Morning Read: Will high gas prices derail the economic recovery?
The Adirondack Daily Enterprise is reporting that Franklin County legislator Paul Maroun is urging President Barack Obama to do something about rising oil and gas prices.
“In my rural upstate New York area, people cannot get to work, health care facilities, places of worship or grocery stores without cars; there is no mass transportation like the Subway in New York or the Metro in Washington, D.C.,” Maroun wrote to the president in a letter earlier this month.
Maroun thinks the president should abolish the three-tiered octane system for gasoline, and have dealers sell one grade of gasoline, increasing the supply and lowering costs.
Meanwhile, NY Senator Kirsten Gillibrand is asking Mr. Obama to tap the nation’s strategic oil reserves. This from the Buffalo News.
“Our families are already struggling in this difficult economy, and the last thing we need is rising gas prices,” Gillibrand said in a statement. “Releasing oil from the Strategic Petroleum Reserve is critical to relieve this extra burden on our families here in New York and across the country.”
The New York Times is reporting this morning that the recent spike in pump prices isn’t likely to derail the economic recovery — unless prices go significantly higher.
One big reason is that consumers and businesses have learned lessons from the last oil shock. Many drivers, for example, have given up their gas-guzzling sport utility vehicles. Automakers, which are selling more fuel-efficient cars than five years ago, reported higher sales in February even as gas prices rose.
Industries like airlines and trucking, which are most severely affected by fuel prices, have passed on their higher costs almost immediately instead of waiting for the price increases to hammer profits.
So what do you think? Are you feeling the pinch when you stop to tank up? Does it mean your family has to crimp on other purchases? Or is this just another fluctuation, business as usual? Comments welcome.
Tags: economy, gas prices, President Barack Obama
So the supply of oil is fine but the price is spiking? Maybe it is time to get the greedy hands of commodity traders out of the market. More of Wall Street types getting rich by picking the pockets of the “little people.”
And people think Unions are bad.
Speculation is the problem. Traders think the Mid-East troubles might interrupt supplies so they drive up the cost in anticipation of a limited supply. Get the speculators out of the equation.
I’m thinking that a single grade of gas is not a good idea. While most vehicles could be re-tuned to work on whatever was settled on we have a lot of small engines on lawn mowers, chain saws, etc. that are already having trouble with the addition of alcohol to our gas. If the one grade was high octane, how would that affect those small engines which are generally designed for regular grade? I’m not saying it would be bad for them but I’ve read reports that the alcohol content is destroying some small engines and it’s something that should be looked at before phasing out all but one grade of gas.
Just imagine how much gas we have wasted driving those giant SUV’s we all just had to have. What would the price of gas be today if we had simply included “light trucks” in the CAFE standards back in the eighties?
“The US and Canada have the weakest standards in terms of fleet-average fuel economy rating among first world nations, e.g. 25 mpg in the US, versus 45 mpg in the European Union.” (Wikipedia)
The problem is us.
The global supply of petroleum is finite, and has probably peaked.
Attempts to obtain more from more and more inaccessible locations continues to produce environmental catastrophes.
Demand from developing economies is putting more and more pressure on oil prices.
The above factors all contributed to the unrest in Middle Eastern nations, that continues to unsettle oil. (I would be interested to know if anyone reading this would like to see the undemocratic and authoritarian regime of Saudi Arabia overthrown).
We, Americans have only made gestures at attaining energy self-sufficiency, and the current Republican regime in the House is against even gestures.
Yes, Mr. Reagan, America’s best days ARE behind it, and thanks to the ignorant, selfish, and generally bumptious nature of the American people.
Maybe, when the smoke clears, we can get by as a large, third-rate nation. Kind of like Russia, but without the oil
We have a lot of oil and a lot of oil yet to be discovered right here in the US. As far as the “regime” goes we have only one regime in power right now and that is the Democrats.
High gas prices are a two edged sword they are the only thing that actually works in creating markets for alternative energy but they do hurt people and families and the economy.
Locally I would rather see the politicians invest some money in a decent local bus service. We have one here in SLC but it is hard for working people to use regularly.
If fuel continues to climb, then yes, it will derail this non-existent “recovery”, or rather it will add to the decline we’re in. people are already complaining about rising food prices. What do you guys think will happen when diesel is at $5.00+? Everything is shipped on diesel. All crops are planted with diesel, fertilized with petroleum by products, cultivated and sprayed by diesel, harvested by diesel, etc. Many fabrics are petroleum related as are plastics, rubbers, medicines. There’s no end to it. Meanwhile the current administration blocks oil production and refinery construction. Great.
I’m all for alternatives, we need them. But nothing will take the place of petroleum at present. I think we need to start there.
