Richie Rich and the High Price of Oil

The sooner we develop alternatives to petroleum the better for climate change and the environment. Also, since 80% of the cost is for the cost of crude oil, and the cost of extraction is probably only about 1/5 to 1/4 of the cost of oil, around $30-35 of the $50 spent at the pump goes directly to the profits of oil companies or oil producing countries. Even if we had to pay the same for some alternative fuel as we do for gasoline, it would be better if the profits were actually going to pay domestic companies that are using domestic workers.

The other good thing about higher prices is that when things are priced like dirt, people treat those things like dirt. Hence the proliferation of ridiculously large vehicles that get under 12 mpg and long commutes. The only way to get people to notice is to make them feel it in the pocketbook. It’s not really the auto companies fault, no one was buying the economy cars until prices started going up. It’s a failure on the part of government and us, the citizens, who only want fuel economy now for economic reasons, not because it would be less wasteful or less polluting.

I’ve been decrying our cheap gas for years. If we saw at the pump the REAL cost of gasoline per gallon, we’d be much further along the innovation ‘pipeline’ (sorry, I couldn’t resist!) by now.

To Post #2,

Actually, I think it is fair to place part of the blame on the auto manufacturers. They have rejected or fought each and every automotive innovation that the government mandated that was in the best interest of the consumer: be it seat belts, air bags, 5 mph bumpers, better fuel economy. How ironic now that fuel economy is again a major factor in the consumer’s decision making and the American manufacturers are suffering greatly because of their decades long recalcitrance regarding fuel economy standards! Wanna talk about an industry hoist with its own petard! Plus, it’s not so much that no one was buying small cars, but the massive push by the America auto makes to sell more SUVs, 1) because they can charge more for them (GM discontinued most of their full frame, full sized autos in favor of SUVs) 2)they were once exempt from fuel economy standards (light truck work vehicles exemption) and was an easy out for them to not have to make more efficient vehicles, circumventing CAFE requirements.

I had pegged my hopes on *alternate* energy for autos in the form of CNG (compressed natural gas) cars as the next evolutionary stage of powering cars , but that rarely gets mentioned these days in the realm of *alternate* energy.

The auto companies care about what the customer cares about. Many americans didn’t care about fuel economy, because gas was so cheap. If you can get an uber-cool SUV or truck that can haul, tow, and rip through heavy snow banks and it doesn’t cost all that much to run, why not? It would add extra expense for the customer to make these vehicles more efficient, and they would balk at the higher prices for vehicles. But now that gas is dear, customers are changing, and the auto makers are reacting more quickly than i’ve ever seen them move in the past.

I paid $42 to fill up my 2006 Honda Civic in the beginning of the week. With my driving pattern, I need to fill it up about once every other week which isn’t a huge deal.

Maybe because I don’t spend that much total for gas, I also see some positives in high prices. It makes people conserve more; it provides incentive for car manufacturers to produce more efficient cars; it makes people buy smaller cars. Even though extra cost isn’t a huge deal to me, I still started to car pool with a friend a couple of days a week, and work from home more. Why not reduce consumption if we can?

Pixel Kid – I do know what you are talking about. I have a cousin who lives in Germany. A couple of years ago we went to Sicily together and rented a car. A really tiny one compared to which my Honda Civic is huge, and with manual transmission too (my cousin can drive those, I can’t). We alternated paying for gas, and was I surprised when I paid 50 Euro to fill up this tiny thing. Wonder how much it would’ve been now.

I have a scooter. It costs me about 5 bucks to go 200 miles

its no surprise that the comic was from 1978, it wasn’t predicting the future, it was commenting on the current state of affairs in 78

I spend about $15 every week on gas for my 2002 Prius. I’d like to get it down to every other week again + bus pass, but The Powers That Be rearranged bus service in my area a few months ago…it much easier for me to get from home to Microsoft now, but not to MY workplace.

(Naturally the neighbors who do work at msft don’t take the bus.)

Walter – I was probably a bit glib when I said the auto companies weren’t to blame. You are correct in saying they were fighting (and still are) any additional fuel economy and emissions regulations, including those in California right now. However, that said, in an era of cheap oil, it would take extraordinary circumstances for a private company to focus on fuel economy when it’s not the focus of consumers. That is where our policy, really the lack of policy, failed us. If we had mandated more efficient vehicles AND maybe even more importantly, introduced policies that helped us reduced the amount of driving, most of us would be talking about $4-5 gas as if it weren’t a huge deal, because it would be $40 to fill up our car, and we would have arranged our lives such that we don’t need to fill up that often.

Motercycles are cheaper to run. So are scooters. How much fuel is needed to propel a human body a hundred miles anyway? Cars are great if you have 2-3 people going with you. Otherwise most of the fuel is burnt pushing dead metel to and fro from the workplace. The lesser metel enclosing you from all sides the better.

I’ve not confirmed this fact that I heard on NPR, but gas is only 20% higher in inflation adjusted dollars than when the Model T first came out.

To Chris, #20,
It’s unfortunate that those auto makers didn’t have the foresight to continue to make those fuel efficient vehicles after the fuel crises in 1973 and 1979 and to improve upon them so that they would be more economical to make and more attractive to the consumer. This current situation was predictable (i.e., past is prologue) and for the auto makers to regress to the point where the most commonly sold vehicles today are hardly any more fuel efficient than my dad’s old 1968 Chevy Impala, is a disgrace. I have read many people being pleased about the rise in the cost of gas to chasten the consumers, myself being one of them who is pleased. Well, I am pleased that the American auto companies are being chastened with their poor sales as people move toward those fuel efficient vehicles that are ready and waiting from the Japanese and German manufacturers, while we desperately try to play catch-up. We apparently didn’t get it in 1973 or 1979, so maybe now we will get it and finally do the right things.

