By on February 4, 2013

You think gas is finally getting cheaper? Cars that use less gas may be a bit more expensive, but save you money in the long run? Households in the United States spent a record amount on gasoline last year, the U.S. Energy Information Administration said on Monday. More of your income is going out and exhaust pipe than at any time since the 1980s.

The average household expenditure on gasoline  stood at $2,912 in 2012, the EIA said, approximately 4 percent of pre-tax income.

“Although overall gasoline consumption has decreased in recent years, a rise in average gasoline prices has led to higher overall household gasoline expenditures,” the EIA told Reuters.

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89 Comments on “We Pay More For Gas Than Ever...”


  • avatar
    Pete K

    Good thing the electric car is dead! Long live high gas prices!

    • 0 avatar
      ranwhenparked

      Not so fast – my electric bill jumped over 30% in January with new rate hikes. Probably time to start shopping around on that one.

      • 0 avatar
        gslippy

        You can thank your utility commission for that. Rate hikes are usually stepped.

        Or did the government regulate your local coal-fired electric plants out of existence?

    • 0 avatar

      America’s energy is mostly created using fossil fuels.

      Until our energy was created primarily through solar, geothermal and nuclear, more electric cars only means more fossil fuel energy required.

      In time, hopefully we’ll be nuclear, but every dog has it’s fleas. Fusion won’t be without some form of waste. The SUN is a natural fusion reactor and the only thing that stops it from melting Earth is the fact that heat can’t travel in a vacuum. Not to mention the huge number of us with skin cancer.

      • 0 avatar
        gslippy

        Heat travels just fine in a vacuum via radiation; that’s how the Earth is warmed.

      • 0 avatar
        rodface

        “The SUN is a natural fusion reactor and the only thing that stops it from melting Earth is the fact that heat can’t travel in a vacuum.”

        Are you aware that the sun heats the surface of the Earth via radiation heat transfer? The only thing that “stops it from melting the Earth” is our convenient distance away from it and the convective heat transfer that distributes the radiated heat throughout the atmosphere.

      • 0 avatar

        The heat comes to the Earth in the form of UV rays the sun gives off. The reactions in the sun create light and other radiation forms, filtering through the Earth’s atmosphere to us. The distance the Earth is from the sun and the protection of its atmosphere are what keep the sun’s rays from burning us alive.

        PHYSICS 101

        The light itself carries kinetic energy to earth.

        HEAT CANNOT TRAVEL VIA VACUUM because their are no molecules to impact one another.

      • 0 avatar
        nickoo

        My Master’s degree focused on heat and mass transfer. I’m sorry but you’re mistaken. There are three types of “heat” transfer (heat is nothing more than a word for a form of energy transfer), radiative, conductive, and convective. Radiative heat transfer travels through a vacuum just fine.

      • 0 avatar

        #1 HEAT CANNOT TRAVEL THROUGH A VACUUM.

        #2 RADIATION CAN TRAVEL THROUGH A VACUUM.

        #3 LIGHT (Photons) CREATE HEAT WHEN THEIR KINETIC ENERGY IS RELEASED ON IMPACT WITH SOLIDS – namely our water, atmosphere, etc.

      • 0 avatar
        nickoo

        Bigtrucks, I’m not sure why you won’t accept that radiation is a form of heat transfer?

      • 0 avatar

        nikoo – because in general that isn’t true.

        Radiation is a general term for the Electromagnetic Spectrum’s various forms of waves and their frequencies…

        RADIO WAVES are radiation, but they can’t transmit heat.
        INFRA RED transmits heat.

      • 0 avatar
        carlisimo

        Heat is usually described as being transferred via three mechanisms: convection, conduction, and radiation. That last one is what we get from the sun, in the form of light rays (infrared being the light frequency most associated with heat).

        Fusion won’t have much waste at all. In fact, you can throw waste into it, run it through a mass spectrometer, and break it down to its constituent elements. Look up ‘fusion torch’. Of course, we’re nowhere near getting fusion working in a viable manner. For now it’s fission, fossil fuels, and some renewables. Most electric cars running on fossil-fuel-generated electricity are still cleaner than gasoline cars though.

      • 0 avatar
        gslippy

        @bigtrucks:

        I think you’re confusing radioactive radiation with heat transfer radiation. They are not the same thing.

        Radiative heat transfer occurs between any two bodies whose temperatures are different. This is how the sun warms everything in the solar system, and it’s how spacecraft dissipate heat; otherwise they’d just burn up since space has poor heat transfer via conduction and convection.

        A good example of radiative heat transfer is the warmth you feel as you approach an oven, a campfire, or the flash from a welding torch. Their temperatures are so high that you feel some heat immediately – there is no time for convection through the air. But they are not radioactive.

      • 0 avatar
        Sigivald

        Inverse square law.

        You’re welcome.

      • 0 avatar

        “A good example of radiative heat transfer is the warmth you feel as you approach an oven, a campfire, or the flash from a welding torch. Their temperatures are so high that you feel some heat immediately – there is no time for convection through the air. But they are not radioactive.”

        Sorry- but that entire paragraph is incorrect

        “No time”????????

      • 0 avatar
        gslippy

        @bigtrucks:

        “Sorry- but that entire paragraph is incorrect. ‘No time’????????”

        That’s right. It takes time to raise the temperature of something through convection or conduction, but radiant heat transfer occurs at the speed of light.

        Here’s a nice summary of all three mechanisms of heat transfer:
        http://en.wikipedia.org/wiki/Heat_transfer

      • 0 avatar
        shaker

        “RADIO WAVES are radiation, but they can’t transmit heat.”

        Then I guess that my microwave oven is a violation of physics :-)

        No, you’re correct – ” Heat” is molecular motion, and it requires matter to exist – radio waves are photons which are quanta of energy with a specific wavelength – they can only impart their energy to matter in specific ways, which results in “heat”.

