By on August 27, 2012

On occassion, I’ll use the Question of the Day feature as a tool to draw on the collective knowledge of the B&B to learn something; today I’m asking your your input on Tropical Storm (Hurricane?) Isaac.

With refineries and drilling platforms in the Gulf of Mexico closing down, the potential for a spike in gas prices is something that can’t be ignored. Jalopnik notes that gas prices went up $1.30/gallon in the wake of Hurricane Katrina and 60 cents/gallon in the wake of Hurricane Ike. Gas prices have been up lately, and they don’t like to come down as quickly as they rise.

A prolonged spike in gas prices won’t do any favors for auto sales, but I’m interested to see how the upward trend in gas prices will affect the 145 day supplies of the GMC Sierra and 137 day supply of the Chevrolet Silverado (as of August 1st).

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54 Comments on “QOTD: How Will Isaac (Not Mizrahi) Affect Gas Prices...”


  • avatar
    Robstar

    Been over $4/g in Chicago for some time….$5/g ? $6? People trade in their H2’s and other SUV’s for prius c’s. Prius C’s sell for $5k over MSRP at least until hurricane season is over (again)….history repeats…

  • avatar
    afflo

    I’m guessing a lot of whining on local news by people who bought the Canyonero or Banjo-Strummy Special Edition F750 to commute to their $40K/year job without considering that gas prices would ever rise.

    In other words, 2005. Drive what you want, but don’t whine when it’s expensive… Swings in gas prices are part of life, especially when we have to drill in less and less accessible places or boil tar sands to get oil.

    I have a 25 mile commute, each way, at roughly 27 mpg. So, roughly 30 miles/week. Lets go ahead and put it up to 40. If gas went from $3.50 to $4.00, it would cost me $160/mo instead of $140. At $5, itwould be $200. If $60/month bankrupts me, I’m doing it wrong. Plus, I can just mix in a few motorcycle days each week and enjoy 60 mpg goodness, now that temps are mostly peaking in the 90s instead of the 100’s.

    • 0 avatar
      redav

      Something’s wrong with your numbers–left out a decimal, maybe?

      But regardless, your point is valid. If you have a problem with gas prices, you have the ability to fix it by using less. If you use less, you are insulated from direct cost increases.

      I have a 13 mi round-trip commute. Because of that one thing, gas prices don’t affect me anywhere near as much as most people.

  • avatar
    multicam

    I’m sitting through Isaac right now (there’s a light drizzle outside). I’m not too worried about it.

  • avatar
    el scotto

    A refinery explosion/fire, hurricanes in the gulf, changing to summer/winter formula, a really big moose in the road; the oil companies will use any excuse to raise prices

    • 0 avatar
      dolorean

      Amen brother. Testify!

    • 0 avatar
      redav

      It isn’t specificially the oil companies.

      Gas stations are franchises, and the franchise owner may increase prices if he expects his next fill-up to be more expensive.

      Oil price is also heavily affected by investors who play the futures market. If they expect oil production to slow down, they will bid up the price.

      But yes, when it comes to gas prices, if it is a very bad day, prices will go up, and if it is a very good day, prices will go up.

  • avatar
    carguy

    The rise in prices is pure speculation based on excessive media coverage of this storm. It will never be more than a Cat 1 and will never blow at more than 80 MPH which is well within the limits of what an oil rig can withstand.

    • 0 avatar
      Mzdaspd304

      + infinity

      Here is your answer folks right there. Thats all it is. Pure speculation.

      Speculators use anything they can to raise gas prices? Why? Because is nieve enough to believe that these guys aren’t being paid by oil companies.

      Everything acts in sense of supply and demand unless and outside force changes it. US Oil demand has dropped quite a bit in the past decade yet price keep going up…Wonder why that is…hmmm….Oh yeah, thats right, speculators.

      • 0 avatar
        danio3834

        While speculation has something to do with it to be sure, a huge chunk of the rise in price is due to the massive devaluation of the US dollar which oil is traded in.

      • 0 avatar
        Chicago Dude

        “huge chunk of the rise in price is due to the massive devaluation of the US dollar which oil is traded in”

        When the price goes down, does that mean that Ben Bernanke threw a bunch of hundred dollar bills in his fireplace to keep warm?

      • 0 avatar
        sllloyd

        Because the good ole US of A is the only place buying oil, ever.

    • 0 avatar
      sllloyd

      Just because an oil rig can withstand 80mph winds has nothing to do whether that rig will actually be producing at 80mph. Newsflash, it won’t be.

  • avatar
    krhodes1

    Funny how the prices shoot up then take forever to drift back down. Given that oil is paid for well in advance, what you are pumping in your car today should not see a price increase for MONTHS, yet somehow it doesn’t work out that way. And the oil companies post record profits. Hmmm.

