Question about current gas prices (for a politically challenged individual)

[Hardcore Zornography]

Simple question, does anybody know what is going on with gas prices and why they are back to being bearable again? I don't really follow or understand too much about politics, so would I be right to assume that they went down for the election and will soon start going up again?

[skinsfan_1215]

The economy is not doing well, and the country as a whole has less money they are willing to spend. That means taking fewer trips, consolidating trips, etc. This drives down the demand for gas, in turn lowering prices. The driving habits people adopted when gas was $4 have not gone away yet. Also has to do with the supply side, and I haven't heard of any serious supply disruptions recently. Anyone think of anything I missed just fill it in.

[IONTOP]

This is just something I've always thought... OPEC doesn't want to see a president elected that will in theory make them less money than usual, therefore they may have thought if gas prices went down, people would think that the economy was going back up (a dollar buys more) and that we're headed in the right direction, therefore it's not time for change...

Okay I was talking out of my ass, but hell, I might be right

[Toe Jam]

This is just something I've always thought... OPEC doesn't want to see a president elected that will in theory make them less money than usual, therefore they may have thought if gas prices went down, people would think that the economy was going back up (a dollar buys more) and that we're headed in the right direction, therefore it's not time for change...

Okay I was talking out of my ass, but hell, I might be right

I think OPEC will spoil this for everybody in the not so distant future.

[Monte51Coleman]

A simple case of supply and demand now that the speculative bubble burst.

[skinsfan_1215]

This is just something I've always thought... OPEC doesn't want to see a president elected that will in theory make them less money than usual, therefore they may have thought if gas prices went down, people would think that the economy was going back up (a dollar buys more) and that we're headed in the right direction, therefore it's not time for change...

Okay I was talking out of my ass, but hell, I might be right

OPEC certainly has a big role in determining gas prices, but nothing like a good ole market economy. They decided to cut production a month or so back to help keep prices inflated, but even that day oil dropped like $5 a barrel. I suspect we would be at about $1.50 per gallon now if OPEC hadn't decided on that production cut.

[IONTOP]

Maybe we should all send them thank you notes, it could make them feel happy and they'll lower prices and up production...

I'm happy about the fact I filled my car up (13 gallons) for under $30

[Peeping Wizard]

OPEC is not nearly as influential as they would like for you to believe. With Venezuela and Iran doing whatever the hell they want, they don't control prices like so many believe they do.

[skinsfan_1215]

OPEC is not nearly as influential as they would like for you to believe. With Venezuela and Iran doing whatever the hell they want, they don't control prices like so many believe they do.

I thought Venezuela was a member of OPEC...could be wrong though.

[Yusuf06]

The economy is not doing well, and the country as a whole has less money they are willing to spend. That means taking fewer trips, consolidating trips, etc. This drives down the demand for gas, in turn lowering prices. The driving habits people adopted when gas was $4 have not gone away yet. Also has to do with the supply side, and I haven't heard of any serious supply disruptions recently. Anyone think of anything I missed just fill it in.
In addition to the above, because of our economic woes we're not buying as much crap as we usually would. The raw material for a lot of the things we'd ordinarily buy, especially plastics, is oil. That means demand for manufactured goods we'd normally import from China and other parts of the developing world have dropped off significantly. Ditto that for the energy they use to make those goods. As a result, their need for oil has dropped like a rock too.

I'm not entirely sure about this, but in the absence of oil gluts/shortages I'd say that oil prices are a pretty good indicator of global economic health. That the price of oil has dropped so precipitously over the past few months is absolutely not a good sign.

As someone mentioned earlier, speculation had a little bit to do with oil prices being so high over the past few years. However at the end of the day somebody had to buy the oil behind all those contracts. The great majority of the runup had to to with ever increasing demand for oil. Now that the demand has fallen off, the prices have dropped.

[skinsfan_1215]

In addition to the above, because of our economic woes we're not buying as much crap as we usually would. The raw material for a lot of the things we'd ordinarily buy, especially plastics, is oil. That means demand for manufactured goods we'd normally import from China and other parts of the developing world have dropped off significantly. Ditto that for the energy they use to make those goods. As a result, their need for oil has dropped like a rock too.

I'm not entirely sure about this, but in the absence of oil gluts/shortages I'd say that oil prices are a pretty good indicator of global economic health. That the price of oil has dropped so precipitously over the past few months is absolutely not a good sign.

As someone mentioned earlier, speculation had a little bit to do with oil prices being so high over the past few years. However at the end of the day somebody had to buy the oil behind all those contracts. The great majority of the runup had to to with ever increasing demand for oil. Now that the demand has fallen off, the prices have dropped.