        The frequency (wavelength) of a microwave oven’s magnetron and resonant waveguides is around 2 GHz – with sufficient power to cause molecular rotation of polarized molecules which can resonate at that frequency (water, some lipids, present in many foods). You may notice that dry foods cannot be heated by a microwave oven.

        Once the radiation reaches infrared frequency and up(around 300 – 400THz), the amount of energy per photon is much higher, but then the photon absorption is affected by the color or reflectivity of the surface (thus, dark colors absorb more energy, which is converted to heat). Also, molecules with a specific structure can reflect these wavelengths (much like a shiny metal reflector would).

        So, the high-energy visible and UV energy from the Sun can pass through our atmosphere with little resistance, and surfaces can absorb this (visible/UV) energy, and by quantum processes, re-emit these waves at a lower frequency/energy level (infrared), which is re-radiated into the atmosphere – this infrared energy is reflected back to the Earth by C02, methane, and other gases, causing the “greenhouse” effect, which keeps our planet habitable.

        Of course, if the atmosphere is subjected to increasing amounts of these “greenhouse” gases, the temperature of the planet will increase accordingly, as the conditions have been altered. Only a small amount of these gases (280 parts per million) are required (with the average solar output remaining close to average). We have increased that amount by 40% since the beginning of the Industrial Revolution. (if the Sun’s output had increased by that much, the atmosphere of Venus would be boiled off the planet in a short time, and Earth would have a temperature close to what Venus has now – 800 deg F).

        But, that’s all rubbish if it keeps me from driving 30 miles to have an ice cream cone at my favorite hang-out of my youth.

      • 0 avatar

        Thank You Shaker.

      • 0 avatar
        ttacgreg

        Nuclear fission is not yet a mature technology even after all these decades. At 60 years of age it makes little difference to me personally, but my concern is for future generations. ( and I don’t have any progeny so that makes me even more odd ) How advisable is it to continue to create new volumes of radioactive substances within the biosphere? Nuclear reactors crate additional radionuclides
        Can’t resist throwing this reference to the to the Robert Farago post because the situations are so similar. I await the next sensationalist massacre with guns images we ignore the daily low-grade massacre, just as I await the next nuclear reactor disaster. I have witnessed three now. Human nature makes both these events inevitable.
        Equipping human beings with certain lethal capabilities is like handing a loaded pistol or a hand grenade to a baby. The baby, and possibly humanity will kill itself.

      • 0 avatar
        wsn

        bigtruckseriesreview “heat comes to the Earth in the form of UV rays the sun gives off.”

        Please just talk about your S550. Physics isn’t your strong subject, obviously.

        Just in case you wonder why:
        1) sunlight transfers heat to earth in the form of radiation
        2) the entire spectrum does the work, not just UV

  • avatar
    prabal34

    And people think I am full of it when I say it costs more every year and I must eat more ramen to subsidize the increasing costs of fuel.

    • 0 avatar
      danio3834

      As a gearhead, and food enthusiast, my resolution is to just make more money.

      • 0 avatar
        DeadWeight

        I wish you the best of luck on that endeavor, even though I know it won’t be enough, as the majority of your existing customers and prospective new ones get poorer in real terms.

        The gaping fallacy in Modern Money Mechanics is what most of us in the U.S., Europe, Japan and elsewhere are witnessing today: Fiat fractional reserve currency economic systems always and will forever meet their demise when the creation of fiat currency outpaces the level of increases in a) real productivity and/or b) real aggregate demand.

        We’ve now had a debt/credit fueled crack up economic boom that can be traced directly back to the Nixon Shock of 1971 (when the U.S. essentially tossed out any fiat printing & debt/deficit restraint) that has resulted in 3 major meltdowns, including massive ones in 1981, 2000 and 2008.

        The answer to these meltdowns, whether in the form of monetary policy formulated by Alan Greenspan or Ben Bernanke, is to create new asset bubbles, to paper over the damage done to the underlying economic foundation and to kick the can & extend and pretend for a little while longer.

        This time, the new bubbles Bernanke has reflated won’t work in quite the same manner, since he truly is “pushing on a string” at this point, and nothing and no one will be able to stem the deleveraging that is and will continue to take place as many businesses (even those managing profits, with a wary eye towards the future) and massively indebted consumers trim, cut, nip, tuck and trade down, perpetually.

      • 0 avatar
        danio3834

        @DeadWeight What makes you think I don’t deal solely in intrinsics and demand all redemption solely in gold and silver?

        Of course I don’t because of the associated liquidity issues, but they play a factor in my investment strategies.

      • 0 avatar
        Lorenzo

        Danio, you just pointed out the alternative explanation for the chart. It’s not just that gas prices have gone up, at about three times the rate of inflation since 1973, but that household income has not even kept up with inflation since 1970, much less at three times the rate.

        When your income doesn’t go up to keep up with inflation, it amounts to a pay cut, in the form of lower purchasing power. Stagnating salaries are bad enough, but over the last four years, median household income has gone down while inflation continues to erode the purchasing power of those dollar, a double whammy.

        That’s the major factor in the cost of gasoline taking a bigger chunk of household income, not just the rise in the cost of gas, which should be offset by better mileage cars and lower consumption. Comparing inflation adjusted gas prices and inflation adjusted median household income in a second chart would lead to a different conclusion as to why gas is taking such a big chunk of household income.

  • avatar
    gslippy

    The inflation-corrected price is also near an all-time high:

    http://www.randomuseless.info/gasprice/gasprice.html

    Doing the math, I was surprised to find I’m spending about 5% of household income on gasoline (and one of my three cars is an EV).

    This problem has as much to do with household income as it does with gas prices. Another big factor is the decline of public transportation in the US.

    • 0 avatar
      wsn

      Where is the inflation data? I only see CPI in your link.

      In case your don’t understand the difference between the two, inflation is a very general term to describe money supply growth exceeding productivity growth. CPI only means a small set of supermarket products’ price index. For example, house price is affected by inflation, but has nothing to do with CPI.

