsyth, one of the few reasons to read Barron's, generally gets it right. And I endorse his opinion on commodities also:
The central bank's Herculean efforts to stave off a financial meltdown that would likely have followed a Bear Stearns bankruptcy in mid-March had raised hopes that the worst of the credit crisis was over.
Perhaps. But the economy is likely to suffer further repercussions from the fallout from the housing collapse. Even as foreclosures climb further, Robert Arnott of Research Affiliates points out that many of those homeowners who manage to pay their mortgages will do so by tightening their belts on other spending.
All of which suggests the Fed realizes and accepts that its measures to bolster the economy work with a lag of a minimum of six-to-nine months, and that's when the financial system is working at peak efficiency to extend credit. That's surely not the case now, which implies a prolonged period of subpar growth. Indeed, observes Komileva, the Fed doesn't expect the economy to get back to normal growth until 2010.
In that circumstance, the stock market is likely to labor. Treasuries, at best, look like they will return their paltry coupon rates in the absence of further rate cuts. The dollar no longer looks like a one-way bet to decline. Commodities, meanwhile, increasingly resemble the dot-com stocks of 1990s. Which leaves little in the way of shelters from this storm.
Now this is the truth........
Buffett blames banks for credit crisis
| Reuters
Buffett blames banks for credit crisis..
Lyon that is Buffett's truth. Remember, Berkshire Hathaway owns 19.1% of Moody's.
it's as much about the steel as the oil
Oil Equations | 05.25.08 - 2:11 am | #
Outstanding presentation. BTW - I was invited to see a technical presentation put on by ASM (Amer. Soc. Mat'ls) on corrosion. I missed it - was out of town on business (damn).
But I can believe it - the business involved with all forms of infrastructure are booming from what I can see. The bad news is this trend & resulting high commodity prices will suck discretionary spending from retail & consumer services.
But it will also provide a lot of jobs world wide. You don't replace/repair infrastructure by wishing it replaced/repaired.
It will likely lead to a period where there will be plenty of work available & good money too but the pay won't be worth a damn if measured in the basic commodities that infrastructure is being replaced in. But the discretionary items will continue t face pressure as long as the commodities draw away spending dollars.
We'll see price inflation in the commodity sectors and price deflation in the discretionary services & products. The more money the CBs pump money to help discretionary sectors the more the price inflation we'll see in the commodities. Tell me we aren't seeing that now?
Still this kind of rebalancing won't be all bad IF we can avoid the social & political disruptions usually associated with dislocations of this type. But to be honest I'm not certain how you convert mortgage bankers into wildcatters and retail clerks into pipeliners but it looks like that has to happen. Market forces & price signals are telling us that - once again.
Eecon,
always!
more good stuff..
404 - World Coal Institute
when we start down the road of 'coal to liquids' , imagine the increased cost of steel!
were so trapped, it's fugly.
Steel Production
Global steel production is dependent on coal around 68% of total global steel production relies directly on inputs of coal. 592Mt of coking coal and Pulverised Coal Injection (PCI) coals are used in global steel production, which is 12% of total hard coal consumption worldwide (see overleaf for more information on PCI).
anecdotal evidence time-
santa cruz CA, memorial weekend normally packed, its a zoo. Boardwalk opens for the summer season, everyday now.
Its dead here. Riva's grill on the wharf, virtually empty at 9pm.
Few people downtown.
Weather grey and overcast on Sat didnt help. Fancy restaurant Soif full at 930. The well heeled still coming over the hill, but less of them.
Gas at $4.17 gal here.
No swell at steamers either. What a weekend.
Output at Cantarell, Pemex's biggest field, fell 33 percent to 1.07 million barrels a day
that's quite the decline curve.
CTL plant's coming soon.
when we start down the road of 'coal to liquids' , imagine the increased cost of steel!
were so trapped, it's fugly.
Its not as bad as that - a lot of those rusted out hulks will be reprocessed & not require a huge increase in actual 'smelting' of new iron ore into steel (that's what uses coke & limestone). There will be a need for some new ore sources but not a lot compared the amount of work needed to be done. Most will be from remelted & realloyed & reformed (rolled, cast or extruded) 'recycled' materials.
At $600/gt and up for basic scrap - you'll see people cutting up all kinds of eye sores to sell back to the steel industry.
The real bottleneck won't be in 'materials' - it will be in the skilled labor needed to process those materials. I was only half joking when I asked above - how do we turn mortgage bankers into wildcatters?
dryfly asked: "how do we turn mortgage bankers into wildcatters?"
