Your comment makes me think that maybe the economic news is even worsely exagerated than usual because right now it’s NY itself looking at hard times due to the financials all laying off to recover from their lunacy. So much of our news comes from NY.

I live in Los Angeles, but I am from the east coast, through the first decade of my working career. In March I attended a conference in New York City; Manhattan. The morning I left from LAX, a headline broke on latimes.com saying that UCLA’s econometrics group forecasts no recession in 2008. This is a group that has an excellent track record for economic prognostication over the last 15 – 20 years. They did outline a number of threats that could derail their forecast, but the gist was that we’d avoid quarter-over-quarter decline. It might feel like recession to some people but overall, no recession.

I boarded a JetBlue flight (first time; yeah, the ads oversell it) and for the next four hours flipped around the usual array of financial news channels, most coming out of New York. The reporting and commentary was saturated with gloom. The newspapers were just as negative when I landed. Oh, yeah, the Eliot Spitzer hooker story was breaking too.

By the time I landed at JFK, the crumbling mood was palpable. I slipped into a cab, immediately engaged by my Russian immigrant cab driver on the sorry state of the economy.

“What you think; will U.S. survive this?” Huh?

“Bush, Congress do nothing. Eight years ago, it cost me dollar gallon to fill my tank in my cab. Now over three dollars!”

I pointed out that eight years ago, gasoline was cheaper in real dollars than it was in 1969. That wasn’t a sustainable reality so no use pining for $1 gas in 2008. He shrugged. “You have point.”

I asked my driver whether he’d be better off driving a cab now in Moscow or in New York. Would he have a better life in Russia? “New York of course! Moscow worse in every way!”

I said I think the U.S. will survive this situation; I’d seen worse before.

By the time we rolled up to my hotel, my driver’s mood had shifted a bit. “You say you fly from L.A.? Maybe should move there. Everybody I drive from there seem more — what do you say — optimistic.”

Yeah. Maybe. Did I mention that gasoline in California costs even more than it does in New York?

Phil

I actually have 5 cars and am always on the look out for another.

Really looking forward to the new diesels coming in.
By the way…one more big big shout out to the do-gooders that placed such restrictions on the diesels , thus forcing them off the market.
Thanks, really.

And one more thing yet again…
p
Please somebody tell me what the government tax on fuel or gas is in Europe.
I understand THIS plays the biggest part of the pricing in the socialistic states they have.
PLUS…why, if they are so environmentally aware, do THEY get diesels and not us!?

But there is no way to strike back.

I cannot confront blind faith. Nothing is harder to deal with than the True Believer….

But I will insist that global warming, although Gore Faithful keep shouting, has not been proven as damaging or even as confrontable as shouted.
Let alone proven that BAD MANKIND is responsible.
And I recently heard more experts warning of an actual cooling of the Earth that actually spells greater trouble.

Hmmm…what to do and whom to believe!?

Oil shortage?

Brazil just discovered two of the worlds largest oil fields IN HISTORY.
OK…what now?

I listened to experts on the news today trying to explain that there was actually plenty of fuel to meet todays demand and they simply could not explain the speculation.
Yes, I am sorry…but speculation is MORE than a small part in the oil price today.
That, and the fact that every spring the refineries find a reason to shut down facilities for maintenance.

And another sorry government interference note…we actually would have MORE refineries IF the do-gooders would NOT have placed so many obsticles (read restrictions) into the construction.
It has become, like our nuclear plants, ridiculously expensive to build with their regulations.
Yes, heating oil would be cheeper IF we had more nuclear power…thus gas would be as well.
So, thank you weirdos.

Thanks again to all those crying wolf yesteryear and today…when they actually play(ed) a huge part in the entire affair that we have.

As a side note…how many are aware that there have been five…yes 5…periods in earth’s history where nearly the entire population (95%)of life had been wipe clean off its surface.

Really, makes you feel really powerful, right?

Panic, everybody!!!

The New York media is especially adroit at talking us into a crisis out of scale with reality. Pay less attention to that.

As a daily reader of the opinion section of the NYT on-line, I could not agree more.

Its as if they represent people that live in a different country. Everything is a crisis that will end the world as we know it. There seems to be a delusional amnesia that makes their writers forget what it was that was going to doom mankind last year, or twenty years ago for that matter.

California has been consuming less gasoline, month over month, for over 18 months now. While the media will always highlight the (real) plight of specific folks from the working poor sector to humanize the story, there is still non-essential demand that can be wrung out of the buy side as prices rise, while longer term shifts in the fleet composition materialize. More to the point, there is still plenty of non-essential consumer spending that can shift to energy without seriously affecting people, other than their mood. So $10 gasoline in the US is unlikely in the time-window warned.