  • avatar
    Landcrusher

    The average family keeps getting smaller as well. Interesting they didn’t put number of gallons purchased and miles driven on the graph.

    • 0 avatar
      highdesertcat

      Well, since you brought it up, I purchased 391.4 gallons of puregas Premium (no ethanol) between Jan 02 and Feb 01, and have the cash receipts to show for it.

      I used it to fuel four vehicles and three AC generators. I consider my usage to be on the low side when compared to people who commute long distances to work every day and who fill up everyday.

      But frankly, gasoline is one of those things that you need for your day to day life, and it is a bargain at any price. For the greenies and oil haters among us, they always have the option to make their political statement and quit buying the gas. That leaves more for the rest of us.

      I’m just grateful it is readily available. After Superstorm Sandy, some people found out the hard way what it was like to have an actual shortage. Most would have paid ANY price just to have gas available.

      • 0 avatar
        nickoo

        >But frankly, gasoline is one of those things that you need for your day to day life, and it is a bargain at any price.

        It really isn’t, increases in fuel affect the poorest the most because they are forced to pay it just as everyone else. Up to 25% of what you’re paying for gasoline is going directly into a Wall Street Trader’s pocket. You can thank the free market zealots such as Bush I and Lindsey Graham (who was also responsible for Enron) for deregulation of the oils futures markets which led to the spike we saw in 2000. Don’t forget nearly everything you buy is connected to gasoline in some way, so the price trickles through the entire economy and is not coincidentally the main driver of inflation.

      • 0 avatar
        highdesertcat

        nickoo, we’re not going to be able to get rid of fossil fuels until we run out of them, and that won’t happen for centuries yet. Maybe we can expand the fuel inventory with Natgas and LPG.

        But anyone, including you, if you own a car and are licensed to drive, always has a choice. They can either buy it, or they can walk. If they don’t buy the gas, there’s more left over for the rest of us.

        I expect that this month, February, I will use a lot more gasoline than I did last month because I have a lot of activities going on. More than last month.

        My wife’s dad just bought a foreclosed home for my grandson who’s getting out of the Marine Corps this June and we are refurbishing it with ceramic tile, electric work and interior painting. That requires workers I hire on.

        I always fill up the gas tanks of the illegal aliens I hire on to do the work, to help them out, because many of them drive from all over the NM and TX to work for me, as independent contractors.

        I cannot fathom a life without gasoline. I suggest life without gasoline would cripple America just as much, maybe even more. It really doesn’t matter what gas costs. You either have the money or you walk.

        Under Obama, pretty soon there will be a gasoline debit card to be used only for gasoline purchases, and it will be funded by US taxpayers.

        You are right, it’s a racket. But everyone is in on it. Me too.

      • 0 avatar
        dolorean

        @highdesertcat, you have a point that its a choice, yes, but for some; i.e., lower classes, its not. Because wealthier people tend not to live ANYWHERE near the people who clean their homes and businesses, provide lawn and garden service, provide KFC and other YUM! brands, those people have to get to their places of employment. Public transportation systems are a definite option if you live in a major metropolitan or progressive society, but in most suburbs, no one with money wants to see a smelly city bus trolling around their neighborhoods. Therefore, the maid, Au Pair, gardener, etc, has to tottle themselves to the job via automobile, which we’ve established requires petrol. These hard-working types are hit the hardest by steeper gas prices because of this limited ‘choice’ in transportation.

      • 0 avatar
        niky

        Centuries, maybe. But only because it will eventually reach the point where pumping liquid fuel out of the ground becomes cost-prohibitive versus the price consumers are willing to pay.

        I’d say we have a century tops (if we factor in natural gas and coal) to figure out what to do next. Fifty years at the worst, if China’s stalled growth gets back into gear.

      • 0 avatar
        highdesertcat

        dolorean, your points are valid and well taken. But I can’t see any way for gasoline or diesel to become cheaper any time soon. The demand all across the globe is rising exponentially. And my demand varies from month to month (and I’m not even employed).

        We have plenty of oil available to supply the globe, albeit at a price. If our dollar was worth any real money, gasoline and diesel would cost a lot less. So would everything else in America.

        If we in America would exploit our own natural resources more thoroughly we could be an energy-exporting nation. But current policy is undermining that idea so foggetaboutit.

        So the reality is, our dollar is worth less each day, and how we apply whatever personal financial resources we have, is how we secure our future. For some it means giving up driving and walking instead. Or Biking. Or taking public transportation where available. This is the new America. This is what we have to look forward to. This is what we, the people, voted for over the decades past.

        I’ll buy gasoline at any price, no matter what it costs, until I run out of whatever little money I have. I don’t whine about the cost of gasoline because I’m addicted to it and I gotta have it. Like MOST Americans.

        Niky, estimates vary. Demand varies. The only thing I worry about is that gas is available for the rest of my lifetime. My kids and grandkids will have to fend for themselves, but we’re helping them financially for their future.

        Our goal is that our kids and grandkids will never have to be dependent on a paycheck and that whatever they choose to do in life is by their choice and of their free will, even if it means only a medium income for them. All their assets are already paid for and their education is funded.

      • 0 avatar
        Felix Hoenikker

        Mr Car,

        I drive 150 miles per day on my commute at 37 mpg for a total fuel consmption of 4 gal/day or 20 gal per week or about 80 gal per month if I don’t car pool which I do. Not many commute farther than I do and I manage to spend less than $360 per month.
        What the hell are you driving and how far to use that much gasoline in a month?

      • 0 avatar
        highdesertcat

        Felix Hoenikker, if your “Mr Car” comment was aimed at me…..

        then “What the hell are you driving and how far to use that much gasoline in a month?” can be answered by

        “I used it to fuel four vehicles and three AC generators. ” A 2012 Grand Cherokee, a 2011 Elantra, a 2011 Tundra 5.7 and a 2008 Highlander (spare vehicle). The AC generators are a 40KW Ingersoll-Rand, a 15KW Generac and a 6500-watt Honda EU6500iSA Inverter; thirsty machines, one and all.

        and “I always fill up the gas tanks of the illegal aliens I hire on to do the work, to help them out, because many of them drive from all over the NM and TX to work for me, as independent contractors.”

