Very OT: Gas prices

[Edward Sargent]

I love the Federal Government when they talk about Wall St, big bad banks etc. It was the Government and yes it goes back to the Clinton years, basically telling banks to find a way to allow more of the "American People" to share the "American Dream" of owning a home. House and Senate Finance Committees (yes Dodd/Frank) relaxed banking regulations to start. Everyone thought that was a good thing and many still do. A system to spread the risk around was developed - think derivatives and the rest is history. Now I am a simple biologist with no economic training so have a simple view of economic theory but I cannot listen to one more dopey Congress person talk about big bad banks, glorification of the hard working poor versus the filthiness of the rich without thinking we have major problems with our government which I see getting worse.

 

[Adios]

I propose New England and New York be annexed by Canada! Mexico can take New Jersey, but Canada gets everything else going down to, eh, hard to say...Tennessee?

 

[willie99]

I think it's about time some idiotic politician steps in and argues "with the price of gas going down, we should take advantage of that opportunity and raise gas taxes"

moronic politicians that think they're the solution can never spend enough

 

[Uconnfanatic]

We are on the verge of a global deflationary contraction. Falling oil & metal prices are the leading edge of that trade. Oil is going to $30 in upcoming months and gasoline prices could drop by another buck or more. The next shoe to drop will be the global equity markets which will drop in 2015 by well over 50%. Most of Wall Street still doesn't see this so most economists and market analysts are still talking bullish just as they were in Sept 2008 on the eve of the biggest financial crisis in history. This downturn could be worse but pretty much contained within 2015. U.S. stock market just completed a generational top. We may not see the recent highs revisited in the next decade or two. Not your standard forecast but as a forty year veteran of Wall Street, I am accustomed tomy contrarian views being at odds with the consensus at major turning points. Go huskies!

 

[willie99]

I'm generally a contrarian, but I don't share your doom and gloom

I also believe high energy costs are one of the primary reasons economic growth has been stunted, and I hope lower costs will help kick start economic growth again

we better play with 10,000% energy for 200 minutes on Sunday, this team better look mad lest we're really doomed

 

[huskiesNhoos]

Really enjoying reading the theories on global economy here for a change of pace. Hard to believe I'm getting this info/theory from a college bball board! You guys better be right so I don't look like an idiot at the water cooler!

Who am I kidding? I'm an engineer...we don't care about all this economy crap. I'm just happy I paid $2.96 for premium down here in NC!

 

[Onions]

Okay - I'm going to explain this, but I want you to really try to understand, and not just be a contrarian to me.

Prior to 2008, a bank would request money from the Fed. The Fed would create a ledger credit in the amount of the loan to the bank. So, you're correct that this money is "out of thin air," in that it didn't exist before the bank asked the fed for the loan. That practice has been going on a very long time, and it increases the money in circulation.

But the bank owes the Fed the money, and must pay it back, and, as it does so, the money in circulation is reduced

After 2008, however, thee Fed has done something that it never did before. Now, it simply creates money that it then uses to buy hard assets, and, specifically, U.S. bonds. It literally is creating money out of thin air and then using that money to buy government debt. That is the modern day equivalent of a government simply printing more money to pay its bills. It's Weimar Germany, Zimbabwe, and so on. It's banana republic behavior. This is why the Fed's balance sheet is at 4 trillion dollars while it was only at 800 billion in 08 when this mess really got going. The 3.2 trillion it has added in the last 6 years represents 1/2 the U.S. budget. It's a disaster in the making.

So the 'money out of thin air' metaphor is appropriate to the last 6 years.

So this has been going on for 6 years - not 6 months, but 6 years, and still no rampant inflation. How long does the disaster continue to not happen before you acknowledge that you might be wrong? 8 years (2 election cycles) 10 years, 20 years? Is there any time limit on your prediction of doom? Or are you like one of those "end of worlder's" who announce a date for the apocalypse and when the morning after arrives simply move the date back a few more years.

 

[Uconnfanatic]

The shale producing states have been responsible for almost 1.5 million jobs in this recovery while the rest of the states have lost nearly a half million jobs in the aggregate. With oil prices plunging we are already seeing big cutbacks in new shale drilling. This will not only impact jobs in the shale industry but jobs across the board in those states. Prior to this cycle when we were so much more dependent on oil imports, a fall in prices was net net stimulative. But now this price drop will likely hurt the economy more than help it particularly given how fragile this recovery has been. Also the dollar is poised to rise another 2o-30% and that means we'll be importing a lot of the economic weakness and deflation from overseas next year. The cycle is about to go in reverse.