Excellent points added there.

[greenspandan]

A simple case of supply and demand now that the speculative bubble burst.

ding ding ding.

no need for opec conspiracy theories.

[Hardcore Zornography]

Ok, I sort of understand everyone's points.

If I missed it anywhere in there, are they going to stay like this for the foreseeable future, maybe even go lower, or is there basically not anyway to predict that?

[skinsfan_1215]

Ok, I sort of understand everyone's points.

If I missed it anywhere in there, are they going to stay like this for the foreseeable future, maybe even go lower, or is there basically not anyway to predict that?

Well, hmm... As far as predictions, the prices might rise a little once it gets really cold and people start using the heating systems. Still depends a lot on driving habits. I could see the prices continue to fall until May, but probably not below $1.75 or so.

[PokerPacker]

My dad predicted over the summer that prices would drop just before the election. Don't know if the gas prices were politically charged, but it is quite a coincidence, isn't it?

[skinsfan_1215]

My dad predicted over the summer that prices would drop just before the election. Don't know if the gas prices were politically charged, but it is quite a coincidence, isn't it?

I don't see that much of a connection... and gas prices always drop after the end of the summer driving season, barring a natural disaster (Katrina). Market forces are at work again, as speculators are backing out of oil for now.

[Seabee1973]

I think Bush taking away the exucutive order to ban drilling on july 20th I looked at fuel prices out here in cali on my base it was 4.40 for the cheap stuff that day. dropped drastically since then to 2.41 today on the same base.

There is also talk that the congressional ban will go back in place once Bush leaves office. I wouldnt be surprised if fuel prices started going up drastically then

[Califan007]

ding ding ding.

no need for opec conspiracy theories.
You beat me to it lol...It's definitely NOT because of the election and now the prices are gonna rise again. That's too simplistic a viewpoint.

[daddys little skins fan]

I've got an average gas price of $1.85 over here in Missouri. It's freakin' fantastic. I'm not gonna lie though, since then I'm trying to fill up as often as possible, worrying when it's going to go back up again.

[dreamingwolf]

do people have no memory or something? The price of gas is always high over the summer cause everyone is vacationing and using alot of gas, come fall and winter that usage drops off so to encourage usage the price drops. Happends every year. year after year. Every year someone claims the price of gas at the pump drops cause of the election, and every year it drops in november even if its not an election year.

I never had an economics class, and I never stayed at a holiday inn.

[10fttall]

I have not studied or researched, but I have just about given up trying to figure it out. I think we're al at the mercy of whatever happens, and not much is going to change it.

Every time oil goes up, there's some BS reason, most of the time just "fears" that this or that will happen. Gas IMMEDIATELY goes way up. Now for whatever reason, oil has been way down for a while, but, of course the price of gas was lagging well behind. (Although it has gone down a lot now too.)

In New York City there's some stupid reason that the gas is 30-40 cents more expensive than anywhere else. That aside, gas in July was $4.40 or so. Now it is $2.65. The "official" explanation for cheaper gas seems to be mostly that the economy is bad and people are using less gas. I call BS on that. People are not driving THAT much less. They still go to work, they still shop, they still go on vacation. Trust me, I've seen them. People might have cut out a trip here or there, but not to the point where it would drop the price of gas by like 40%.

[BadKarma]

Agree with you 10fttall, I am going out on a limb but I find it real hard to believe that "supply and demand" is the sole reason for an almost 50% dropoff in gas prices over the past 3 weeks. The timing is just too quick for demand to be affected that drastically imo.

What pisses me off more than thinking this is somehow connected to the election is buying into the supply and demand rationale. What kind of product can be sold for full price one week and then at a 50% discount a week later like its not a "going out of business sale"? Didn't car manufacturers restructure their product lines a few months ago to sell these hybrids and green vehicles we see plodding down the highway at 55 mph.

We never get any real answers to the economic questions in this country anymore without it being spun 20 different ways on 20 different networks but I think its safe to say that giant companies like Exxon Mobil didn't get to where they are by selling products at a loss.

[Mark The Homer]

A simple case of supply and demand now that the speculative bubble burst.I think this is the main reason.


I've got an average gas price of $1.85 over here in Missouri. It's freakin' fantastic. I'm not gonna lie though, since then I'm trying to fill up as often as possible, worrying when it's going to go back up again.I know. I buy and two days later the damn price has dropped another 20 cents and I can't fill up yet! Dammit!