        I live out in the middle of the high desert, altitude 4893ft, 120 miles north of downtown El Paso, TX and 83 miles east of NMSU in Las Cruces, NM. Nearest town where I get my gas is 26 miles north of me.

        I also do a lot of towing to help my wife’s dad refurbish his rentals and the homes he bought for his great-grandchildren.

        I keep two 55 gallon drums filled with puregas Premium at my home that I use to fuel the vehicles and also run the three AC generators for my house, at least once a week, or more if we have power outages.

        I keep my cash receipts for my gas purchases because my wife’s dad reimburses me for the gas I use and then keeps the original for tax expense purposes, since his real estate business has to file each year.

        Next month, because of the extra towing and commuting, I expect my gasoline usage to be quite a bit higher than for January 2013.

        It all depends on how quickly we can get the newly purchased home of my grandson refurbished and how quickly everyone (the labor) gets to go home.

        We all put in about 16 hour days and I go home every night but the illegal aliens sleep on the floor in the house we’re working on until we’re done with each stage. Some of them live two, three or four hours driving distance away, so they stay in the building we’re working on until the job is done.

        The ceramic floor tiling took me 3.5 days until noon this past Sunday. Tomorrow we start the painting and electrical upgrade and rework, now that the power company has pulled the meter.

        When my wife teaches, her daily commute is ~160 miles roundtrip in a 2012 Grand Cherokee 4X4 V6, four days a week. My grand daughter’s commute to her college is about ~150 miles roundtrip, four days a week. And my daily trip in my 2011 Tundra 5.7 is ~52 miles roundtrip to the nearest town, sometimes further if we’re working up in the mountains.

        My contractor friends have monthly fuel bills much higher than mine, hence that’s why I wrote that I am on the low side.

        Bottom line: if you gotta have gasoline just to live and get around, you’ll buy it no matter the price. And millions upon millions of ordinary Americans do just that.

        My lifestyle is not unique for this part of the country so there’s no use in whining about the price of gas. Just as long as there is no shortage of gas! A shortage would be devastating.

      • 0 avatar
        bd2

        @nickoo

        More so than Lindsey Graham, it was Phil Gramm who was responsible for all the over-deregulation which led to the banks engaging in malfeasance (leading to the subprime mess), Enron, $$ pouring into oil futures, etc.

        Gramm pushed for the Gramm-Leach-Bliley Act which did away w/ the Depression era protections and was instrumental in pushing thru the Commodity Futures Modernization Act of 2000 – which allowed for speculators to rush into the futures markets and which included what is known as the “Enron Loophole.”

        Not coincidentally, Gramm’s wife, Wendy, served as the head of the CFTC and was a Board member of Enron.

        Gas prices are also higher today relative to the price of oil during the spike towards the end of Bush’s 2nd term.

        This is due to US refiners doing everything they can to keep the price of gas high since American are driving less (this includes exporting gas and other fuels overseas where they are now the no.1 US export).

  • avatar
    onyxtape

    But then again, our cars are now much more full-featured and powerful than 80s models, so these comparisons are not very useful.

    I still remember having 5 adults in an 87 Accord 4-door fully loaded with luggage, screaming its 107hp 4-banger up the Canadian Rockies.

    I’m pretty sure I remember reading that obesity since the 80s have added $1 trillion to our gas bills annually or something like that.

    • 0 avatar
      CJinSD

      “I’m pretty sure I remember reading that obesity since the 80s have added $1 trillion to our gas bills annually or something like that.”

      You might want to apply just a bit of critical thinking to that. If we spend 4% of our incomes on fuel, we would need to make 25 trillion dollars to spend even one trillion on gas, let alone an extra trillion. The gdp is probably about 15 trillion dollars, and that includes a couple trillion confidence notes.

      • 0 avatar
        onyxtape

        Running on 4 hours of sleep – so I’m not really in a position to apply critical thinking on some throwaway comment on the Interwebs.

        http://usatoday30.usatoday.com/money/industries/energy/2006-10-25-gasoline-obesity_x.htm

        OK, so it’s billion with a b. But they’re only talking about civilian vehicles, and not planes, boats, military vehicles, etc. The figures are probably much higher by the time those are accounted for.

    • 0 avatar
      28-Cars-Later

      “I’m pretty sure I remember reading that obesity since the 80s have added $1 trillion to our gas bills annually or something like that.”

      Now that’s an interesting figure!

    • 0 avatar
      Mikemannn

      cool, you must have had the fuel injected model.. my 87 LX had 98hp IIRC. It’d do 200km/h flat out with a tailwind (headlights flipped down for more aerodynamics, of course)

  • avatar
    missinginvlissingen

    By the logic of this chart, here are some things that are also true:
    We pay more for food than ever.
    We pay more for housing than ever.
    We pay more for health care than ever.
    We pay more for entertainment than ever.
    We pay more for clothing than ever.

    The little blue label “nominal dollars” is important.

  • avatar
    Dr. Kenneth Noisewater

    What’s this we shit, kemosabe?

    (2-4 cents per mile FTW..)

  • avatar
    SVMaldemer

    When I was commuting I filled up three times a week on average. Now that I work from home I drive the same car all month on one, maybe two tanks of gas at the most. Makes a big difference.

