What is causing the high fuel prices?

[msta999]

A friend of mine, sent me an email, asking what I thought was causing the high diesel prices. Diesel should be at a lower price than gas, because it is suppose to be easier to refine. He was asking if I thought it was big buisiness trying to snuff out the little guy? Many independent trucker are falling by the wayside because of the high prices.
Who is going to make out when they do? The larger trucking companies? The Railroad companies? Is this really just big business just taking back what they think is theirs?

This is what I told him I thought of the situation. I am posting it to see what others have to say about it. *

As for the fuel market? I think and this is just me, I think there are several reasons for the high prices. First, I think the oil companies are fedup. We require...no we demand that they make enough fuel for us to use as we see fit, yet the government, due to the environmentalists say the oil companies can't build more refineries (remember they lost 2 in the last 5 years due to fire) and they are also not allowed to drill for more oil in places where we know there are large quantaties. And "we the people" don't say anything so it is just like we are siding with the environmentalists. They are forced to buy larger amounts of oil from overseas, at these high prices and you know they are going to pass those prices on to us. Yes, the oil companies are enjoying record profits, but I don't blame them. If we (the people) really wanted to do something about the prices, we would get off our duffs and let our political leaders know, but we don't and this is what we get.

or

The oil companies see something that will be replacing fuel, in the future, and are trying to get the most out of the oil that they can, while they can. Did I send you the video on the HHO car some guy made and was invited to washington dc to show it off and describe how it worked? it made its own hydrogen, all you have to do is add water. This guy even hooked his system up to some military hummv's for the government to experiment with. If it works, like this guy says it will, it "will" replace fuel. I'm not saying this could be the cure all, but there might be something coming, that we just don't know about and they do.

So I'm not sure, but I do know we have say, if we the people want to, but it is easier to just complain about it and not do anything. I think if someone really wanted to do something about it, they would rally the people in to writing their political leaders and if enough did, something would have to give.....maybe.

[AlchemyAcres]

[re....asking what I thought was causing the high diesel prices. Diesel should be at a lower price than gas, because it is suppose to be easier to refine.]

Inelastic demand (it's essential for home heating and transport), limited refining capacity (a bottleneck)and a greater excise tax than gasoline. That's a few of the excuses anyway...LOL

Inelastic demand is the real crux of the problem. The world runs on oil!!
The world is dependent on oil!!!
The fat cats can manipulate the markets any way they see fit!!!!


[re: So I'm not sure, but I do know we have say, if we the people want to, but it is easier to just complain about it and not do anything. I think if someone really wanted to do something about it, they would rally the people in to writing their political leaders and if enough did, something would have to give.....maybe.]

Politicians? LMAO
What are they gonna do other than up taxes to subsidize fuel prices (to create an ILLUSION of lower fuel costs) and just move the due date for poor decisions into the future with added interest and penalties?

Freedom and entrepreneurship is the answer! Maybe! LOL


~Martin :)

[kawalekm]

Hi msta999
Here's a copy of a post I made in "Current Events" that I think will thicken the pot somewhat

"A observation made by Ron Paul got my attention recently, which I think is worth further discussion. For some time now I've tracked the price of gas, and used its rise as an indicator of whether peak oil was occuring. I just heard about an alternative explanation for the price of oil in its relationship to the price of gold. In 2000, an ounce of gold cost about 300$, whilst a barrel of oil cost 30$. That means that in the year 2000 1 ounce of gold could buy about 10 barrels of oil.

Well, fast forward to 2008 and gold is now in the 1000$ range, while a barrel of oil costs about 100$. So, 1 ounce of gold still buys about 10 barrels of oil. Over the course of 8 years this works out to be about 40% inflation. Is it that the REAL rate of inflation that has been hiden from us? In other words, the price of oil hasn't gone up at all, it's just that the US dollor is only worth a small fraction of what it used to be worth! I would very much like to hear people's comments on this!"

One logical conclusion is that the price of gas has not gone up. It is only the dollor that went down instead! Might foreign investers be pulling their money out in droves because they're scared of American's fiscal irresponsibility?

I don't buy the refinery capacity issue. Just last week I heard a comment on the news that US refiners were only operating at 82% of capacity, so it's not as if they're pushing the limits right now. Author James Kunstler thinks that companies are not building new refineries because they know that peak oil is right around the corner and it is an wasted investment.