“We have a lot of oil and a lot of oil yet to be discovered right here in the US.”
Mervel, you may want to surf around a web site called “The Oil Drum,” a haunt of petroleum engineers, geologists, resource economists, commodities traders and Peak Oil types. It’s nerdy. But it may change your opinion somewhat:
http://theoildrum.com/
And they just did a best-of compilation: http://www.theoildrum.com/node/7191
A few years ago (2004?) there there was a great story in National Geographic about the coming petroleum shortage. It had a lot of great photos, including one of a Beijing Auto show, with a Chinese guy ogling a Hummer. But my favorite showed the girl with her Blue Ribbon -winning bull in the Maryland State Fair, next to a pyramid of 50 gallon drums representing the 1500 gallons or so of petroleum it had taken to produce him. (That sounds low. Maybe it was 15,000).
Speculative pricing is an economic fact of commodity trading. What is really needed is an aggressive and sustained energy policy that anticipates these economic facts and at the same time provides guidance relating to supply, production and demand (including global). Both sides of the aisle (democrat and republican) have failed miserably at developing an effective energy policy for this country. Obama is just the latest failure.
The policy needs to consider short-term, mid term and long-term needs and solutions. And please stop with the green energy or alternative solutions. Demand will not be curbing any time soon. Just consider how many cell phone charger, electronic reader chargers, laptop chargers, plasma/LCD televisions that have to be powered in the modern American home that were not there even 5 years ago. And the energy star label is a fallacy. 25+ cubic foot refrigerators and huge super capacity washer and dryers with energy star labels are laughable. They can be energy efficient as much as they want but bottom line consumption is up across the country do to the ever growing size of demand. Also, consider other aspects of the life style now needing demand, the Phoenix Cardinals football team plays home games in September Arizona heat at 95 degrees and up. There home stadium is enclosed with a temperature controlled interior environment of 70 degrees during game time. Can you imagine the energy needed to pull the temperature down in that size of building for that length of time in that condition? Also, drive by a shopping mall sometime after hours and notice the amount of lighting left on. Display windows fully illuminated for the apparent benefit of the night time security staff. I was at Disney world last year and went to the illuminations light show in the World Showcase in Epcot. The flame in the middle of the man made lake that fires each and every night is completely generated by propane gas. I was at least 1,000 feet from it and could feel its heat. And these are just several examples. My point is we as a nation are not serious about our energy consumption and the proper use of our available supplies. We drive our Priuses (which actually in consideration of its complete production cycle is one of the most environmentally unfriendly cars on the road -oh the irony) and use our conservation light bulbs and feel so good about ourselves. Yet these hugely dramatic impacts on the energy stream are occurring in countless ways across the country each and everyday.
No but what economic recovery?
Mervel, do you know something these guys don’t know? If so, where is your evidence?
All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas. ”
— William J. Cummings, Exxon-Mobil company spokesman, December 2005
It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. Any new or unconventional oil is going to be expensive. ”
— Lord Ron Oxburgh, a former chairman of Shell, October 2008
We need to be drilling in every possible location within out borders if we are to meet the ever growing demand for energy. the issue is that enrgy demand is growing in three ways:
1. Globally – China and India with huge population increases are ramping-up their production to meet a virtually endless demand for goods;
2. Population increase – the national population grew by 9% on average from 2000 to 2010 – not a bad thing in terms of demand but none the less more energy is needed;
3. Per capita use – each individual and corresponding household now cannot due without cell phones, laptops, electronic books and 60 inch televisions.
These are the facts of the energy demand profile that must be accommodated
Americans have had 100 years to accustom ourselves to cheap gas. So we happily drive our big trucks and SUVs (I drive a medium size SUV, I’m not throwing stones.
A fact that has to mentioned is that the US is not Belgium It’s a real big country. I guess I could pay $8 a gallon if I lived within biking distance from work and 20 miles was a “drive in the country.”
Hi PNE,
But notice that the experts are not saying there is no oil reserves; they are saying that the massive amount of untapped oil left will be more expensive to extract. The easy stuff has been found, but we have new oil recovery technology all of the time. As the price of oil rises it will spur investment in more advanced technology to extract oil in ways that were not even known or thought possible 20 years ago.