  • avatar
    nickoo

    Thank Bush (the first one) and Lindsey Graham (notice how the chart spike coincides with Graham’s commodities modernization act of 2000?) for deregulation of the oils futures market which led to the wild price swings and generally higher prices. Free market types love to pretend the free market is so great, but in reality, the free market when left to its own devices is nothing more than sharks and minnows in the same tank. Oil is a necessary product that pretty much everyone in our society must buy and there is no competition on price as oil is oil on the world market (this known as a fungible product). Every gallon of gas you buy puts a significant chunk of money into the pocket of a goldman sachs trader, whom adds no value to the product or market by only seeking to extract as much money from the consumer as possible. There is a lot of info out there on oil politics, but the bottom line is we ARE getting screwed, here is one source on the oil market:

    http://thinkprogress.org/report/koch-oil-speculation/

    Beyond just the cost at the pump, one must consider that oil is the most significant driver of inflation as pretty much every good/service has oil somewhere in it’s production chain, not to mention it’s role in middle eastern geopolitics and the atrocious US foreign policy. It will be a monumental day for the world when we can spit on the graves of the big oil pushers and show them the disrespect they deserve for all of the terrible things they have wrought in this world.

    • 0 avatar
      geeber

      The only problem is that history didn’t begin with the first Bush Administration. We had a big run-up in oil prices in the 1970s, and, adjusted for inflation, gas prices were at record-high levels in early 1981.

      This was before George Bush 41 deregulated the oils futures market.

      Oil and gasoline prices began FALLING in the 1980s, and after the spike when Iraq invaded Kuwait, continued falling in the 1990s. I was paying a little over $1-a-gallon for regular unleaded in the late 1990s. This was despite a deregulated oil futures market.

      I’m also missing where free-market types promised low oil and gasoline prices for eternity. They argue for the fair-market price, which can be higher, if supply is tight and demand is high, as well. They understand that a free market will not necessarily result in lower prices. It may result in higher prices to reflect higher demand and tighter supplies. What they oppose are price controls in response to higher prices, which inevitably lead to shortages.

      I am really upset with oil companies for providing us with an economical, easily transported source of energy that has helped lead to a boom in personal wealth and improved standard of living. We should have continued using those whale-oil lamps and never venturing more than 20 miles from our homes, as 90 percent of native-born Americans did in those wonderful times before cheap oil and the Model T made relatively inexpensive travel possible. We could have also contined to wipe manure from our shoes every time we crossed the street, and dealt with piles of horse manure and the flies it attracted in the summer. Those sure were the good old days.

      Yes, we should have continued shunning oil use until we were ready go completely solar, which should be happening any day now, I’m sure.

      • 0 avatar
        28-Cars-Later

        slowly clapping… well put

      • 0 avatar
        nickoo

        The 70s oil spike and inflation was the result of the failure of the Bretton-Woods system which moved us to the petro dollar. The US dollar which was artificially high under BW reached a more fair value, causing commodities to increase in price, that’s how world markets work.

        Oil/gasoline as a product is just fine. Literally everything associated with that product is not. This world is going to be a lot better off when we can move away from oil politics and economics.

      • 0 avatar
        geeber

        Oil prices collapsed in the 1980s, years after the failure of the Bretton-Woods system. They continued to fall in the 1990s, after Bush 41 had deregulated the oils future market.

        I’d like to cut our dependency foreign oil, too. One way to do that is drill for natural gas in the United States. Natural gas is also cleaner-burning than oil.

        But here in Pennsylvania, there are very vocal folks who don’t want us to do just that, and they aren’t free-market Republicans or fanatical Libertarians. I sure can’t heat my house with solar power, as even the solar-powered pond lights we have flicker off at about 5 p.m. in December and January.

      • 0 avatar
        DeadWeight

        The Gramm–Leach–Bliley Act, also known as the Financial Services Modernization Act of 1999, actually did allow the the financial community and Wall Street complex to massively manipulate the price of commodities, including oil, as never before in history.

        Prices for goods and services in any economy that proclaims itself to be anything remotely close to that based on free market capitalism should be based on the supply & demand curve.

        When you have speculators that can literally purchase as much of a commodity as they wish, whether oil or wheat, on a 30 day contract, using 30-to-1 (or greater) leverage (meaning they can control massive amounts of a given commodity with just a fraction of that’s commodity’s present price), that they never intend to take delivery of, and that they can then roll over and over and over, perpetually, in order to keep supply from actually landing in the market, it’s an invitation to create the exact kind of commodity price volatility spiking that we’ve actually witnessed since that legislation was passed, 14 years ago (to the nonbelievers, pull up a chart of commodity prices and compare and contrast the year-over-year changes in commodity prices pre and post 1999).

      • 0 avatar
        Pch101

        “I’d like to cut our dependency foreign oil, too. One way to do that is drill for natural gas in the United States.”

        The US has begun to import natural gas. Don’t be duped by the T Boone Pickens types; increased gas usage will lead to increased import dependency.

        And relying upon more gas imports will mean higher prices. Gas is, well, a gas, which makes it more costly to ship over long distances. Meanwhile, nations around the world are jumping on the gas bandwagon because it is a cleaner burning fuel, which means more demand for what may be limited supplies are likely. That dependency is not a great idea over the long run.

      • 0 avatar
        CJinSD

        Pch101,

        I’m not sure where you buy your natural gas propaganda, but the US Energy Information Administration doesn’t have anything to support your theories. Natural gas imports fell in 2011 as domestic production grew faster than consumption. We imported about 8% of what we consumed in 2011, and what was imported almost all arrived via pipeline, ruining your transportation theory. There are people that hate cheap energy, and the middle class it enables, so lies will be told to people that will listen to them. Ramping up domestic energy production still doesn’t increase our reliance on imports though. Maybe you should ask yourself how you became open to such an idea.

      • 0 avatar
        Pch101

        CJ, I’m not sure where you got your reading skills, but they’re subpar and you should demand a refund from whoever educated you.

        (When I note that the US has begun to import natural gas, you should realize that agreeing that the US does, in fact, import gas doesn’t serve as a rebuttal.)

        To transport gas on a boat, it has to be converted into LNG. When it gets to shore, it then gets reconverted into a gas that can shipped via a pipeline.

        The process of gassification and degassification costs money. That cost is passed on to the buyer. Nations that are highly dependent upon gas imports, such as those in the EU, pay higher wholesale prices because they have to compete for supplies in the global market.