Little if any transformation needed. They were some pretty wild cats!
Here in West Palm Beach most boats are staying at the dock or they are just hitting the local sand bar to park and party. Have a few friends that cancelled their annual Memorial day trip to the Bahamas. Gas for a center console 28 or open sports fisherman runs about $1000.
The price of gas is killing the marine industry. Even the rich are hurting. Hinckley Yachts has 72 Motor Yachts for sale. West Marine has same store sales down 9% for the first quarter. Americans are going to be going crazy now that their recreation options are becoming more limited. It is going to be a long hot frustrating summer
This iwl not be pretty.
I wish I could get my hands on a brand new 1985 pick up truck. Nobody makes small pickups in the US any more. There's a bunch overseas, but we're not likely to see any of them soon.
Small engines, not a ton of power, but great mileage and easy to maintain. But that was back in the day when auto manufacturers didn't load a car up with a bunch of unnecessary features and call them "standard."
The market is betting Bush will invade Iran before leaving office.
dryfly
I agree there is miles of unused railroad tracks that will be torn out and reused. I think the guy at Mittal steel emphasizes the point that there are not enough steel mills in the world.
giocatoli,
Sf wharf is empty too. Same with downtown .
How much of the decline in driven miles has to do with unemployed builders/laborers and, actually, anyone in the housing industry, including realtors?
Maybe the entire decrease in miles driven can be explained by the absence of specuvestors - wouldn't that be funny.
Deep oil: really, really deep oil
CHARLIE GILLIS | May 14, 2008 |
It is among the least-known feats of Cold War bravura, and if the Soviets had known what it would one day do for Big Oil in America, they probably would never have tried it. It was 1965, and a team of geologists, engineers and roughnecks had set out to drill the deepest hole on the surface of the planet. If all went well, the Kola borehole would descend through 15 km of rock in the Arctic hinterland northwest of Murmansk, eventually brushing up against the half-molten ooze known as mantle, and yielding no end of invaluable secrets about the earth's internal physics in the process.
But as with so many ideas that seem simple in principle, complications ensued. The planning dragged on, and when crews finally broke earth in 1970, they were plagued by folding and breaking pipe, as the drill string succumbed again and again to crushing pressure and temperatures topping 100° C. It took 13 years of drilling to reach the 12-km mark, by which time the hole kept plugging up with hot, shifting rock which behaved more like melting rubber than hard mineral. Crew leaders grew frustrated. Folks at the Kremlin began asking exactly what the motherland stood to gain from boring a 49,000-foot hole in the ground. In 1989, with the Soviet bloc on the brink of collapse and the team still far from its 15-km target, progress came to a halt: the rig had reached a world-record depth of 12,262 m 2,679 deeper than a gas well in Oklahoma completed 16 years before. But beyond bragging rights, the whole project seemed pointless.
Wondering whether these prices and their apparent impact on demand (at least short term) might resurrect discussions about 1) putting a floor under the oil price (i.e., taxing the increment above a set cost) to nix that strategy (per Bond guy) for suppliers interested in slowing development of alternatives, and 2) given the impact on demand at these levels, the potential for a revenue neutral gas tax increase/payroll tax reduction (or something like that) to keep the incentive without sending all the gravy to the producers etc.
Anything out there?
"Is there any need to force conservation of oil?"
To raise prices even more.
I agree there is miles of unused railroad tracks that will be torn out and reused. I think the guy at Mittal steel emphasizes the point that there are not enough steel mills in the world.
Tim | 05.25.08 - 3:39 pm | #
Better yet would be to put those unused railways back into operation. We need to move back to a far more RR based trasport system, esp for freight. keep trucks for last 50 miles, stack intermodal containers on trains for the long haul stuff.
Hi. I'm from Portugal, in Europe, and just want to thank you for this post.
In my country, we are facing a serious situation, because the gasoline prices are constantly growing (almost everyday).
Since the speculation entered the oil market, the gasoline prices have risen, and here in Portugal it has been catastrophic.
Although our gasoline companies buy the oil in dollars, they sell the gasoline in Euros. So, if there was a rational behaviour, the gasoline prices should have only grow up 2% instead of the 20% growth only in this year. So, basically, the portuguese people are being stolen by the gasoline companies.
Besides that, we have another problem. Almost 60% of the price of 1 gallon of gasoline reverts to the Government, because they created a tax for these kind of products. So, this means that our government is taking advantage of the growth of the gasoline price to get more money with taxes.
It's a disaster...