Canada has more oil reserves than every Middle East country with the exception of Saudi Arabia; but much of it comes from sand, expensive and environmentally noxious to extract. Consider the Bakkan oil field in North Dakota and Montana. It is the largest oil field ever discovered in the US and we have not really started to tap it yet; it has between 3-4 billion barrels of recoverable oil right now using today’s technology.
http://www.usgs.gov/newsroom/article.asp?ID=1911
We have not even begun to tap Natural Gas resources we have the technology right now to convert all of our total automobile industry to natural gas if we really had to. I just don’t buy the peak oil stuff. Oil will become more expensive and as it does we will find new sources or other fuels will become relatively more attractive. But that would be a good thing right?
mervel I agree. What you are eluding to is the need to advance the utilization of forms of energy. Petroleum, bio-mass, nuclear, natural gas, electric (from solar, hydro – small and large, and wind), coal should be aggressively pursued. This stance is based on a realistic consideration of demand. As I have explained in prior comments demand is growing exponentially. Even under generous estimates, the impact by alternative sources will be minor in meeting the huge demand that will be present by 2050. Under these estimates petroleum and coal will still provide 85% of the fuel source. Therefore, less be aggressive on finding domestic oil sources in the short-term while advancements are made with real utilization of alternatives in the mid and long-term. If we do this correctly we could be a global leader in domestic energy generation and production.
Wow! 3-4 billion barrels of oil? That sure is nothing to sneeze at. BTW, how much oil does the USA import in one year? Ten million barrels a day times 365 = 3.65 billion barrels. So the Bakkan oil field will replace about 1 years worth of imported oil and then what? Well, we have all that shale oil, maybe 800 billion barrels. A RAND corp. report notes that in 20 years we may be able to extract 1 million barrels of oil a day from shale oil.
BTW, what exactly is the GOP energy policy besides “drill baby drill”?
So, with the higher prices, it’ll be inevitable that profits at the multi-national oil conglomerates will rise considerably. So, why exactly, are the Republicans and some Democrats in Congress insisting that we continue to give them Billions in annual subsidies? Is it possible that these Billions would be better spent providing more subsidies to the development of alternative, renewable forms of energy?
Finally, I would pose this question: if the oil companies insist these subsidies are necessary and that we continue our insane foreign policy vis a vis our military imperialism in a good portion of the world simply to control the flow of oil, why don’t we just nationalize the oil companies and be done with it? I mean, really, if government support is so crucial to these profit margins, and nearly every segment of our economy relies on cheap oil, why not lessen its impact by removing the profit motive all together? Oh, that’s right, that would be a different form of government intervention we call by another name.
This question illustrates how completely whacked out energy policy is. And as a previous poster mentioned, until we create a real, viable energy policy designed to wean us from cheap, imported oil, we’ll continue to be a prisoner to our own addictions.
As for Brian’s question. yes, this will affect our economic recovery. The last few recessions have been triggered by higher oil prices. That was what has happened in 2008 though most people were paying attention to financial services industry.
PNE, one year is a lot and that is just one field.
But I hear you we consume a lot of oil.
The only reason we will consume less oil is when it becomes too expensive, then we will substitute other forms of fuel for oil, probably much more natural gas and more coal based forms of energy. as those become too expensive either through environmental costs or supply costs we will substitute less damaging energy sources.
Why do we need an energy policy anymore than we need a iron ore policy or an aluminum policy? We need a pollution policy is what we need and we need a mass transit policy, but I am not sure we need an energy policy. The one we have now subsidizes private corporations and artificially promotes oil over other sources. The international markets will dictate our actions in this area we can have all the policies we want.
Actually, if you care to think about it, gas prices should be up around $8 per gallon.
Why? Because there was a time when gas cost about 20 cents a gallon, the same as the price as a pack of cigarettes which now cost about $8 per pack.
Fair is fair.
Some good points have been presented. Let me add a few things to consider-
Why aren’t we build nuclear plants? Seriously guys, we all know the down side, but the down side to NOT building them is freezing to death in the dark. That’s only a slight exaggeration.
Short sited policies abound- Look at NYS recent outside wood boiler ban. Oh, I know, it’s not an outright ban, you just have to buy an OWB that’s 90 FREAKIN’ % MORE EFFICIENT than current boilers. Talk about short sighted! The complaints about smoke all could have been handled at the local level or through local zoning. But no, we have to get good old “one size fits all” DEC involved and slap a virtual moratorium on OWBs. That was nothing but a political move and a rather stupid one at that. Lets face it, who does this hurt? Mostly rural low to middle income people. Those are the folks who dream of an OWB, lower electric and propane bills, etc. So now the $8K OWB installation will probably be more like $15K, because nothing 90% “more efficient” is going to be as inexpensive as what we had. And BTW- if it hadn’t had been for Joe Inconsiderate burning tires and used diapers in his OWB (something a local law could have dealt with) the issue never would have come up. But that’s the big gov’t way- punish everyone instead of the violator!