        Unlike oil, gas has been a regional product, with the US enjoying relatively low prices. If the US increases its need for imported gas, that will change.

      • 0 avatar
        CJinSD

        http://www.eia.gov/naturalgas/importsexports/annual/index.cfm

        The gas crosses the border via pipeline from our neighbors. That is what pipeline imports means. There is some LNG importation occurring, but the chart reveals it to be token. Net imports peaked years ago. They are not climbing, nor is the price of natural gas as a result of imports as imports become an ever-smaller percentage of consumption and as they shrink in absolute quantity. I don’t know when natural gas imports began, but the linked page shows they were occurring back in the ’70s, so they aren’t a new threat to our energy supply. Our natural gas exports have risen by a couple hundred percent in the past decade, so we seem to be headed for status as a net exporter of natural gas, also primarily via pipeline.

        The only way we’ll become a large natural gas importer is via political policies designed to make us one. It isn’t outside of the possibilities with our elected and entrenched cretins, but it will not be due to any relationship between domestic resources and consumption.

      • 0 avatar
        Pch101

        “There is some LNG importation occurring, but the chart reveals it to be token.”

        This is like talking to a wall, except that the wall would probably have better comprehension.

        You’re missing the point (as usual.) If the US greatly increases its gas consumption, then higher importation is likely. And if those imports are high enough, that means that we will start needing it from other sources outside of North America.

        For a long time, the US was almost entirely self-sufficient. Over time, that self sufficiency has begun to erode. And doing what Geeber is suggesting could completely change the game.

        The US has been quite fortunate to have largely avoided participation in the global gas markets. You want to change that. Not a bright idea.

      • 0 avatar
        CJinSD

        US natural gas production is rising faster than consumption, and it will continue to do so until politicians with evil intent stop the trend. It is hilarious that you said, “The US has begun to import natural gas,” as if this was the result of recent growth in the sector. The US began importing natural gas more than 40 years ago, and those imports are of less importance now then at any time in that period. Those of us that want an economically healthy US with a future know that cheap energy is the single most important component. You’re showing your hand when you’ll do anything to argue against viable sources of that economic engine.

      • 0 avatar
        TW4

        The geopolitics of oil is so much more important than the petty pissing competitions in our government. If you look at the events in 2005, it almost appears that OPEC and the US intentionally drove up the cost of oil to stop Chinese mercantile imperialism.

        The Chinese were forced through international pressure to quit pegging their currency so aggressively. They responded by using their trade surplus to hoard resources. Almost immediately, OPEC began cutting production, particularly Saudi Arabia, which cut production by 1M bbl/day between 2007 and 2005. In December 2005, Republicans tried to sneak through an ANWR drilling initiative. In 2006, United States Commodities Funds LLC was founded, and the USO ETF was offered to the general public. To be frank, the oil trading strategies appeared to accomplish nothing other than raising the price of oil. In 2007, Bush proposed Twenty in Ten and Congress passed the Energy Independence and Security Act almost immediately before oil prices went on an epic tear.

        It’s as if they intentionally drove up the price of oil to slow Chinese aggression, and we positioned ourselves to soften the blow. Unfortunately, the global economy took another crazy turn.

    • 0 avatar
      CJinSD

      “It will be a monumental day for the world when we can spit on the graves of the big oil pushers and show them the disrespect they deserve for all of the terrible things they have wrought in this world.”

      The most terrible of the burdens they placed on the earth is the middle class. When the world is off oil then the serfs will have been returned to their rightful place under the boot of the elite.

      • 0 avatar
        nickoo

        My friend, we already are under their boot and oil is a large part of it. Oil runs the world as there is currently no alternative competitor and won’t be until we run out. If you were young and naive at one time and had fought in a war started under false pretenses, watched many of your friends not come back, or come back with scars that will last a lifetime, you might feel differently about oil geopolitics. There is nothing wrong with oil itself as a product. Everything associated with oil is the problem.

    • 0 avatar
      Pch101

      Give credit where it’s due. It was Jimmy Carter who deregulated prices. But the policy was to be implemented during late 1981, during what would have been his second term had he been reelected. When Reagan came into office, he sped up the implementation of that policy.

      Opening up the trading markets did help to create price stability. But this system has since become eroded by the increased role of speculators in price setting.

      Hedgers play a valuable role in commodity markets. Speculators also help to a point, but too much speculation feeds volatility. As is true in much of life, there are some approaches that work well for a time but that eventually backfire. It’s not black or white.

      • 0 avatar
        nickoo

        Hedge funds might theoretically play a role in stabilizing prices, but they historically haven’t. We need to reform the commodities futures modernization act of 2000. Force speculators (who add nothing to the value of the product and are largely responsible for wild price swings as they play both sides of the market and in unregulated derivatives insurance markets) to take delivery on the product and the price of oil will reach its fair value based on supply/demand rather quickly.

      • 0 avatar
        Pch101

        “Force speculators (who add nothing to the value of the product and are largely responsible for wild price swings as they play both sides of the market and in unregulated derivatives insurance markets) to take delivery on the product”

        That shows a fundamental misunderstanding of how futures markets work. It frankly doesn’t make any sense to suggest that.

        It would make more sense to increase the margin requirements. An oil contract can be controlled with relatively little money, and the implied leverage of the trade helps to fuel volatility during times like these.

      • 0 avatar
        28-Cars-Later

        Pch101, you’ve always struck me as someone with a background or education in finance, so I’m curious how do futures markets work (from a high level)?

      • 0 avatar
        Pch101

        In theory, the purpose of the futures market is to provide a hedging benefit to commodity users and producers. Prices that are too low can bankrupt producers and prices that are too high can make consumption unprofitable for the users.

        The futures market provides them both with a place to find a happy medium to minimize the impact of cycles on either side. Theoretically, their primary use of the futures market is to mitigate losses from their main business, not to generate substantial profits.

