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Gas Prices Need to Fall Further
Posted by Patrick O'Connor on 8/11/08 10:42 am
Gasoline prices are down only 7% from their highs, and nine states are still paying more than $4 per gallon for regular. They need to come down a lot more if consumers are going to get some immediate relief. Oil is down about 23% from its high, so gasoline should continue to fall if crude does not rebound.
Oil demand in China dropped significantly in July year/year.
Conflict in Georgia threatens oil supplies.
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Analysts Say Gasoline Prices Would Fall to $2 if Congress Acted
Posted by Patrick O'Connor on 6/23/08 1:33 pm
Election-year hyperbole may have hit higher highs today when four analysts told Congress that retail gasoline prices would drop to $2 and oil to $65-$70 if Congress would pass new laws aimed at speculators in the energy markets.
MarketWatch
The price of retail gasoline would fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy markets, four energy analysts told Congress on Monday. Testifying to a House Energy and Commerce Committee subcommittee, Michael Masters of Masters Capital Management said the price of crude oil would drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135. Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy agreed with Masters' assessment at the hearing. Other witnesses say speculators aren't a major factor in oil prices, however.
Tell us your opinion. Do you think limiting speculators in the energy markets would drive prices down by 50%?
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Should Congress Allow More Offshore Oil Exploration?
Posted by Patrick O'Connor on 6/18/08 9:53 am
Today President Bush advised Congress to lift certain bans on offshore oil exploration in existence since 1981, and accused Democrats of blocking his energy initiatives. Bush also blamed Democrats for record-high gasoline prices.
House Speaker Nancy Pelosi was quick to retort, saying his remarks were “another page from [an]… energy policy that was literally written by the oil industry—give away more public resources.”
Senator Barack Obama said, “This is not something that’s going to give consumers short-term relief and it is not a long-term solution to our problems with fossil fuels generally and oil in particular.”
Tell us what you think about this topic. Should Congress allow more exploration? Would doing so lower gasoline prices? Click the ‘Comments’ link below and get involved in the discussion.
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“But look how much they pay for gas in Europe!”
Posted by Tim Hope on 5/30/08 12:24 pm
In the midst of the latest rise in gasoline prices, one frequently hears a refrain similar to “…look how much they pay in Europe.” All too often buried in the story is a meek reference mentioning higher European taxation rates on gasoline. Yet the difference in the magnitude of gasoline taxes between the US and Europe is significant. A recent article in Time Magazine points out that state and federal taxes in the United States amount to roughly 11% of the pump price while in France and the U.K. taxes are over six times higher with an average of about 70% of the pump price.
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April 2008 Wholesale Inflation Results are Old News
Posted by Louis Navellier on 5/20/08 9:29 am
The April Producer Price Index (PPI) report should be taken with a grain of salt. It showed that wholesale inflation rose just 0.2% last month, half as much as expected, thanks to a 4.6% drop in gasoline prices.
The PPI core rate rose 0.4%, twice as much as expected. The core was boosted by a 1.3% jump in light truck and 0.4% increase in car prices.
There is no way these results will be sustained in May. Gasoline prices have gone through the roof this month, up about $0.30 a gallon, and truck and auto prices are expected to drop now that consumers are getting pinched by record food and energy prices.
I’m expecting ugly results for the CPI and PPI in May.
We want to hear your thoughts! Comment to this post by clicking the ‘comments’ link below.
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Pumping Up: Is a Gas Tax Holiday a Good Idea?
Posted by Patrick O'Connor on 5/9/08 8:45 am
When politicians start jawboning about gas and taxes, about the only certainty consumers can count on is that they’ll get more gas from their political leaders - and probably more taxes, too.
Exhibit “A” this week is the volleying between Hillary Clinton and Barack Obama over a temporary federal gas tax holiday this summer. GOP presidential nominee John McCain and Clinton both support such a holiday, touting it as a way to give beleaguered consumers a few more bucks in their pockets this summer. “Nonsense,” says Barack Obama, who’s dug his heels into the political turf against the suspension of the 18.4-cent-per-gallon federal gasoline tax, calling it a “gimmick” out on the campaign trail. Obama seems to have the bigger megaphone and, so far, the upper hand on the issue, primarily because he has just about every media pundit and economist on his side during this debate.
