Question of the Day: What's Your Gas Price Breaking Point?

by Jonny Lieberman

May 22nd, 2008 5:26 PM

question of the day whats your gas price breaking point

Back on tax day, we asked you what you were paying for gas. I was balking at the fact that I was paying $3.99 per gallon of premium. Well, bring back those salad days. Just five short weeks later (i.e today), I had to shell out $4.27 per premium gallon. And while I have it bad, the Ford Escape-driving lady in front of me had to charge $61 to AmEx. To fill up a teeny little SUV! Gulp. And a barrel of crude now goes for $135 on the open, OPECian market. Which means higher prices are yet to come. Case in point, John Horner shared with us the horrifying news that the IEA is predicting $12 a gallon gasoline. Quick translation: it would cost me $150 or so a tank to fill up my car. Big gulp. So I'm asking you, at what price does a gallon gas make you cry uncle?

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4 of 89 comments

Menno on May 23, 2008

Re: my assertion that inflation is getting rampant, and how it is largely due to rampant printing-press of monopoly money known as the US dollar (and my assertion that other nations are soon to follow our destructive path), here's a quote from Thursday's Daily Reckoning: "A news story in the Financial Times tells us something very interesting. "The gap between input prices and what can be passed on to consumers is at its widest for 20 years." For example, a 4-pint bottle of milk has gone up 16.5% in the United Kingdom. The price of milk from the farm has soared nearly three times as much - 45.8%. Or take bread. Wheat is up 56.9% over the last year. But a loaf of bread has only gone up only 8.5%. Crude oil is 62% more expensive today than it was a year ago. But a can of oil…or petroleum products generally, at the retail level…are up only 25.4%. What does this mean? Probably two things. Maybe more. First, input prices have jumped so fast retail prices have not been able to keep up. It may also mean that retailers don't think the raw output prices are permanent…or that they, the retailers, can afford to pass them along without losing customers. It may also mean that commodity or wholesale prices have gone up too far, too fast. One thing is certain, the gap can't last. The retailers can't buy oil 62% higher and sell it only 25% higher - not for long. Either the price of crude comes down…or the price of retail petroleum products goes up."

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Chuckgoolsbee on May 23, 2008
Speedlaw had it right: This is a currency problem, not a commodity price problem. The US dollar is losing value faster than a Hummer being driven off the lot. As for the question: My breaking point was $3 a gallon. When it got there a while ago I started the project out in my barn to homebrew fuel. I drive Diesels so I have that option. I still buy a few tanks of premium a year for the classic car, and since my daily driver uses fuel I make myself I don't mind paying whatever it costs for that ride... I put less than 3,000 miles per year on the old car. But I could see parking it semi-permanently if gasoline were to go up to $10 a gallon. --chuck http://chuck.goolsbee.org

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Pch101 on May 24, 2008
However, due to the US dollar being printed by the government as if it were monopoly money (in order to reduce the real value of holdings by our friends (?) in China, Japan, etc.) combined with the fact that most oil sold in the world is sold denominated in US dollars, the end result is that Americans are taking a far bigger price increase because it is our currency being devalued. I'm sorry, but this is just flat wrong. Point of comparison: In January 2005, the M1 money supply (the sum total of cash, traveler's checks and demand deposits) was $1,366.0 billion. In April 2008, that figure was $1,367.6 billion, which means that it increased by 0.12%. So, no, you can't claim that the Fed is pumping out cash like it's going out of style when it went up by 1/8th of a percent over 13 quarters. There is no data whatsoever to support this "fiat money" argument. The dollar has a floating exchange rate, so the market determines the value of the dollar. Obviously, the market doesn't feel so good about the US dollar at the moment. When you understand why investors have traditionally believed in the dollar and why their belief might be shaken as of late, then you'll be closer to figuring out what's going on here, and why the printing money has absolutely nothing to do with it. Change the policies that provoke investor pessimism, and it will become clear what needs to be done to strengthen the dollar.

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Markm49uk on May 26, 2008

Well you guys need to come across to the good old UK to realise how cheap your fuel is in comparison to rip off Britain. To fill my Audi A3 now costs me around £70 or in your money $140 - some are prediciting that within the next year that a tank of fuel will cost me over $200. In the UK over 70% of this cost is tax - the Government keeps hitting on the car owners under the 'environmental' banner. They have just postponed a 2p per litre increase until September as I am sure they can sense a groundswell of anger at the way the car owners are seen as an easy target. I am sick of it to be honest - what are the alternatives when only the large cities have what could be described as a joined together public transport system (actually probably only in London and even then....). Time to stand up and say enough is enough.....

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