        Speculators help to provide liquidity (cash) to make this work, so they are useful to this system, but only to a point. The problem is that if they get too involved, then then they start influencing pricing for everyone else, since they can bid up or bid down prices to excess. Instead of the future prices reflecting the supply and demand of the underlying product, they begin to reflect the level of interest in purchasing the futures contracts for the sake of flipping the contract.

        Some people would suggest that this contributed to the late 2000s oil bubble, and I happen to agree with them. The level of trading increased severalfold, and pricing went up with it. Since futures prices impact the spot market, these higher prices end up in your fuel tank and other parts of your daily life, and not just in the business section of your newspaper.

      • 0 avatar
        28-Cars-Later

        Thank you for the explanation.

    • 0 avatar
      redmondjp

      Um, guys, you are aware that North America (US & Canada) are in high gear to start exporting mass quantities of LNG? There are multiple LNG plants/export terminals in BC under construction right now, and two new N-S pipelines across WA to a new LNG plant/export terminal on the Oregon coast.

      With the war on coal shutting down most of America’s coal-fired power plants over the next 10 years, we will be replacing this energy with . . . natural gas.

      Combine these two factors and we will see natural gas prices go nowhere but up . . . way up!

      [edit] This comment was meant to be below Pch101’s comments at 6:05pm above.

    • 0 avatar
      wsn

      Also thanks to Obama, delaying Canadian pipeline projects that will send cheaper oil to the States.

      But Obama is for a good cause for sure. I mean, yeah the Canadian oil is dirty. Hundreds of ducks died in the tailing ponds there. In comparison, mid-east oil is much more environment friendly. Only Muslims die for the oil, no ducks.

    • 0 avatar
      bd2

      Phil Gramm is the one primarily responsible for the subprime mess, Enron manipulating California energy prices and the high price of oil due to the influx of speculators.

      The previous spikes in oil had more to do w/ geopolitical happenings rather than speculators manipulating the market.

  • avatar
    SunnyvaleCA

    It’s silly to say “cars” because about 1/2 are “light trucks” by EPA guidelines. If we only considered EPA-certified “cars” that graph would look far different. Specifically, the entries for 1980 would be affected very little because there were far more cars than light trucks in the mix., However, the more recent entries would show less cost because many of the least efficient vehicles would be taken out of the metric.

    I think that the people who buy new vehicles choose features other than fuel efficiency. I see no reason why the USA “needs” this shift to thirstier vehicles, as the rest of the OECD countries seem to get by with vehicles that consume less fuel. Economists would call vehicles in the USA “normal good,” not “inferior goods.” That is, as the nation gets wealthier (or, at least, the demographic that actually buys new vehicles gets wealthier), the buyers tend to prefer shifting a higher percentage of their spending toward vehicles. Unfortunately, the 2nd and 3rd owners of these vehicles will be stuck with what the original buyers prefer, not with something geared more toward low cost utility.

    Uncounted income is not addressed by the chart. Run the chart above but factor in 20% increase in income with 20% of income going to healthcare and see what the chart looks like. Suddenly, that 4% vehicle cost becomes 3.33%. To some extent, when the employer is forced to provide healthcare, they drop the salary by the same amount.

  • avatar
    Conslaw

    If we are paying more for fuel than we were 10 years ago, it’s a product of choices that we made, and the prime culprit is ourselves. Most of us aren’t driving the same vehicle we were 10 years ago. Most of us had the opportunity to buy a vehicle that got twice the MPG. Many of us aren’t working the same job or living in the same residence. We had the opportunity to choose to live closer to work or work closer to where we live. Presumably we factored the cost of our choices into our decisions. If we didn’t we should have, so nobody should really be whining about fuel prices.

  • avatar
    Carlson Fan

    Let’s look at the average number of miles driven per household yearly over the same period. That will tell the whole story.

    • 0 avatar
      DeadWeight

      Americans are driving fewer miles annually than they have in over 35 years.

      The new state tactic to extract its pound of flesh from the plebes is to increase vehicle registration prices, since the taxes on gasoline just can’t support the army of state and local government employees that has mushroomed out of control since the 1960s (people think the federal government is bloated and inefficient, and it is, with federal employees numbering close to 4.5 million and making 2x what their private sector counterparts make, but the real action has been in the now 20 million state and local unit of government workers that have risen like a tsunami).

      • 0 avatar
        corntrollio

        “but the real action has been in the now 20 million state and local unit of government workers that have risen like a tsunami).”

        The number of full-time equivalents has actually gone down since 2007 (even though the total number of full-time + part-time has gone up about 28K since then):
        2007: 16,453,570
        2011: 16,358,439

        However, the absolute number of state and local employees is not a particularly helpful stat. For example, as of July 1, 1960, the US population was 180 million. As of July 1, 1970, the US population was 205 million. As of Jan 1, 2013, the estimate is 315 million. (data from Census bureau)

        Extra kids require extra teachers, for example. So the absolute number tells us nothing. The number of state and local employees per person tells us a lot more.

      • 0 avatar
        icemilkcoffee

        “Americans are driving fewer miles annually than they have in over 35 years”

        Where did you get that? The mileage driven has declined since its peak in the 2000’s, but it’s still higher than it was in the 90’s or 80’s.

        http://mobikefed.org/files/us-ave-annual-vehicle-miles-vtpi-2009-01.png

  • avatar
    Zackman

    I drive much more than I used to and use more gas because of it. My “100-mile-commute” is a real pain – and expensive. Not to mention my 2012 Impala has a more powerful engine that doesn’t get the mileage of my old one. I fill up every 3.5 – 4 round trips at an average cost of, say, $43.00 on average.

    Thing is, I’d rather have a larger car for the mostly highway driving I do.

    It’s a pay cut any way I slice it, and no one is going to hire me at age 62, so this is it for another three years, unless some miracle happens, which isn’t likely.

  • avatar
    TW4

    Nominal dollars during a period of unprecedented quantitative easing. Much ado about nothing. Now that we are producing oil again, we have a hedge against the brown line, as well.

  • avatar
    Landcrusher

    Lets get a couple things straight.

