Remember when the high price of crude was supposed to cause the “greatest transfer of wealth in history”? When Saudi Arabia’s sovereign wealth fund was getting ready to buy up the entire world? It feels like yesterday. Wait a minute, maybe it was yesterday.
Anyhow, once again, the United States of America – for all its many faults – is taking a group of foreigners to the cleaners. In the early 1990s, our recession bounced back onto Japan and put it in a decade-long swoon. Today, it’s the Saudis (CNN):
Oil prices fell sharply on Wednesday, reaching prices not seen since June of last year, after the government reported a greater-than-expected rise in crude stockpiles – an indication that the slow economy may have impacted demand for fuel.
U.S. crude for December delivery lost $5.43 to end the session at $66.75 a barrel in New York.
Of course, OPEC will be looking to slash production to bring the free-fall to a halt, right?
Ummm . . . (CNN):
The organization considers the market to be oversupplied by two million barrels a day, but it has yet to agree on the size of the cut. This lack of agreement could hinder its efforts to control prices.
“Two million barrels a day is a very big number and it’s not that easy to do,” said Joseph Stanislaw, an energy expert and independent senior advisor at the consultancy Deloitte & Touche.
. . .
“Most [OPEC] members have planned massive infrastructure projects on the assumption that high oil prices will continue,” wrote Anas Alhajji, chief economist for NGP Energy Capital Management, in an email to CNNMoney.com. “If they cut production in the current environment, revenues will decline and they might not be able to finish these projects.”
Damned if they do; damned if they don’t.
Of course, it would help if non-OPEC oil producers cut back, but Russia won’t play along (same link).
Meanwhile (same link again): “On Monday Deutsche Bank lowered its 2009 oil price forecast by $25 a barrel, to $60, saying the price could bottom out at $50.”
About three weeks ago, I opined that this might have an impact on the election; that’s when oil stood at $88, and the price of gas in my neck of the woods was at roughly $3.20. Gas is down another 50+ cents since then as oil has dropped to its current level.
I would also note that the polls which have been showing McCain gaining on Barack Obama (if they can be trusted, of course) have it coming “after the last debate” – which was also roughly when oil first dipped below $70.
Are the requisite lower gas prices having a political effect?
The only thing I have to add to this is: DRILL DRILL DRILL!!
You would think that lower gas/oil prices would be a benefit to Obama since his energy policy is nonexistent.
Or am I missing something?
Lower gas prices will mean the economy doesn’t seem so bad to voters, which is good news for McCain.
Good point. Thanks.
I just checked the MSN gas price locator. It always gives the lowest price in the U.S., which as of this writing is $1.97/gallon in Independence, MO.
I live in Pensacola FL and our gas is still $2.70. I live right next to the refineries and am paying almost a dollar more for fuel that doesn’t have to go very far. I sure would like it to get as low as in Independence. MO. I also hope the prices of oil continues to fall so the greedy oil companies can’t continue to rape the good people of this GREAT COUNTRY. Go McCain/ Palin!!!
Craig…your ignorance is amazing…
Point one: Did you miss the news about the supply problems in the SE following Gustav and Ike? Gasoline inventories in the Lower Atlantic sub-region fell to their lowest leves ever (since sub-regional information has been tracked in 1990) after Ike due to the disruption to refining and importation following the hurricane. They have just returned to more normal levels last week. Econ 101…Low supply = high price
Point two: Now that inventories have rebounded, prices are falling more in line with other areas in the US. Yesterday, the wholesale price for gasoline was around $1.60 (before taxes, transportation, and retail margin). Now, wholesale prices take about 7 to 10 days to show up at the retail level, so we should see US average of $1.60 + 0.494 = $2.094 in about two weeks…
As for now, last week, wholesale prices were about 1.90 on 10/13. Add to that the 18.3 cents in federal taxes and the additioinal taxes that your fair state adds (33.3 cents–which, by the way is MUCH higher than MO, which is 17.7 cents) and you get $1.90 + 0.534 = $2.434 (before any retail margin or transportation costs). Compared to MO $1.90 + 0.36 = $2.26.
AAA has the average price in FL at $2.838 and in MO at $2.503. The difference is 33.5 cents. About HALF of this is taxes…so, what about the other 17.9 cents?
Neither MO nor FL have refineries! However, Missouri receives its petroleum products from several pipelines that originate in the Gulf Coast region (the main area of refining in the US). The Mississippi and Missouri Rivers also provide important transportation routes for petroleum products moving via barge.
FL, on the other hand, relies on petroleum products delivered by tanker and barge to marine terminals near the State’s major coastal cities. TRANSPORTATION BY TANKER IS MUCH MORE EXPENSIVE THAN BY PIPELINE. Plus the import duties added to products coming from overseas adds more cost.
Point three: Due in part to Florida’s tourist industry, demand for petroleum-based transportation fuels (i.e., motor gasoline and jet fuel) is among the highest in the United States. ECON 101 again…High demand = high price
Point four: The refinery you live close to (I assume it is the one in Atmore, AL) is one of three refineries near you (all in AL). ALL THREE OF THESE REFINERIES ARE CONNECTED TO THE COLONIAL PIPELINE SYSTEM and do not supply Florida!
Point five: The “Greedy Oil Companies” make, on average, about 9 cents on each dollar of sales! (At $3/gallon, that is about 27 cents…where the State of Florida makes 33.3 cents…those Greedy Bureaucrats!–Leave alone that at $2, Big Oil will make 18 cents–nearly half of what the central planners and social engineers in the state government will get—AND THEY DIDN’T DO ANYTHING TO GET THIS TO YOU THE CONSUMER!)
A response to the claims we are exporting our oil!
[...] not to sound like a broken record here, but dropping oil and gas prices essentially change the perceived future of the [...]