Thus, the debate begs an economic question: Does a gasoline tax suspension work – or not? And, is there any proof either way?
Actually, there is; and it goes right back to the Illinois gas tax holiday in 2000, and a similar moratorium about the same time in neighboring Indiana. Economic data from the “Illinois experiment” show that the price of gasoline at the pumps declined by three percent in the aftermath of the suspension, while prices climbed four percent after the moratorium was lifted. Economically, that roughs out to a 70% pass-through rate, according to the only scientific study done on the pass-through of the tax holiday savings to Illinois and Indiana consumers. The study, entitled "$2.00 Gas! Studying the Effects of a Gas Tax Moratorium," by Joseph J. Doyle, Jr. and Krislert Samphantharak, concluded that the tax moratorium, by and large, was a benefit to consumers, albeit a marginal one.
For a good "pros and cons" take on the issue, listen to this NPR clip.
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Chain-Store Sales Results Misleading
Posted by Patrick O'Connor on 5/8/08 10:59 am
Many financial news sources are cheer-leading the April chain-store sales results today, which were up a bigger-than-expected 3.6%. But when you scrape off the headline fluff, one can easily see that the overall result was tainted by higher gasoline prices, an extra shopping day from this year’s early Easter, and significantly warmer weather compared to April 2007, which was jolted by a record cold snap. Moreover, consumers flocked to the discounters last month, so the gains were not well distributed. Watch Video
Nonetheless, the good news is these data support the notion that consumers, who represent about 70% of economic growth, held up better in April than many expected. Still, with gasoline prices hitting another fresh all-time high today we have to wonder where the tipping point is, especially with the summer driving season still to come. That point will be difficult to gauge, though, with the artificially buoyant tax-rebate checks arriving. But that’s no accident. The big bet is the economy will begin to rebound about when the last of these checks has been spent (if they’re spent).
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Stocks Surge on Consumer Spending
Posted by Louis Navellier on 5/1/08 10:45 am
Stock prices got a bump from personal income data this morning when they revealed that consumer spending, or personal consumption expenditures (PCE), rose 0.4% in March, double the 0.2% consensus. Real consumer spending, or real PCE, (spending minus inflation) increased just 0.1%, but that was better than the 0.1% drop in February.
As a result, economists were encouraged by the fact that these data indicate the economy is not falling off a cliff. However, Ian Shepherdson at High Frequency Economics remains skeptical about consumers.
“Overall, the trend in spending growth has slowed markedly, and remember that the full impact of the recent plunge in [consumer] confidence is yet to be felt. We expect [consumer] spending to fall in Q2.”
I’m not convinced consumer spending is about to rebound either, at least not significantly. Watch my Video. No doubt a lot is riding on the tax rebate checks. If consumers use them to pay down debt and/or deposit them in savings accounts, spending will unquestionably suffer. BUT, we Americans love to shop, especially when the weather is nice. As such, it wouldn’t be a shocker at all if spending upticks as a result of the government’s stimulus package, especially if oil prices continue to fall like they have during the past few days.
Still, you have to wonder how temporary the government checks will be. After all, housing prices are still trying to find a bottom, food costs have gone through the roof, and we’re nearing the summer driving season, a time when gasoline prices typically increase. Listen to NPR Summer Driving Season Clip.
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Consumer Confidence at 5-year Low
Posted by Patrick O'Connor on 4/29/08 9:28 am
The Conference Board’s Consumer Confidence Index dropped to a five-year low in April after home prices continued to plunge, gasoline prices hit fresh all-time highs, and jobs became less plentiful. Confidence is now “consistent with real consumers’ spending falling at a year-over-year pace of about -2%,” said economist Ian Shepherdson at High Frequency Economics.
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U.K. Refinery Strike May Lead to a Retread of Media Images
Posted by Tim Hope on 4/25/08 3:44 pm
Get ready for a spillover media effect in the United States should a potential U.K. refinery strike come to pass. It will be the first such strike in 73 years and could idle about one third of the oil and gas output from the U.K. North Sea oil fields. Such a strike may result in fuel shortages in Scotland along with the inevitable visual images reminiscent of the American fuel shortage of the early 1970’s. It would not be surprising if the American media were to seize on the issue in an attempt to drive home the idea of global resource shortages.
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