If I didn’t live in Texas where the summers blister (despite the alleged global warming), then I could consider a moped…if I didn’t have to wear business attire everyday.

If I was not a local management consultant with clients around the metroplex, then I could consider public transportation. Mass transit is not a forte here, especially the areas I travel to.

Riding and walking to work…not an option.

Car pooling is potentially an option but invariably schedules do not align. More investigation needed – probably the best bet.

Kimberly Amadeo has an interesting article that exposes other greedy individuals at the root of our oil situation.

We all know somebody somewhere is being very greedy, but it may not be the American consumer, the oil execs, or OPEC alone.

“Crude oil prices have increased 25% in the first quarter of 2008. According to most news sources, this is a result of surging demand from China and India, and a curtailment of oil supply from Nigeria and Iraq….the price of oil is being affected by more than supply and demand. In fact, the data shows global demand is down and global supply is up. Oil consumption decreased from 86.66 million barrels per day (bpd) in Q4 2007 to 85.73 million bpd as of this quarter. During this same time period, supply has increased from 85.49 to 86.17 million bpd. According to the laws of supply and demand, prices should have decreased.”

The EIA says look to commodities traders for part of the blame.

Bring on the high gasoline prices. My wife and I each drive a compact car long before prices are what they are now. We live in an energy efficient home. We recycle as much as we can. Conservation and reduction of excess are the keys here- there has been too much excess using a non-renewable resource such as gasoline. What kind of future are we leaving for the next generation if we squander it all now?

While not totally responsible for the exising pain at the pump the US copious demand for gasoline (and other excesses) has helped cause the poor to suffer locally as well as internationally because many of us want to drive trucks and SUVs that get us 10 mpg. Now with demand exceeding supply high food prices are one result of this problem which force families in developing countries to eat one meal per day instead of two.
High gas prices throughout the world will lower demand and eventually temper the high per barrel oil price.

Wow, that celebrate-the-$8-a-gallon article was extremely frustrating to me. This guys points are so naive and in some cases downright insulting:

“1.RIP for the internal-combustion engine – There should be some sort of Moore’s law for fuel efficiency. ”

This is naive to point of ridiculousness. For one thing, most of fuel efficiency is spent pushing a column of air around. There’s only so much you can do to make it more efficient, and that has mostly been done. Anyway, without internal combustion, that power would have to come from somewhere, and there is no better source than petroleum, period.

“3. Wither the Middle East’s clout
This region that’s contributed little to modern civilization exercises inordinate sway over the world because of its one significant contribution.”

Well, little if you don’t count things like rule of law, architectural fundamentals that keep our buildings standing, algebra, nearly all of our domesticated wheat crop varieties, beer, not to mention that pesky little thing called civilization itself. I know, I know, but what have they done for us *lately*, but still…

“4. Deflating oil potentates
On a similar note, Venezuela’s Hugo Chavez and Iran’s Mahmoud Ahmadinejad recently gained a platform on the world stage because of their nations’ sudden oil wealth. Without it, they would face the difficult task of building fair and just economies and societies on some other basis.
How far would their message resonate — and how long would they even stay in power — if they were unable to buy off the temporary allegiance of their people with vast oil revenues? ”

Yeah, it well and truly sucks to see the little people of Venezuela get a leg up in life.

“6. An antidote to sprawl”

Don’t even get me started. I don’t *want* to move to a city. I don’t *want* to live near all of your crime, pollution, noise, lights, stress and everything else that sucks about living in cities.

“8. Easing global tensions”

This one is perhaps the most naive of them all. As if the $2500 Tata in India would translate to a $2500 car in the US. He’s erroneously comparing two completely different things. But beyond that, what he is suggesting here is tantamount to saying “Let’s just give up on oil and leave it all to the Chinese and Indians.”. But maybe he’s right. Maybe they will be kind and benevolent masters when they ultimately surpass us. Also nevermind the fact that he’s saying the Indians and Chinese should get the increased standard of living, but not the Venezuelans. That strikes me as contradictory. Why does he hate Hugo Chavez so much? The Chinese government is far worse.

I *enjoy* our higher standard of living, and I’m sure as hell not going to celebrate when we have to abandon it. In fact, if it happens in such short order, I think its going to be downright catastrophic. $8 a gallon gas might be a good thing IF we had 25 years to transition to it, but the way things are looking, we’re probably going to get 2-3 years at most. That shouldn’t make you celebrate, it should make you afraid.

Check out my new ride: 1400 mpg!
http://www.scootonthis.com/inserts/dart/photos_veloce.html

Another problem related to higher gas proces – I just read a news article saying that the various auto aid services (AAA and the like) are seeing a large jump in calls from people who have run out of gas. With the higher prices, folks are not filling their tanks and trying to get by further on what is in their tank. The article also stated that running on fumes can cause problems for your fuel pump, leading to expensive repairs eventually. Just another thing to worry about…

hey here in Canada the cost for gas is $1.47 per liter i would pay from $145 – $200 per fill up !!