It's April now, so why hasn't diesel/heating oil demand dropped back down? Truckers don't drive more in the springtime do they? Maybe more likely is that the last oil refinery fire was at a diesel production plant. I don't know, I've gotten kind of immune to listening the various reasons why the price always goes up.

Forget about HHO. It's just a scam! Anybody that says they can get energy from water is a lier or a fool! Better to invest your dollors in pyramid power! Nobody is going to come along with a magic energy source that's going to solve all our problems.
Michael

[AlchemyAcres]

Hi msta999
Here's a copy of a post I made in "Current Events" that I think will thicken the pot somewhat

"A observation made by Ron Paul got my attention recently, which I think is worth further discussion. For some time now I've tracked the price of gas, and used its rise as an indicator of whether peak oil was occuring. I just heard about an alternative explanation for the price of oil in its relationship to the price of gold. In 2000, an ounce of gold cost about 300$, whilst a barrel of oil cost 30$. That means that in the year 2000 1 ounce of gold could buy about 10 barrels of oil.

Well, fast forward to 2008 and gold is now in the 1000$ range, while a barrel of oil costs about 100$. So, 1 ounce of gold still buys about 10 barrels of oil. Over the course of 8 years this works out to be about 40% inflation. Is it that the REAL rate of inflation that has been hiden from us? In other words, the price of oil hasn't gone up at all, it's just that the US dollor is only worth a small fraction of what it used to be worth! I would very much like to hear people's comments on this!"

One logical conclusion is that the price of gas has not gone up. It is only the dollor that went down instead! Might foreign investers be pulling their money out in droves because they're scared of American's fiscal irresponsibility?

I don't buy the refinery capacity issue. Just last week I heard a comment on the news that US refiners were only operating at 82% of capacity, so it's not as if they're pushing the limits right now. Author James Kunstler thinks that companies are not building new refineries because they know that peak oil is right around the corner and it is an wasted investment.

It's April now, so why hasn't diesel/heating oil demand dropped back down? Truckers don't drive more in the springtime do they? Maybe more likely is that the last oil refinery fire was at a diesel production plant. I don't know, I've gotten kind of immune to listening the various reasons why the price always goes up.

Forget about HHO. It's just a scam! Anybody that says they can get energy from water is a lier or a fool! Better to invest your dollors in pyramid power! Nobody is going to come along with a magic energy source that's going to solve all our problems.
Michael

The devaluing of the dollar certainly is part of it.

[re: refinery capacity]
It's my understanding that refinery capacity has averaged about 90% over the past 6-8 years which is about tops. There's down time at any factory, especially OLD refineries. Does anyone know for sure?

[re: Springtime, heating oil and truckers.]
Naturally, heating oil demand is low this time of year, but ag demand takes over as farmer's begin to plant and such.


But all that doesn't matter anyway. As long as demand is inelastic, the price must be paid, "they" can make up any excuse they want.

~Martin ;)

[AlchemyAcres]

Freedom and entrepreneurship is the answer! Maybe! LOL


Oooops!
I left out creativity and responsibility!

Freedom, creativity, entrepreneurship and responsibility!

There! That's better!!

~Martin
;)

[ryanmercer]

Diesel costs more, as you are left with less byproduct... gasoline leaves you with a lot of stuff after refinement that can go into making asphalt, those plastic bags on the grocery, etc. (thats only a partial bit of it though)... also global demand for diesel is increasing. In some European countries, more than half the cars have diesel engines... also the refineries are in the process of switching over to making "clean diesel" with virtually no sulfur content... which means new equipment which means a more expensive process (about 5-8 cents more per gallon)

Also... the Federal excise tax on diesel fuel is 6 cents per gallon higher. (Diesel fuel is essentially the same stuff as heating oil, but is taxed at a higher rate. 18% of the average price at the pump, according to the DOE, is taxes, 54% is the cost of the oil itself, 22% is the cost of refining, and 18% is distribution, marketing, and profit... while or gasoline, again according to the ODE, 15% of the price is taxes, 55% the cost of the oil, 15% the cost of the refining process, and 14% distribution, marketing, and profit.)

[msta999]

Oooops!
I left out creativity and responsibility!

Freedom, creativity, entrepreneurship and responsibility!

There! That's better!!

~Martin
;)

I agree, but the political leaders keep the oil companies from drilling more oil locally and building new refineries. This is what I was talking about as far as rallying the people. Let the oil comanies drill for oil and build new refineries.