    Then again, I think gas is FAR too cheap in the US. Just leads to completely irrational vehicle and lifestyle choices. Yet another of the myriad ways Europe is ahead of us.

    • 0 avatar
      Darkhorse

      Myriad ways Europe is ahead of us? Move to Greece krhodes1 and enjoy.

      Crude oil is a commodity subject to the world’s futures markets. Speculators will try to take advantage of any political or natural disaster or threat thereof to make a buck. It’s not the oil companies that are the villains here.

    • 0 avatar
      Robstar

      @krhodes1>

      Can you explain what some “rational/correct” lifestyle choices are? I’m not sure your statement is so accurate…..and while we have cheaper gasoline than Europe there are quite a few countries that have it cheaper than us. What is the “correct” price for gasoline anyhow?

      • 0 avatar
        danio3834

        What he’s talking about is just old fashioned totalitarianism. He fails to realize his lifestyle isn’t a one size fits all proposition (much like policy makers).

      • 0 avatar
        dolorean

        Robstar, where does krhodes1 state ‘correct’ in anything he said? He does bring a good point to rational though. It’s been widely stated on TTAC for YEARS that most people who buy an SUV or pickemup truck do not use them for the intended purpose of the vehicle. Rather they chug away to work and the mall, buying these machines based on style, not substance and will be the first to howl with indignant rage when gas prices go up. To buy anything based solely on style against you own needs is irrational. However, we live in a country that allows for this. If you want to buy a cement mixer to drive back and forth to work because you just love swinging a thirteen-speed around in heavy traffic, I say great! Do you what you can afford. But PLEASE stay off the ‘news’ bitching about it costs so much to fill up your tank. You bought it, you pay for it.

      • 0 avatar
        Robstar

        @dolorean: he doesn’t specifically say it but it sure sees implied.

        People can state whatever opinion they want on ttac. Because something is stated in ttac doesn’t mean it’s a universal truth. You know, 90% of the time my wife uses her 7 passengar cuv to carry just herself & our son around, and then 1-2 months (30-60 days) a year she uses it for the 3-4 people that live with us. Then occasionally we drive my parents & my brother & his wife around (that makes 7). People who see her 99% of the time, driving by herself or just with our son are probably thinking like you do “She doesn’t need that big car!” but we’d really rather not pay insurance & other costs & buy garage space for a vehicle for every possible imaginable scenario (We’d probably end up with 20 vehicles or so).

        The logical/rational choice – BY OUR VALUES – is to have a 7 person vehicle available for when we need it, even if 90% of the time it’s empty.

        Why should anyone else judge us for our choice?

        Also: If you drive a prius around & complain about gas prices, can I then say you shouldn’t complain until you drive a 125cc scooter? What if 90% of your driving time is to worK? You don’t need to carry 5 people. What about a bicycle? Walking? Bus/Train? Working from home?

        Fuel efficiency & need is in the eye of the beholder….

    • 0 avatar
      gslippy

      Since when are ‘record profits’ a bad thing?

      A profitable oil industry is good for the economy, employing thousands of people and fattening your retirement fund. Would you rather they be in the condition of the US airlines?

      Athletes make ‘record’ salaries, too. If you don’t like it, don’t buy the product.

      As for Isaac, the effect on gas prices will be minimal.

      • 0 avatar
        danio3834

        Profits are evil bro!

      • 0 avatar
        stuart

        In most situations, I agree that a healthy oil industry is a Good Thing.

        However, sometimes a monopolistic company (or industry) gets a lock on their corner of the economy, and uses it to extract wealth from customers to an unhealthy degree. For example, when Microsoft owned over 90% of the PC operating system market, they made billions via the “Microsoft Tax.” (Today this has diminished greatly due to the ascendency of smartphones and tablets.) I gather that Honda had a similar, extremely profitable run years ago, when their products totally outclassed the US domestic competition.

        If the oil market gets buggered up so badly that the oil companies can “name their price,” they will use the opportunity to gouge consumers, to the detriment of the US economy as a whole. Ergo, extremely profitable oil companies aren’t always good for the economy.

        Agreed about the effect that Issac will have on gas prices.

        stuart

      • 0 avatar
        geeber

        The oil industry faces still competition from the natural gas industry when it comes to heating homes or powering electric generation plants. It’s not quite a monopoly.

        Honda was never a monopoly. A monopoly means that the company has driven ALL competitors out of that segment of the market, and customers therefore basically have no other choices. Honda never had that level of control over the segments of the market in which it competed.

