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The Astounding Fuel Price Conundrum
Wolf Richter www.testosteronepit.com
Republicans have been out in force, trying to tar President Obama with gas prices that are approaching $4 a gallon, and that appear to be shooting for an all-time high into the driving season. But no one has even tried to out-claim Newt Gingrich, who in his desperation claimed that gas would miraculously plunge to $2.50 a gallon if he became President but would hit a world-ending $10 a gallon if Obama stayed in power.
The strategy worked: Obama’s disapproval rating on handling the "situation with gas prices" has reached 65%, and his disapproval rating on the economy as a whole has jumped to 59% over the weekend from 53% in early February.
Meanwhile, oil companies worldwide and our special friends, like Iran, are drooling over these gorgeous prices, while consumers are getting rattled as the cost of a tank of gas is dreadfully close or already beyond their pain threshold. Gallup, which excels at finding irrelevant averages to everything, has found one for the pain threshold as well: $5.30 a gallon, the price at which people would "make significant cutbacks" in spending in other areas. In fact, 17% would do so with gas under $4 (now happening), and an additional 28% would do so with gas between $4 and $4.99. So 45% would cut back significantly in other purchases before gas ever hits $5.
The White House feels the heat—and is fighting back. Already, 85% of the people want Obama and Congress to take "immediate action" to lower gas prices, and 65% actually believe that the government can do so. Consequently, you can’t turn on the TV today without seeing Obama discussing energy.
The White House also released a report that touts energy feats already accomplished or to be accomplished, some as soon as 2025. Many of them are laudable, such as reducing oil imports by a third by, well, 2025—they're already down by a million barrels a day over the last three years. Yet, in the biggest non sequitur of mankind, given that high fuel prices sparked the report in the first place, the report also brags about the refining sector that has become ... a net exporter.
Turns out the place where gas prices tend to be the highest in the nation, San Francisco....
March 12, 2012
.... is just across the Bay from five major oil refineries that together are the largest exporters of petroleum products in the nation (Brookings Institution, New York Times, March 8, 2012). In 2010, the period of the report, the five refineries exported $7.8 billion in petroleum products, an increase of 10% over prior year. Other refineries on the West Coast have also experienced booming export sales. Last December alone, West Coast refineries exported over one million barrels of gasoline, eight times as much as in 2007.
The Census Bureau's trade report confirms the trend nationwide: in January exports of petroleum products jumped 16.8% to $8.9 billion from December's $7.6 billion, and were up 8.8% from January last year.
Why? Because that’s where the money is. Domestic demand is stagnating. In California, based on data from the State Board of Equalization, which collects taxes on motor fuels, gasoline sales have actually slid 14% from 2006 through last year:
People in California—and in many other places—are driving slightly less, and their vehicles are slightly more fuel efficient. It adds up. So we’ve got a little problem—sagging demand—that should push gasoline prices down. But business is business:
“Our options were to reduce production, lay off workers, close refineries, or find markets for our products," said Tupper Hull, a vice president at the Western States Petroleum Association. And those markets are in Mexico, Brazil, China, and other developing countries where demand for refined petroleum products is growing.
Oil and refined petroleum products are worldwide commodities whose prices are determined by the markets, not Newt Gingrich. Or President Obama. Central banks, however, are another story. They’ve handed trillions to their cronies for the purpose of driving up asset prices. And some of this money has hit oil. For just how helpful this has been, read.... The Fed’s Rain Dance at the Bottom of the Stairs.
As always, consumers pay the price, this time at the pump. They’re already squeezed, particularly those at the lower half of the income spectrum. And people who just finished their higher education, the future of America, are struggling like never before. For the whole fiasco of the costs of higher education, and how they're mauling young people, read.... Next: Bankruptcy for a whole Generation.
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"Place a massive tariff on exported petroleum products."
How else should the USA pay back their debts? With the gold they don't have? The products they don't produce? Mercenaries and slavesP Wake up, noone wants the prrinted promises anymore and it's getting time to pay up. And who else but the people are paying for the mistakes of their leaders?
noses.
Place a massive tariff on exported products and you will destroy one of the few industries where the US is actully a leader...
The US imports oil and exports refined products because it has some of the most sophisticated profitable refineries in the world....Not all of them are though, the old dinosaurs in the NE need Bonny Light from Nigeria and that is in tight supply at profitable crack spreads....
Refineries use lots of natural gas in processing. You can figure out the rest.
Yet another reason why refining in the US is profitable...
Hey, Valero are salivating at the prospect of getting Western Canadian Select at $50 a barrel cheaper than Brent and exporting the refined products from a tax free Export zone on the coast....
ding ding ding we have a winner!
not the consumer though is it. Tariff makes sense to me as a way to PROTECT the banks (drives down prices.) In other words "why is China producing such an excess of gasoline?" Well...this isn't rocket science: we had the same problem in the USA "back in the day." Gasoline is a WASTE PRODUCT--as oil is used to produce every doo-dad and knick-knack imaginable (and some that can't be imagined actually)--gasoline as a by product is created. Sure..."they buy cars and fill their tanks"--but you can't drive anywhere over there. You have a GLUT...but the "product just sits there in a tank." NOT PRO-GROWTH. In other words "USE IS NOT WASTE." For an economy to function "it's needs data"..."to get data you need use." Pro-growth policies "get lending going first." We're on the right track in the USA--but the economy isn't functioning..."economically"...in my view because of "veryspecial interests" in DC.