But if it does materialize, even that’s not a wholly dark development. Long before $240 oil, oil moving north of $160 brings progressively more unconventional energy sources within viability. At $118, shale oil can’t be economically brought to market, but at $200+ it can, and continental US shale oil deposits are estimated at up to 12X all the oil in Saudi Arabia. Coal liquification, clean coal, synthetic fuels, mass-scale solar all change the supply side , which can either push fuel prices back down some, or ensure sustainability of domestic sources. More to the point, consider what happens to the dollar if most of the cash we ship out to buy foreign oil instead stays within the US economy? You don’t even have to get into shale oil to get that benefit. Offshore drilling, safe ANWR extraction, expanded nuclear power, mass-scale clean coal, domestic solar farming all can displace a substantial portion of oil imports.

The situation instigating the hand-wringing here is far from unmanageable.

The world now has deeply interconnected interests. The Chinese might not be devastated by a deep US recession, but you can be sure they do not want to lose the American market. Same for India and the EU. Our primary current economic crisis, housing and related credit, isn’t propelled by energy inflation. And even now, for most people automotive fuel is more affordable than it was in 1981. It’s just that too many people got accustomed to 1999.

Until comprehensive supply side reaction to new demand pressure asserts itself, we’ll see temporal and locational price volatility. We’re as likely to see $2.00 gasoline again in the US as we are to see $6.50. But for the majority of people, if they’re really honest with themselves, this run-up requires an adjustment quite different from being an emergency.

A very well-off friend commented this morning that driving to Coachella and back this weekend cost him $200. He’s very well off and that expense was meaningless. But it still made him think about the cost. He mused that “this is going to start affecting people’s choices about when and where they drive.” Yeah, perhaps, and there’s no doubt it’s easy to wound the consumer psychology of Americans through their perception of what fuel should cost. Or other things. Locally, restaurant waiters are noticing that tips are getting smaller again, and as one server was quoted in an LA Times article, “Big men are ordering littler steaks than they used to.” No doubt these price surges ripple.

But unless the jobs machine completely unravels, we are facing problems well within our prior experience, with more knowledge and tools for managing them if people with memory pre-dating Bill Clinton have their hands on the wheel.

It’s entirely possible that we will not see true recession conditions this year. Scant to no-growth for a quarter or two, sure. But export markets out-scale the economic activity suppressed by the housing dive. Even (artificially-driven) energy inflation has the silver lining of triggering expansion of unconventional supply.

The New York media is especially adroit at talking us into a crisis out of scale with reality. Pay less attention to that.

Phil

You note that $200/barrel will yield $6 gas (not counting increased taxes or increased refining costs). I used two different calculations to reach the numbers $5.65 and $6.10–right within your range. The $6.10 figure assumes all costs scale the same as the change in oil cost.

You are absolutely correct that refining margins increase with gasoline demand (which usually occurs in the summer). However, demand decreases with high prices. Thus oil prices are negatively correlated with refining costs, as can be seen quite clearly on the AAA website. I’m not sure that the refining margin can get any smaller, but I don’t see it getting larger with $200/barrel oil either.

As for increased taxes, the federal tax is a fixed amount. No increase there. States are going to feel the pressure to lower/freeze/stop taxes on fuel, as it will somewhat relieve their constituents at the expense of people in other states. I came up with the $6.10 figure based on no fixed costs. i.e.: $3.60 * 200/118 = $6.10. You need taxes to scale more than linearly to exceed $6.10. Also, 2 out of 3 presidential candidates want to cut the federal tax.

As for higher costs related to stronger environmental regulations, you are right again but miss an important point: because of higher costs associated with stronger regulations, we won’t see stronger regulations! During the Katrina incident, G.W.B. actually demanded that the EPA temporarily lower regulations for the specific purpose of reducing fuel costs.

So… I think $7/gallon will come, but not in the next few years if oil “only” goes to $200. We’ll need oil at $230 or we’ll need another Katrina.

$6 tops.

Being alert to possibilities and using discernment with all of the lies and deceats out in the world, however, is just being smarter than the average bear, isn’t it?

Sure there is SOME truth to the speculators bringing up prices.

But being that you’re writing on TTAC, I’m going to assume you’re a car guy and thus kind of keep up with the news (automotively speaking)?

Like, the fact that the Chinese are moving from mopeds and small motorcycles to automobiles? Like the fact that TATA is going to start churning out $2500 cars for the Indians so they don’t have 5 people on one 50cc scooter on family outings?

And that these vehicles all require fuel in greater quantities than the scooters which they are replacing?

And that there is only so much oil to go around?

BTW, there is “some chance” that the US could pay off all its debts. There has been a precident in the recent past.

It was called the Weimar Republic. The victors of World War I declared that Germany owed them God only knows how many millions of marks for war reparations.

“If it is marks they want, it is marks that they will get.” (“Krrrank up ze prrrrinting prezzes!”)

It’s called monetarizing the debt. AKA hyperinflation. Look at Zimbabwe.

So, yeah, looking around with discernment is not such a dumb thing to do.

Now, if only the Detroit auto executives had yanked their heads of out their – whoops this is a family friendly site – out of the sand…

Nothing is going right in Iraq.