        Customers were free to buy a vehicle from Ford, GM, Dodge, VW or Nissan.

        Many did not want to, but that is not the same thing as Honda leaving them no choice but to buy one of its products.

      • 0 avatar
        gslippy

        @stuart:

        Congress has repeatedly dragged the CEOs of Big Oil to testify about price collusion, to no avail. They only do this when prices spike and profits are ‘record’.

      • 0 avatar
        rnc

        Considering the world’s largest oil companies are state-owned and usually owned for the sake of financing the government and subsidizing the population, if there is any collusion the major-publicly traded firms are along for the ride. The current price of gas reflects the price of a barrel of crude oil that may not be delivered for a year.

      • 0 avatar
        onyxtape

        “Since when are ‘record profits’ a bad thing?”

        In a theoretical perfect smooth-running capitalist system, it’s an indication of an inefficient economic allocation of resources and capital.

    • 0 avatar
      bikegoesbaa

      Why do you think that the amount paid for something should directly relate the the selling cost of that same something at the end user level?

  • avatar
    danio3834

    I long ago accepted that my fuel-centric lifestyle won’t be compromised by the impact of (relatively minor in perspective) changing fuel prices.

    My solution to fuel costing more: Make more money.

  • avatar
    Beerboy12

    The big 3 keep stamping out those dinosaurs of pickup trucks in much the same way the Soviets kept stamping out Trabants and Lada’s. The answer to high gas prices is smaller trucks and the world is awash with great examples. Except here in the USA where is is hard to find one, hard to justify them because the big trucks are so cheap to make and to a large extent engrained into the culture.
    So nothing much will change until the gas price and / or the economy forces people and business to downsize at which time the big 3 will be caught on the wrong foot… again…

    • 0 avatar
      Robstar

      But perhaps smaller trucks aren’t the answer. Perhaps motorcycles or scooters are……oh wait, maybe bicycles…walking? Slippery slope…

    • 0 avatar
      danio3834

      Building trucks is a hard business to walk away from when in spite of high fuel prices, they are still selling in record numbers. Can’t blame the Big 3 for filling a need.

      Also note that non-domestic manufacturers ie. Toyota would LOVE to sell as many full size pickups as any of the Big 3. So much so they invested multiple billions in designing all new models and building new plants to screw them together in recent years.

    • 0 avatar
      geeber

      Beerboy 12, it’s no longer 2005. During that time, the only products really worth considering at your local Chevy or Ford store were the large trucks and SUVs (along with niche cars, such as the Mustang and Corvette).

      Today you can walk into your Chevy store and buy a Sonic, Cruze or Malibu. These are all very good, competitive vehicles. Same with Ford – the Fiesta, Focus, Fusion and Taurus are all very good vehicles.

      The smaller crossovers that each brand offers – Equinox at Chevrolet, and Escape at Ford – are also quite good. Even Buick-GMC has the new Verano and the aging, but still reasonably competitive, LaCrosse.

      If the market does suddenly swing away from full-size trucks, it’s not as though the domestics don’t have anything else to offer customers concerned about high gas prices.

      • 0 avatar
        Beerboy12

        Yes I know that but I am talking trucks and you can’t haul a load with a Sonic… Well you could because it’s a hatch but it won’t make much sense to a business or a private buyer who wants to haul yard wast on the weekends.
        None of the big 3 have good small truck products on offer even though they do all have access to some very good products. I am just saying in terms of trucks they are not well prepared for high gas prices and as per my next comment the hurricane is a very small issue…
        BTW I really like the Sonic, a very good move from GM IMHO.

      • 0 avatar
        el scotto

        @ Geeber, Sadly, none of the Big 3 make small trucks anymore. GM makes Colorado/Canyons to compete against Toyota’s Tacoma and Nissan’s Frontier. All four are mid-sized trucks. When I was an iron-worker, you saw a lot of Rangers/S-10’s at urban job sites. Small trucks for small parking areas. Strong is the loyalty of current/former Ranger/S-10 owners. I just hope GM/Ford marketers realize there is a market for small trucks. Off soap box.

      • 0 avatar
        krhodes1

        You can haul a load with a Sonic the same way millions of Europeans do – hitch a little 4×8 utility trailer to the back of it. I did it for many years, works great, cheap, minimal maintenance, no insurance needed. And no worry about scratching your pretty truck, most of which seem to haul nothing but air.

  • avatar
    Beerboy12

    While the hurricane will cause a spike in the gas price. The drought will have a far longer term and much more of an impact.
    A very real shortage of corn will bring the cost of ethanol up and at 10% per gallon… This storm is only getting started.