I paid a $2.35 in Kensington the other day. That's less than it was last winter, IIRC.

[Dictator]

In New York City there's some stupid reason that the gas is 30-40 cents more expensive than anywhere else.

the cost of doing business in NYC is greater than elsewhere.

[Burgold]

There wasn't a fifty percent drop in demand people. Be real. There are a number of factors. Supply and demand being one. Politics being another. Fear of a real mobilization towards alternative energy away from oil being a third. Possible expansion of resources being a fourth. Speculation and market meltdown being a fifth. Artificial inflation of prices by crooks using speculation to get super duper rich being a sixth. etc.

But there were several nefarious reasons tied to economic ones. Politics definately was in play here.

[motorhead]

Gas is $2.15 @ Wawa's here in Lancaster.

I go by a Costco on my way to work and it just seams funny to me that people are waiting in line 6 to 8 deep to save 2 or 3 cents a gallon.( It was $2.13 this morning.)

I mean isn't your time worth something.Not to mention what are you saving 30 or 40 cents? How much gas are your burning waiting in line.:doh:

Wake up people!

[Kilmer17]

Obama fixed it already.

[Art Monk Fan]

AMong many of the other reason listed here, investors are pulling their money not only out of stocks, but also bonds (the credit crisis is killing the bond market) and they're now buying ... cash! The demand for the dollar has risen remarkably in the last few months (it had been at record lows against several currencies) and, since oil is traded in dollars, a strong dollar lowers the price of oil. The prices we were paying was a combination of demand, low refinery capacity, a terribly weak dollar and rampant commodities speculation. Demand is now down, the dollar is strengthening and the speculators have all left the market.

[techboy]

The demand for the dollar has risen remarkably in the last few months (it had been at record lows against several currencies) and, since oil is traded in dollars, a strong dollar lowers the price of oil.

Not so fast. It's not quite that simple...

From Oil and the Dollar (http://www.econbrowser.com/archives/2007/11/oil_and_the_dol.html), by James Hamilton, Professor of Economics at the University of California, San Diego:


The depreciation of the dollar has certainly been the focus of much discussion by reasonable people recently. And if reasonable people are talking about it, then unreasonable people will also be talking about it. But if you believe that the falling dollar is the explanation for why oil prices are going up, then maybe you also think that Osama Bin Laden's real mission is to reverse global warming.

and


I can't improve on Mish's analysis:

"Before continuing, it is clear that this basket of currencies deserves a name. I propose we call it the WHISIT. This stands for "What the Hell Is It?" But the name does not really matter. If you have a better one, please send it my way.

Regardless of what the basket is called, politics is ruling over sanity.

No one ever buys anything in a basket of currencies. For example, go to the store and try and buy a loaf of bread in WHISITs. It can't be done. Nor can one buy gas in WHISITs, or for that matter anything else. The same holds true in Europe. I defy anyone to buy anything anywhere in a basket of currencies regardless of what that basket is called. The only way it can be done is by exchanging everything in the basket to the local (favored) currency. What a headache for those walking around with Swiss Francs in their pocket trying to buy a loaf of bread in the US."

The currency in which oil exporters hold their assets matters a great deal. The currency in which the price of oil is quoted matters substantially less. And the latest economic insights offered to the world press by Ahmadinejad and Chavez are to me worth substantially less than those much-maligned pieces of green paper with George Washington's picture on them.


For a more indepth treatment, try:

Does Dollar Weakness 'Cause' High Oil Prices? (http://www.econbrowser.com/archives/2007/10/does_dollar_wea_1.html).

I won't quote the nearly mind-numbing statistical analysis, but the short answer is no. :)

[DCSaints_fan]

Well the price of gas is tied to the price of crude, and the price is crude is driven by whatever investors think it will be. So ask them.

[Mark The Homer]

Speculation and market meltdown being a fifth. I think speculation and market meltdown is first.

[Art Monk Fan]

Not so fast. It's not quite that simple...

From Oil and the Dollar (http://www.econbrowser.com/archives/2007/11/oil_and_the_dol.html), by James Hamilton, Professor of Economics at the University of California, San Diego:



and



For a more indepth treatment, try:

Does Dollar Weakness 'Cause' High Oil Prices? (http://www.econbrowser.com/archives/2007/10/does_dollar_wea_1.html).

I won't quote the nearly mind-numbing statistical analysis, but the short answer is no. :)
I don't think I implied that the strength of the dollar alone caused the rise (or decline) in oil prices, rather that it was one among several factors (I even listed a few of them).