You do understand that the product being exported is refined from crude that is imported...
Slap an export tariff and imports will decline and you will force closure of even more refineries...
You should check out what the pay grades from refinery workers are...And people here rag about Obama and "job killing" policies....
The irony is delicious....
Much as I hate to admit it, I think you're right and I gave you an up arrow, Flakie.
Appreciated and noted....
does Smoot-Hawley ring a bell?
I'm liking the way you think. We also need tariffs placed on items imported here. Just disincentize the production elsewhere and jobs will flow back here. Unleaded Regular here in Sou Cal is running about $4.37 when it should be $1.37. I can't believe what we Americans are putting up with. It doesn't have to be this way; it sure as hell isn't like this in Sweden as far as lifestyles are concerned. I have a cousin there who while not rich has two houses and regularly vacations all over Europe. 4 weeks vacation, free healthcare.
Not to mention a uber-tight immigration policy (try to immigrate TO Sweden....betcha can't), and 90%+ of the population indigenous Swedes, and, the whole country as small as Florida, with drivers using a 1/10th of the gas Americans do to get around, and voila~.
But there, I mentioned it.
Should be $1.37? Based on what might I ask? Your wishful thinking?
Im not even going to bother with what you think gas "should" cost or why- but you do realize that alot of this is your state, right?
Unleaded here in South Carolina is about $3.45- $3.50 now.
What is your cousin paying for gas? Do tell, no doubt in such an enlightened nation its quite affordable. Oh wait, about 1.5 Euros per liter!
http://www.numbeo.com/cost-of-living/country_result.jsp?country=Sweden
Heck thats only like $8 ish a gallon, what stupid benighted people we Americans are.
I AGREE! Withy you mostly junior. First of all, Europe is short and small! I can drive across your country, before you cross 1/2 my state.
Second of all, I would suggest the Library, and sak/ASK you one question? If I can ask that question please reply. Thank you Yen.
I think one of the things Americans miss when they talk about 8.00 gas in Sweden and other parts of Europe is that they are small countries and the cities are smallish and people don't have to drive near as far as Americans do. It used to be nothing for me to drive for up to an hour 1 way to get to some shit sucking job! That's why gas prices have such an impact on Americans.
And what magic formula does the USA employ in order to keep gas prices at half of the rest of the developed world? Theft? The USA fax payer is paying, just not the pump, you see that 20 trillion national debt in 2014? How much of it is due to keeping oil prices low?
There is no magic formula- it isnt taxed to the hilt. European countries have per gallon tax rates greater then the cost per gallon in the US.
Take some time and look up tax rates for gasoline in Europe- it will be quite obvious.
Yep, in a tiny country with an extremely dense population its one thing- here it hits hard. However, it doesnt HAVE to cost that in Sweden or elsewhere, the government just chooses to use energy as a golden egg laying goose.
Obama's continuing rejection of the Keystone pipeline feeds into the feeling that people have that Obama secretly cheers high oil prices because they are the next best thing to a carbon tax. How much Keystone would actually lower US oil prices is debatable, but as long as Obama continues to block it, people have the feeling that lowering oil prices is not something that is high on his agenda.
More than a feeling
Far more than a feeling, and there's no secret about it. Look up the quotes from O'Dumbo's Energy Secretary, Steven Chu:
"Somehow we have to figure out how to boost the price of gasoline to the levels in Europe"($8-$10 per gallon)
Or, take Barry Soetoro at his word, "Under my plan of a cap and trade system, electricity rates would necessarily skyrocket".
These people, same as their predecessors, are domestic threats. They are traitors, guilty of the highest crimes, and deserve nothing less than public execution.
Maxxy has it under control...
http://www.youtube.com/watch?v=OrA9zj94NuU&list=FLeGAOM7ibPwtPLGNel9UVBA&index=5&feature=plpp_video
or this guy, this socialist pig:
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/05/AR2008060503434.html
as I respect you Testo, this is just bread and circuses to confuse the masses, the masters of propaganda play us like you know what.
The real tragedy in my opinion is that even though the technology exists and millions are out of work the political will is missing to mobilize resources to build infrastructure that supports alternatives to crude based transprotation. This should be done now while we have the oil available and we have the time to do it. Once oil becomes scarce and even more expensive getting the job done will be that much harder and take that much longer.
I hope you mean something like NG. Because solyndra and the volt and fisker haven't worked out to well. Paying subsidies for wind farms in Washington St not to produce electricity isn't the answe either
How about we remove ALL subsidies, open up all of the leases, and let these guys drill and while we are at it, shut down the FED and stop the devaluation which is the real cause of gas prices rising.
We will get of of fossil fuels when it become economical too. Let the markets move us there
Force the nuclear power companies "and the States that love it" to pay for waste disposal and you'll see those windmills churning! WHY DO STATES WITH NO NUCLEAR POWER SUBSIDIZE THOSE WHO DO????? I say BARAK HUSSEIN OBAMA!
If it were only so simple....
These promises just show how far politicians will go to pander and how little economic education is in the public. At most, the government can put a tiny dent in the secular rate of increase of gas prices. It wouldn't be noticed in the noise of seasonality and short term economic conditions.
Additionally, there's no good reason for the government at any level to interfere. The price needs to go up through market forces to force efficiency decision which have to happen.
Saudis told us we'd have to keep Oli high to allow us to play in their sand pit.