  • avatar
    Mark MacInnis

    On the grand scheme, it will be an annoyance, but not a catastrophe…

    But it WILL be fun to watch New Orleans struggle again, proving that they didn’t learn any real lessons from Katrina….

    Man keeps buildin’ it up, God keeps knockin’ it down.

    As for me, I’m gonna put on Led Zeppelin 4 and rock out.

    “If it keeps on rainin’, the levee’s gonna break.

    When the levee breaks, you got no place to go….”

  • avatar
    Trend-Shifter

    Refined gasoline, diesel, and jet fuel is now USA #1 export.

    So expect the future projected cost to US consumers to be headed towards the exported price less shipping & handling. The oil companies will use every excuse to get the profit of domestically sold oil products equal to their exported profit levels.

    “Drill Baby Drill”, pipelines, and opening the reserves is not going to chaange this price path as the oil companies chase profits.

    Where we screwed up is when we let the oil companies merge. It should be Exxon versus Mobil, not Exxon/Mobil.

    • 0 avatar
      stuart

      I read somewhere the reason for this: insufficient oil pipeline capacity in the US.

      I gather that most US refining capacity is on the Gulf of Mexico, and demand on the East coast of the US exceeds what they can pump through existing pipelines. Ergo, the refiners in the Gulf export to whomever will buy, and the East Coast buys from whomever will sell, delivered on tankers.

      If this is actually what’s happening, it artificially increases US imports and exports simultaneously.

      It’s a plausible explanation. Dunno if it’s true…

      stuart

      • 0 avatar
        Trend-Shifter

        You can find existing and proposed pipeline maps online.
        Most are shown to feed the gulf coast refiners.
        So they need more pipelines to feed gulf coast refiners, hmmmmm.

        Profits and money will always follow the path of least resistance.
        Big oil is not our friend. They just keep a balancing act so no legislation is brought up to regulate exports or increase competition.

  • avatar

    Isaac effects everyone, everywhere. Even in Europe this non-event is used as a rationale for gas price increases.
    Governments in debt-ridden Europe are happy, as each increase in gas prices automatically rises the gas taxes which already are well over 50%.

  • avatar
    Lorenzo

    The price of gas is already up and will rise nationally to $5-$6, with $7-$10 in the usual local hotspots. There will be big bargains on Sierras and Silverados this Fall. The new model intros will be a disaster, car company profits will evaporate, and airline fares will skyrocket, with a crash in passenger volumes causing airports to close. The high cost of fuel will cause a further spike in food, putting people in an ugly mood, with demonstrations, angry confrontations and violent riots from coast to coast, with martial law imposed nationally, and the social fabric of America torn asunder. Or not.

  • avatar
    golden2husky

    As expected, Big Oil will use the storm, like anything else it can, to jack prices. And right now, this storm is a Republican’s best friend. Because expensive gas will be hung on Obama, high prices now until November is like pouring unregulated dollars into the political machine. Wait, I forgot that the Roberts-Scalitomas Court made that legal. Anyway, the oil companies want Obama out so the Drill baby Drill folks will help pave the way for even more record profits. Once Obama loses, fuel prices will drop assuming a real, honest disaster does not happen. There was no reason for the bump in oil prices in June or July other than political reasons….

    • 0 avatar
      gslippy

      Umm, ‘Big Business’ supports the Left as much as the Right, despite rhetoric to the contrary.

      • 0 avatar
        golden2husky

        I think it is safe to say that most lefties don’t pour much into Big Oil. Certainly it pales in comparison to what the far right does. I did not say “big Business”…

    • 0 avatar
      CJinSD

      The political reason was that Obama wouldn’t suspend the ethanol mandate during a serious drought. Obama drove up food and energy prices while starving 3rd worlders as a taste of what his vision is all about.

  • avatar
    pacificpom2

    Strange, here in Australia they are predicting lower fuel prices. The reasons given were: lower demand in the US would result in a surplus for the rest of the world. But with prices in Australia set by the price of refined fuel in Singapore, we will probally not see much of any change. And with Caltex planning to shut down it’s most profitable refinery in Sydney (Kurnell) and most other smaller refineries in Australia closing we will be at the mercy of the speculators even more :(

    • 0 avatar
      Athos Nobile

      I don’t know about profitability, but I find highly disturbing and concerning the fact that refining capacity is going to be lost here, as it seems to be the trend.

      There are some industries that are strategic to any country, energy production (in whatever form) is one of them. Becoming a 100% importer of refined fuel is not a good thing is the fhit sit the fan in the region or the suppliers decide to gouge the prices.

  • avatar
    skor

    If only someone could figure out a way to refine the grease that drips off the cast of Jersey Shore, America could once again be energy independent.


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