Alternatives aren’t cheap- I’m all for alternatives, have been since the mid 70’s. Well, here’s the problem. Alternatives aren’t cheap and don’t always produce power efficiently. Look at those big wind mills. Aesthetics aside, what does one of them cost vs how much electricity it produces? I’m asking, I don’t know. But I’m pretty sure I’ve read that the return takes something like 10 years based on power produced. Of course, good ol’ T. Boone Picket loves them because (IIRC) he’s getting a 25 cents a KW subsidy no matter how much the power sells for. Or how about solar? Didn’t we just recently hear China controls most of the rare minerals needed to produce solar panels? Didn’t I also read the last mines in the US that had these minerals was closed due to some EPA reg or environmental issue? My memory may be faulty on that, regardless we still have other issues beyond that. A couple years back there was some massive solar collector system proposed for some desert area like Death Valley, I forget where it was. Sure enough the very next thing we hear is that it can’t be built because it would create a micro climate beneath the collectors that would allegedly harm something that managed to survive there is that wasteland. Of course we can’t we can’t have offshore wind or tidal generators because birds might get hit or crabs might get squished. In the end we’re going to have to come to some decision about whether we worry about bugs in the desert or our kids freezing. It’s getting to that point.
Isn’t time we actually put some thought in to our future?
“Why do we need an energy policy anymore than we need a iron ore policy or an aluminum policy?” Bad analogy. Better analogy would be a metal policy. And, if China indeed has a corner on certain metals of a strategic interest, yes we should have a metal policy. Although I guess we could forget about policies and just go with our gut feelings. Why bother planning for the future?
Find a job closer to home, or a house closer to your good job. Stop spending your valuable time in the car and your life will improve dramatically. Pay attention to where your energy dollars are going and start working seriously to save energy.
There are millions of cars that NO ONE will want to drive when fuel prices top $5. There are many, many millions of sub standard houses that NO ONE will be able to heat. There is a new reality coming, and it’s coming fast. We had a warning a few years ago and some people have gradually changed their habits (and their cars), started to car-pool, replaced the windows etc.. but not enough, and not soon enough. We’re not even talking about saving the planet here, just about keeping financially afloat. Start to take this personally because no one is looking out for you.
Will high gas prices derail the economy?
It did 3 years ago.
Regarding Bret’s question regarding Nuclear power plants, there is discussion at the federal level about building new nuclear plants. It’s actually an initiative being pushed by the Obama administration.
What is of particular interest to me with this initiative is that there’s an emphasis being placed on building Thorium fueled plants and not necessarily Uranium powered plants. I mentioned this some time ago in the thread related to the mayor of Massena advocating the building of a nuclear plant in Massena. In that post I provided a link to a number of articles and research papers explaining the benefits of thorium powered nuclear plants compared with the traditional uranium plants. I agree we should be considering nuclear power, especially with newer technology, as part of our overall electric generation portfolio.
“I mentioned this some time ago in the thread related to the mayor of Massena advocating the building of a nuclear plant in Massena.”
Yeah, Bret. Go back to that thread. As Clapton says, we’ve considered your question before, and the answer is, the question (of nuclear power) IS being considered. There are many new designs out there that we need to get after, and actually are looking into.
The reason they’re not building old-school nukes right now is that those dinosaurs are really expensive. And then there’s the safety questions…
The paradox of all of this is that the reason companies are not building nuclear plants or massively investing in alternative energy is because we have cheap gas, coal, natural gas and electricity right now. Europe and Scandinavia adjusted long ago to gas prices that are in the range of 4-7 per gallon, their economies are not crushed by those prices.
If people were really confident that yes gas was not going to go below $4-5 per gallon I think they would adjust and the market would adjust. The one energy policy I would be for is a larger federal gas tax to make up for the external costs of using oil and to provide a floor for the price so alternatives could become economical.
Guys the problem is that we haven’t built many, if any, new power plants in a long time. Not nuclear, not coal, not gas, not oil. Same for refineries, same for a lot of things that reek of heavy industry. Our politicians and various gov’t agencies blocked construction or exploration of new industry. I’m not pointing fingers at either side here. It was short sighted, and yet there were always people down here at the commoner level wonder about this. If a sheep farming schlub like me can see that a growing population is going to demand more power, why don’t our educated, intelligent, elite leaders?
Hey, one other lesser point. Someone was complaining about huge SUV’s, etc. I drove one of those huge SUVs for the state. I got 11-13 mpg, depending on what I was doing. An average everyday mid sized car might get what? 22-24 mpg? We had 45 mpg cars in 1980. Europe has extremely efficient diesels that can;t be imported here. Maybe we ought to rethink a few things. I had a half ton 1970 Chevy pick up that got in the low 20’s on a trip. Something is wrong with this picture.