[msta999]

RE: I don't buy the refinery capacity issue. *Just last week I heard a comment on the news that US refiners were only operating at 82% of capacity, so it's not as if they're pushing the limits right now. *Author James Kunstler thinks that companies are not building new refineries because they know that peak oil is right around the corner and it is an wasted investment. END:

This is dead wrong, our government will not "let" the oil companies build new refineries, due to the environmentalists. Just like our gov will not let the oil companies drill for oil in new locations of the US. This is all due to the environmentalists, and if we do nothing, we are siding with the tree huggers.

The refineries are old, they can not run at 100% unless some of them are rebuilt, that means shutting it down and spending a few years rebuilding it. The oil companies can't/won't do that. And think about, could you push your car to 100% of the power it could produce for years and years?? No you can't.

[msta999]

R: But all that doesn't matter anyway. As long as demand is inelastic, the price must be paid, "they" can make up any excuse they want. END

Yes, there is a past history of when we buy less, and the reserves get full, the price does come down.

[Stephen_B]

As of a few years ago, there were more oil and gas wells drilled in US territories than all the rest of the world combined.....yet US oil production is now about 1/2 of what it was at peak around 1970.

Blame the environmentalists if you want, but US oil production peaked before the enviromental laws really began to get any teeth at all (late 1970s under Carter.)

Oil production is peaking in a bunch of other countries too.....Yemen, Mexico, Iran..... countries that are not bedeviled by environmentalists.

Ya'all gonna have to find another bogeyman to blame imo.

[Stephen_B]

Also, though the total number of US oil refineries has shrunk over the years, the total refining capacity hasn't really changed much.

The real problem is that economics favors refining oil closer to its well head....and that means somewhere other than the US.

[msta999]

As of a few years ago, there were more oil and gas wells drilled in US territories than all the rest of the world combined.....yet US oil production is now about 1/2 of what it was at peak around 1970.

Blame the environmentalists if you want, but US oil production peaked before the enviromental laws really began to get any teeth at all (late 1970s under Carter.)

Oil production is peaking in a bunch of other countries too.....Yemen, Mexico, Iran..... countries that are not bedeviled by environmentalists.

Ya'all gonna have to find another bogeyman to blame imo.

Ok, so the oil companies are the cause of high prices. How are they doing it? Holding back oil? I though crude oil was bid on? Or do the oil companies make up a price as they go along? I haven't heard of EU countries having to deal with such high prices. Are they or is it just because the dallar value shrank? I don't know the answers, all I know about this subject is what I see on the news and read on the net, but then we all know, that is not a real realiable form of info.

[Stephen_B]

What's causing high oil prices is the now (slightly but surely) declining supply of conventional light crude in the face of increasing world demand. Period.

[kawalekm]

Ok, so the oil companies are the cause of high prices. How are they doing it? Holding back oil? I though crude oil was bid on? Or do the oil companies make up a price as they go along? I haven't heard of EU countries having to deal with such high prices. Are they or is it just because the dallar value shrank?

No msta999, YOU are the one to blame for high oil prices, and ME, and every other American that tops off their bloated SUV at the pump tonight. *Not one single word about conservation! Not one single word about car pooling! Not one single word about smaller cars! *Not one single word about taking the train or bus!

As long as we all just line up at the pump to fill our tanks, we can just continue to bend over and get reamed for the product we all are addicted to. *Europeans aren't complaining about higher prices for two reasons. *First, they've been weaned off cheap oil for decades now, mostly driving little subcompacts with a stick and diesel engine. *If they get less the 40 MPG, they are up in arms. *The typical American doesn't even notice when his jacked up Suburban is only getting 8MPG!

Second, if I'm right, the Europeans are not deep, deep, deep in debt as American are, so their currency has not been dragged through the mud like the American dollor has. *Their euros are less inflated than dollors, so they can still buy the oil they need with good currency. *I really can't see anyone to blame for these problems except for the American people ourselves!
Michael

[DM]

I have friends in many other countries, and they do have very high fuel prices. "They" blame the US for there climbing fuel prices, saying we are the nation useing the most fuel, so we control the price... (there words, not mine)

DM

[msta999]

RE: No msta999, YOU are the one to blame for high oil prices, and ME, and every other American that tops off their bloated SUV at the pump tonight. Not one single word about conservation! Not one single word about car pooling! Not one single word about smaller cars! Not one single word about taking the train or bus! END