 

[Kitaman]

Ok thanks for all of the analysis, I didn't know I was so stupid. Now for the reality (i.e. personal) issues for all you smart respondents:

Will my heating bill be reduced?

Will airline tickets be reduced?

Will costs of goods be reduced (transport costs)?

This inquiring mind wants to know, as I certainly know how corporate greed works.

 

[Uconnfanatic]

2015 will see some price reductions as a result of oil prices going down and what I expect to be a global recession. It probably won't be immediate as corporations tend to raise prices faster than they reduce them. It will be a promotional environment for sure - lots of sales.

 

[Revrat]

2.45 In Minnesota. Not a bad deal these days. even the Natural gas bills are low for heating so far.

 

[upstater]

http://www.eurotrib.com/story/2015/1/1/195652/1093

A Picture Tells a Thousand Words
It is virtually impossible to tell someone that a belief essential to his world view is untrue: it's invariably necessary to show him. So it is that oil producing nations such as Iran, Russia and Venezuela all believe that the global market price of oil is based upon physical supply and demand.

That conventional view may been briefly shaken when the price collapsed from $147/barrel in July 2008 to $35/barrel in December 2008 while the physical demand for oil varied by no more than 3%. But the subsequent reflation of the price saw producers' faith in the oil market Gods restored.

Since I predicted the current oil market collapse three years ago, I have not found it easy to explain in simple terms the way in which the oil market has been financialised and has therefore enabled Saudi Arabia and the US between them to 'peg' the price at a level comfortable for both.

The Great Transfusion
In 2007/8 a colossal pyramid of US bank debt backed by real property collapsed when the burden of debt became too great for the US population to support. As has been said if debt cannot be paid, then it will not be paid and this debt has not gone away.

The visible wounds of the US economy - the damaged private banks - have now healed through being recapitalised, but invisible internal bleeding continues into unsustainable and unrepayable property debt.

This requires a continuing transfusion of new dollars which have until recently been provided by the US Federal Reserve Bank ('Fed') in exchange for financial assets such as government bonds. This Fed economic policy of a programme of dollar creation and asset swaps is known as 'Quantitative Easing' or QE.

These dollars had to end up somewhere, and apart from conventional investments, new types of funds were created which enabled investors who feared inflation to invest in gold and commodities.

Perhaps the most sought after commodity as a protection against inflation is and was crude oil. A colossal amount of dollar lending - no one knows how much - was therefore made via investment banks to Saudi Arabia, and possibly to other GCC nations, by US funds in return for oil loans made through 'prepay' sale and re-purchase agreements.

 

[The Smart One]

1.59 here in oklahoma

 

[Hoophound]

1.59 here in oklahoma

Wow. Almost a dollar less than South Florida.

 

[UconnFamily]

Saw the pump reading $2.65/g in Fairfield County.

Not complaining but WTF is going on?

It should drop another $1 by the middle of 2015

http://www.worldstarhiphop.com/videos/video.php?v=wshh167s2EaypHQ9e62o

 

[zyron]

It should drop another $1 by the middle of 2015

http://www.worldstarhiphop.com/videos/video.php?v=wshh167s2EaypHQ9e62o

Because when I need up to date news and financial advice, I go to WorldStarhiphop.com.

 

[upstater]

Prices are falling because they were artificially high in the first place. Speculation had driven futures contracts well above the reality of production.

Ive invested accordingly. I bought SCO (short oil futures) 6 months ago.

SCO at 100. Yowza. And, I'm out!!!

 

[zls44]

WORLDSTAR!!!
WORLDSTAR!!!
WORLDSTAR!!!
WORLDSTAR!!!

 

[Echo Hawk]

This is the opposite of true. Gas taxes are based on usage, meaning that the state's revenue increases as more gas is used. With lower prices, usage increases, so this is actually good for everyone except middle eastern oil barons.

Gas has an inelastic demand curve. The fun starts when it goes back up due to any number of variables. And it will. The problem is that you just can't turn a switch to "on" and get the well pumping again. There is a big lag time. A lot of producers are shutting down wells. All of the drillers hedge their projected output so we can assume 2015 will see low prices and then it gets interesting. There are really big energy advances ahead with fusion projects like ITER and energy storage technology. But they are a long ways off. In the meantime, enjoy the low gas prices - for the time being. It's not going to last.

 

[jibsey]

On Tuscon now, just saw $1.88

 

[Huskybass]

2.04 today at Citgo on the Berlin Turnpike.

 

[WillB4]

Wolcott, Cumby's on Meriden Rd, $2.11

 

[Kitaman]

What's nice now is that I can again enjoy my long Sunday winter 'cigar' drives without adding to the cost of the cigar.

 

[CTPride]

1.75 here in Dallas