    Deregulation does not mean a free market. All it means is the removal of some regulation with the implication that a freer market will result. It doesn’t always end up that way, nor is it really intended to IMO.

    A “Free Market” is generally percieved to be a market free from a lot of things. Freedom from monopolies and oligopolies and manipulation generally requires at least a possibility of government intrusion while too much intrusion from governments causes a market to cease being fairly called a free market. Oil hasn’t been a free market in well over 100 years. Big Oil is not a bunch of companies, it’s a bunch of governments.

    Finally, I can’t recall PCH ever admitting an error or a change of mind. Don’t bother trying. He is bright, but quite biased and even more obtuse than I. And that’s saying a lot.

  • avatar
    JaySeis

    Well, duh. Income growth for the middle class has slowed, been slowing for 20 years but really slowed last 6. Do some research “reporters”.

  • avatar
    mr_min

    Welcome to the global economy, where 1.3 Billion Chinese & 1.2 Billion Indians (along with other emerging nations) aspire to drive vehicle, just as we in the Western world have enjoyed for the last 50 years.
    The simplistic economist in me says that if someone is willing to pay USD 100 per barrel, then oil companies will sell it at that price at not to the person only willing to pay USD90 per barrel.
    Yes, I know there are complexities but at the heart of oil prices is supply and demand, and I think OPEC have lost control of the supply curve, as demand is so high. Its not the 1980’s any more…

  • avatar

    “Households in the United States spent a record amount on gasoline last year”

    Not mine. Round trip commute – 6 miles plus rode the bike to work all summer and most of spring/fall. The fairway market is right next to my apt. We can walk to get groceries and actually buy less crap since we have to carry it back home. The train station is 0.2 miles away when my wife and I visit the city(NYC). /endsmug

    Everyone needs to move closer to work if they have a chance. You would not believe how great it is to reach home in 15 minutes irrespective of traffic.

    • 0 avatar
      Onus

      I’m with you on that. I used to work until two weeks ago at my local government. Worked their for 5 years. It’s a 5 minute walk from my house. Sure was nice not having to drive in.

      Hope i can find another job close by otherwise the cost of commuting is going to kill me unless i make $5 more an hour.

      Okay maybe not that much. But, you get the point.

    • 0 avatar
      geeber

      Unless, of course, you have children – as we do – and you discover exactly why people want affordable houses with a yard, three bedrooms and at least two bathrooms. Not to mention the fact that it’s hard to carry home a big box of diapers and wipes from Costco on the back of a bicycle. The amount of food one purchases is also much less for two adults than it is for two adults and two children.

      Then we get into the importance of public schools where the students actually learn something and don’t take their lives into their hands just walking down the hallway. (My wife and her cousin, incidentally, teach in an urban school district here in Pennsylvania, so we have firsthand experience with that phenomenon. She is the one who is adamant about moving to a municipality with a better school district. Which generally means the suburbs.)

      Of course, there are private schools in the city, but the tuition will quickly eliminate any cost advantage brought about by reducing car usage (tuition usually ends up costing more than the car, gasoline, maintenance and insurance).

      • 0 avatar
        Power6

        You make it sound like you had no choice ;-)

        When we bought a house last year outside Boston we could have bought very Suburban, a little further out, and then even further out. We only considered towns that had good schools we figured paying more for house and taxes still cheaper than private school. We wanted a bit more room than a townhouse/condo so we chose the second option.

        We paid what most consider a whole lot for a small old Bungalow on a nonconforming lot. But we are close to work. Not close enough that the wife can walk like she used to. But we have short commutes. So many others I work with or friends, they drive longer distances and have bigger newer nicer houses than my wife and I. Maybe it is turning around but the buzz is everyone wanted the 2000+ sq ft house. We have a 3 bedroom with 1800 sq ft, no finished basement, or walk in closets or whatever else is “required” these days. We have room for kids, maybe it will be tight, oh well at least we won’t be stuck in the car driving to and fro for hours.

        Everyone makes their choices.

      • 0 avatar
        geeber

        There is one school district in our city. We both work in the city, while the city school district, as well as the districts of municipalities that are right next to the city, are problematic.

        Our move is being driven as much by the need to live in a decent school district as much as it is by the quest for additional room.

        And private school isn’t an option.

  • avatar
    Big Al from Oz

    Some of what sandman4x4 wrote I agree with, people will pay high prices for fuel. But the cost of energy has a major impact on GDP. I can forsee big changes in the near future on the way all resources are consumed.

    It is also inevitable that the standard of living in the US/Euro/Japan will have to decrease, as it has been.

    The US exporting coal isn’t going to be as easy as some think. You have to break into the existing markets. Australia is the largest coal exporter in the world and is quite close to these new developing economies that will be driving the global economy.

    The also figure Australia will be the largest exporter of natural gas within a few years in the world.

    Last week an oil field was found in Australia that could contain 223 billion barrels of oil, you are talking Saudi Arabia size, $20 trillion. Even if the find is much smaller it appears Australia will also become a major oil exporter.

    Australia is the worlds largest exporter of uranium.

    Energy is a problem for the “old guard” (US/Euro/Japan) economies, the developing nations economies have factored in the higher costs of energy.

    The “old guard” has to restructure if they want to survive.

    Out of the OECD there will a few countries on the globe that will have increasing standards of living, they are Norway, Switzerland, Hong Kong, Singapore, Australia, and Canada.

    The US/Euro/Japan economies will still be significant, but much less influential. The US dollar used to be the currencies that commodities were priced at but that will gradually change. The US will have to manage flucuating prices as well.

    All commodities and resources are going to have to be spread thinner, which drives the supply-demand side. Prices will only go up.

    CNG will not be the saviour of the auto industry, look at the subsidies that are directed toward purchasing of these vehicles. We already have the technology, so if it requires subsidisation it will fail or drain the US’s coffers.

    The economic future of the US/Euro/Japanese will be more challenging than ever, I just hope they can work it out.

    I just hope the people are ready.


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