I was in germany for 3 years, one thing I do know is when they have car accidents, they almost always drag out the body bags. Those little cars are just not safe. I do drive a SUV, it has a inline 6 cyl and gets 21 mpg hwy, 16 mpg city. If the automanufatures would put a diesel in it, I'd get around 30 mph, but they won't. The city slickers won't drive them, so the auto manuf. build very few of them.
As for riding our transit systems, they just won't get you where you want to go without lots of walking and transfers. In germany, the trains and buses were easy to use and they would get you to main areas with little walking, or if you had to walk, atleast you went though areas that were clean and well kept. Have you ever road a bus to downtown Seattle? Talk about slums! The only way our transit systems will get fixed is if they privatize them, when a profit is the concern, then it is in the owners interest to make transit something people will be willing to use.
When I commuted to the East side, I could drive it in 40 min. If I took the bus it was 1.5 hrs minumum with 3 bus transfers. So I drove.

[Stephen_B]

msta999, what you say about small cars getting all smacked up and public transportation not going your way and/or taking too long may well all be true.

So what?

It doesn't get around the fact that a huge nation of huge vehicles driving huge, daily distances is running up against declining geological supplies of light crude oil and it's causing oil and gasoline prices to skyrocket.

One can say I don't like small cars and trolleys. Fine. Just be willing to pay the price for those huge cars going huge distances in huge numbers, because the bill is coming due.

[Stephen_B]

Privatization.....ah, an interesting topic.

Years ago, we had private railroads. *The big ones owned 1000s of miles of rail and hundreds of stations. *They paid taxes on all those rails, all those stations. *I used to have a copy of the Saturday Evening Post - I want to say Sept. 1957ish, that had an article: *"So You Don't Ride the Rails Anymore." *That story detailed how RR's like the NY Central had 600+ stations up for sale because they were being taxed and taxed on them while taxes were being levied on rr passenger tickets to help pay for the Interstate Highway System then being built. *It mentioned how the then privately owned Washington (DC) Union rr Station was paying over $4500 in property taxes every day, while Washington National Airport was being built on the other side of town with taxpayer dollars.

In the 1940s and 50s, when the railroad companies tried moving into bus and airline businesses, the federal government blocked them on anti-trust concerns. *So...our private transportation network, the one that arguably built the Industrial United States, was being taxed to death, to build its competition, while being blocked from buying into that competition.

Years later, when all the public roads built with tax payer money, on land removed from the tax rolls, finally killed the private rr *and trolley passenger business, we created *another* taxpayer supported entity, Amtrak to *&^% transportation even more.

Here in the Boston area, all the highways eventually put the NY, New Haven & Hartford and Boston & Maine railroads as well as all the trolley and street railways under water financially and they ceeded their commuter passenger business to a government transit agency, the Massachusetts Bay Transportation Authority (MBTA) one of the biggest, most financially inefficient government entitites that has ever existed in these parts (and in MA, *that* says something.)

I think all the interstates should be sold off, fee simple to whomever wants them to run as toll roads. *Let them pay property taxes too on all that real estate just like the rr's used to have to do. *Let's do likewise to all the government run airports too..... Let the airlines buy them and run them as "union" airports (not union as in labor union, but union as in jointly owned by several airlines like the railroads used to do when they got together to build a large, shared train station.)

The day is quickly coming when declining gas and diesel sales will make the federal gas tax $$$ dry up all while construction and repair costs for roads continue to go through the roof. *(Construction equipment runs on diesel and pavement is rock glued together with heavy oil components. *Even concrete depends on large amounts of nat. gas to cook the limestone and diesel to mix, transport, and spread it.)

Our problem is that for going on 70 years now, government at all levels has been heavily subsidizing the public paved road for the private automobile as well as the public airport and it was all predicated on cheap, cheap oil.

Things are about to change in a big way. *Too bad too many of those private rr lines (at least the branch lines) with their very durable (read: needs no oil) metal rail roads and all their stations have been sold off. *Too bad too they weren't allowed to get into other transportation businesses. *

Now we are stuck with deteriorating roads that falling gas tax revenues can't pay for, and a lousy govt. run remains of a national passenger network that is sick. *(Though at least for freight rr's, though it looked bleak 30 years ago, things are still going okay.) *Just wait until the interstates start dropping bridges over all the culverts etc. and we can't pay to replace them. *The few trucks left plying the roads end up with broken wheels and axles from all the potholes. *Thank Goodness that we may still have the freight rr's like Burlington Northern, CSX, Norfolk Southern, etc. *Maybe when the airlines try to run their own airports (now taxed like everybody else's real estate) and fly planes on $7.00 a gallon jet fuel, the freight rr's will get back into the passenger business like they used to do so well.