The earth is nearly at it end because of us damned humans.

All children are in danger of being shot in school.

It NEVER ENDS!

Please relax folks.
The price of gasoline is all out of control due to speculators…these same panic stricken dorfs that make the stock market look feel like a day at Six Flags!

Well, relax…and this winter seems to be lasting through fall.
So much for global warming.
I was so hoping for a warmer Chicago!

Once the train arrives in the city, there are free public buses that do loops downtown (called CATs). So you can catch a CAT to your office from the central station. Also, any bus is free downtown. So if a CAT isn’t close enough, just walk on any bus.

The suburban train stations also have bike lockers for those that want to bike to the train from home. However, you can not bring your bike on the train during rush hours.

The stations also have kiss-n-drop car lanes for those who have a spouse drop them off/pick them up.

gsp:
ANWR, FL/GA Atlantic coasts, FL gulf coasts, Caribbean south of the Keys…all “easy” as in traditional sources, all off-limits due to self-inflicted limitations by the watermelons (green on the outside, red on the inside).

Again, that means it is not easy. Other areas are also not easy because of unstable politics, China competing with big dollars for development to secure oil, not enough skilled oil workers,… There is always something.

Hibernia (the worlds largest oil rig)in Newfoundland was the last huge North American development . It started as a effort in the 1980’s and started to produce in 1997. Although it is now extremely profitable, it was only undertaken as a project with the economic backing of the Government of Canada. Risky. Not easy. Expensive. These are things that any corporation does not like to hear.

In any event, it is like Alaska. Corporations might want to develop every pristine area in sight, but it is not like you are going to find another Saudi Arabia underneath. At best it will be a band aid.

Prices are going up.

Imagine being an oil executive; prices are going through the roof; and you have “a 6 percent fall in oil production”?

Imagine the reverse announcement: “This year Shell production rose 60% from development of their ultra-giant discovery in the Blubber formation.”

gsp:
ANWR, FL/GA Atlantic coasts, FL gulf coasts, Caribbean south of the Keys…all “easy” as in traditional sources, all off-limits due to self-inflicted limitations by the watermelons (green on the outside, red on the inside).

1. There are no large domestic sources anymore. There are no easy oil deposits anymore. There is no easy supply answer anymore. New developments are expensive and risky which lead to higher oil prices.

2. The world demand keeps going up. USA uses a lot, but it is “only” 25% of world consumption. Just because US demand decreases doesn’t mean global demand will decrease. North Americans are unique in that we drive big vehicles. The rest of the world does not have the option to downsize because they are busy up sizing from a bicycle or scooter to a small car.

3. The US dollar is screwed. So many points to consider here, too many to list. Read NY Times, Economist, etc, etc; article DAILY to support this fact.

4. Just because the USA goes into a recession does not mean that the world will enter a recession. It may, but it may not. Things are different than 20 years ago.

“One barrel of crude oil makes about 19½ gallons of gasoline, 9 gallons of fuel oil, 4 gallons of jet fuel, and 11 gallons of other products, including lubricants, kerosene, asphalt, and petrochemical feedstocks to make plastics”

Based on this chart from the California DOE, oil at $118 = 87 octane gas at $3.85. If oil goes up to $200, then the oil part of the price would increase by $1.95/gal and the sales tax portion would increase by 20 cents for a total Spring price of $6 even for 87 octane.

During summer profits and refining margins increase, so more like $6.40 during the summer months, or $6.60 for me since I use 91 octane.

http://www.energy.ca.gov/gasoline/margins/index.html

This assumes, however, that refinery costs don’t increase. Stronger environmental regulations, higher maintenance costs, and higher skilled labor costs would probably add another 10-20 cents to the price.

That should be “thank you Nixon/Ford/Carter/Reagan/Bush/Clinton/Bush administration”.

Maybe we wouldn’t need to borrow so much if we didn’t spend nearly $1 trillion per year on the military?

Looks like a Banksy painting to me.

As far as vehicles go, I’m holding out for a gen3 Prius with plug-in and lithium batteries.

You owe the bank 9 trillion dollars, the bank is the one who is scared.”

True enough. But when you’re entire nation is set-up to only enable it to function with an ongoing injection of monies from overseas to service new debt, and that money isn’t forthcoming, which is starting to happen at this time, it is going to mean that the Fed will simply crank up the electronic printing presses (i.e. they won’t even counterfeit US dollars at the Fed – they’ll conjure them out of thin air). This will produce hyperinflation. Look up what happened in the Weimar Republic of Germany in the 1920’s. You know what (and “who”) followed that don’t you?

Furthermore, EVERY nation – underline EVERY nation which has ever had fiat money (“promises, promises, lies”) not based upon real commodities (such as gold and/or silver) has historically gone through phases leading up to economic collapse. Even the Roman Empire.

This is not “just” an American problem, either, since “every” world currency is now fiat currency.