We've been clueless on transport in this country for way too long and we're now getting what we deserve for messing with govt. subsized transport in the middle and latter half of the 20th century. *Government subsidized transport systems will not have the flexibility to adapt to a post-oil world so we best get govt. out of transportation.

[ryanmercer]

As I've said several times before here... America has always had, and still has, some of the lowest fuel costs in the world... and probably always will.

[msta999]

msta999, *what you say about small cars getting all smacked up and public transportation not going your way and/or taking too long may well all be true.

So what?

So what?? You go ahead and drive you kids around in one of those death traps. Not me!



It doesn't get around the fact that a huge nation of huge vehicles driving huge, daily distances is running up against declining geological supplies of light crude oil and it's causing oil and gasoline prices to skyrocket.
I'm not the one who is forceing all the industrial companies to build in just one area. I not the one who is forcing all the car dealers to put thier dealerships on the same strip. Most of the problem of having to comute is, you can't live close to where you work, because of government intervention. We have to commute to go where the work is. If the companies could spread out, then it would be easier to find a place close to work.

One can say I don't like small cars and trolleys. *Fine. *Just be willing to pay the price for those huge cars going huge distances in huge numbers, because the bill is coming due.

I already said, I'm all for vehicles that get better mpg. You don't have to drive a VW Rabbit to get good fuel mileage.

[High_Desert]

Memory is failing, but didnt some new legislation take place a couple of years ago requiring additional addtives to be put into diesel for the new emissions requirements? Thats when I remember diesal taking a big jump then and passing up gas.

HD

[msta999]

I think that is when they removed the sulfer. It caused a lot of problems with injection pumps, because it reduced its ability to lubricate. This was back in 95ish.

[High_Desert]

I was thinking it was in the 2000's as I was still in the RV industry. Gradual emissions restrictions finalizing in 06.

Regardless, I am sure there are multiple reasons, some legit and alot not.

HD

[mike762]

They went to ULSD, less than 15ppm last year, and it has caused problems with lubricity, requiring additives. Ford was supposed to come out with a diesel powered F150 and Expedition in 2002, using a V6 Navistar turbodiesel, but were blocked from selling it in CA, NY and MA. Since those 3 markets are 15% of their total, they delayed indefinitely the introduction of the diesel option. These vehicles would have boosted mileage into the mid 20's depending on 2WD/4WD and gearing, but would have been significantly better than gassers. Diesel power is a great option that is being ignored due to "environmental" concerns, just as every other energy option except the politically correct "green" alternatives of solar and wind. Even geothermal is being blocked in CA because it ruins the ambiance of the natural surroundings. We have 250+ years of coal which could be used for transportation fuels through liquefaction, and also for electrical generation, but it is deemed unworthy by the greens and is thus off the table. Same with nuclear energy. Until we as a people quit allowing a small minority of Marxists masquerading as environmentalists to control our energy policy, we will get much higher energy costs across the board.

As to the oil/dollar issue, the devalaution of the dollar is the primary driver of the increase in the cost of crude. If you overlay a chart of the increase of M3 (gross money supply) over a chart of the price of crude oil from 2001 to 2006 or 2007 if you use MZM (money zero maturity) vice M3, you find that they coincide almost perfectly. There are some supply/demand spikes on the oil chart but yoy the mean price of oil tracks perfectly. This also is a basic supply/demand function. If you print more dollars, they become worth less and it requires more of them to purchase commodities such as oil, which are priced in dollars. Compare the price of crude to the Euro or to gold, and you find that it has not increased all that much. Actually, when compared to gold, it has not changed at all.

We have met the enemy, and he is us. We have allowed our politicians to be coopted by a vocal minority, who are selling a big lie called "anthropogenic climate change", or "Global Warming". It is a ruse designed to control the means of production through environmental regulation and litigation, and it is succeeding. Almost every one of our politicians has bought into this big lie, as has most of the public, and we are reaping the fruits of that in our current energy problems. Two things would bring our energy problem down to a manageable level, a stable currency and removal of government involvement in energy production. I do not see either of those happening, so prepare yourself for worse to come.