During the economic recession, large SUVs became something on an eyesore to Americans.
Their sudden lack of popularity hurt companies like General Motors (GM), and made Americans who drove SUVs feel somewhat like pariahs.
But the large SUVs that U.S. citizens have shied away from for so long may be making a comeback. This resurgence in popularity may be due to the one thing that sparked much of the backlash in the first place—gas prices.
In recent months, gas prices have dropped significantly. The cost per gallon hit $3.00 or lower throughout the U.S.
GM recently reported $400 million dollars in third quarter earnings thanks to the renewed popularity of SUVs in America. Ford said its company made nearly $281 million in North America during the same period.
Americans aren’t the only ones falling in love with the spacious SUVs once more. These larger vehicles are also quickly finding popularity around the globe.
Karl Brauer, a senior analyst for car-buying site Kelley Blue Book, compared large SUVs to a genie “out of the bottle”.
“[SUVs have] been discovered by enough people that you’ll never put them back,” said Brauer.
And it isn’t just the smaller SUVs created by companies to survive the economic recession; non-Americans are very much impressed with the larger SUVs.
Brazilians love the spaciousness; Indians love their ability to navigate tough roads and conditions.
The biggest fans of big SUVs? That would be the Chinese, who analysts expect to represent the largest market for the vehicles by 2018.
In a surprise to everyone, the ordinarily environmentally conscious French is hot on their heels when it comes to purchasing large SUVs.
With so many nations taking a second look at SUVs, one wonders whether or not this renewed interest in a once despised product is permanent.
Though Americans believe that the drop in gas prices are to thank for SUVs popularity, we should remember that this fuel is typically more expensive abroad than we are used to. And so fuel prices wouldn’t be much of a factor in their popularity abroad.
Perhaps large SUVs should thank the fact that for all the gas-guzzling they’re prone to, they’re also very useful in tough conditions.
The good news is that should gas prices ever spike in the US again, American SUV makers already have markets abroad to rely on.
With the Fourth of July holiday weekend fast approaching, most Americans who have plans to travel are hoping that gas prices will be favorable for long drives.
Unfortunately, it doesn’t look like that’ll be happening. Although nationwide gas prices are already elevated, they’re still expected to rise even more by the weekend.
According to Yahoo! News, gas prices are projected to reach a six-year high, surpassing the staggering prices of 2008.
Gas analysts have stated that the price of regular-grade gasoline is expected to reach a national average of approximately $3.68 a gallon. That projected average is a whopping $0.17 cents higher than the prices were leading up to Independence Day weekend last year.
GasBuddy.com chief oil analyst Tom Kloza recently spoke with CNBC where he shared a number of interesting facts that support his rising gas price prediction. “We’re going to see the highest July 4th prices since 2008, and we probably wouldn’t have if it weren’t for Iraq,” Kloza said.
“I certainly would not rule out, if something happens near Basra or south of Baghdad, that we would see national prices make a pass at $4,” Kloza said.
He went on to explain another big factor that could contribute to the notable change in gas prices – hurricanes. If there isn’t a cut in Iraq production, the biggest price threat could come from potential hurricanes later this summer.
“If the troubled region’s production isn’t disrupted, potential hurricanes would be the next significant threat to gas prices. Without hurricanes, the last 100 days of the year, we’ll start talking about how cheap gasoline is,” Kloza explained.
Kloza also touched on the subject of taxes. As of July 1, some states will be implementing taxes on the sale of gas, which could also contribute to the spike in prices.
With waiting lines like this and gas prices the way they are, you’re likely not alone. Despite predictions this past spring that your car’s diet would be fund friendly this summer, it seems as though that may not come to pass after all. High demand, fewer supplies than anticipated, and declining production are all reportedly culpable for crude oil price rise. Gregg Laskoski, senior petroleum analyst for GasBuddy.com, thinks the nations gas prices will continue to escalate, claiming:
“We’re expecting prices to go up because of problems in Iraq, and expected spikes in wholesale gasoline and retail gasoline prices.”
Recent price jumps may imminently drive the price of regular unleaded gasoline from the current $3.64 a gallon up by 5 to 10 cents. Last year, by comparison, costs averaged around $3.58 a gallon between Memorial Day and Labor Day. Tom Kloza, senior energy analyst at Gasbuddy.com believes that while costs will rise, that:
“We’re not looking at a Gas-zilla event; it’ll probably be a slow drift higher rather than skyrocketing.”
As Iraqi oil production was already cut by about 10%, or about 300,000 barrels a day, since March, John Kingston, global news director for industry tracker Platts Energy, asks:
“The question is, who is going to fill the gap? Saudi Arabia? That’s what the market is looking at.”
Until prices relent, some have offered suggestions on how to circumvent feeling pickpocketed at the pump. While none of them include taking a nice, long, country drive while bumping a playlist of Jack Johnson mixed with Westside Connection (which totally foils my plans), they just might prove helpful for those who are penny pinching this season:
A few people have also mentioned workarounds – like taking a bike if you’re not too worried about being sweaty at your destination or using public transit when possible. These might seem like common sense tips, but a few of them (like being a lead foot) are indeed on my driver defect list.
Along with some of these driving tips, come a few “planning ahead” ones. For example, Laskoski suggests: “First, try to think about what trip you’re making and how to consolidate your errands.” For instance, if one errand’s location is on the way to another, we can try to plan our schedules around not having to backtrack or make a second trip later. Other suggestions include lightening the load (the literal junk in the trunk problem – or for me – a second wardrobe in my backseat). Also, regularly checking tire pressure (which we should be doing anyway because, ya know: safety) will ensure we all get the most bang for our buck.
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(Click infographic for larger version)
May you all have safe and wonderful summers – despite this financial inconvenience!
With the weather getting warmer and people looking to do a bit of traveling, it always comes back to one essential question: “How hard is it going to hit me at the gas pump?”
Not all vehicles answer this question equally, and when it comes to SUVs, many Americans believe it’s not worth knowing!
These vehicles had taken a terrible wrap during the recession. With gas prices climbing and wallets shrinking, it seemed perverse to invest in a huge car that took you a short distance in terms of gas mileage.
The American economy is easing out of its slow down, leading consumers to give SUVs a second glance.
Regardless of increased interest in SUVs, fuel efficiency remains a major factor in the decision to purchase of these vehicles.
Lexus RX 450h – This SUV came up on a number of lists for best gas mileage, even topping a few. It gets 30 mpg combined (32 mpg city and 28 mpg highway). The average expected cost is $46,000.
Toyota Highlander – It’s physically similar to the Lexus RX 450h and is an ideal seven-seater if you have a big family. As for gas mileage, it tends to get a combined 26 mpg (27 mpg city and 25 mpg highway). There is also a hybrid model available. Expected cost $29,000.
Subaru XV Crosstrek – It’s described as a smaller SUV, but when it comes to miles per gallon this model packs quite a punch. Its gas mileage is typically 26 mpg, however the hybrid is believed to provide maximum of 31 mpg! The average cost is $21,995.
While these represent some of the best SUVs you can look for, there are a few models you should avoid:
Mercedes-Benz G550 – It costs $113,000 and yet only gets 13 mpg. It’s like a cruel joke.
Mercedes-Benz ML63 AMG – At $47,000, it’s far less expensive than the G550. But at 11 mpg, it’s probably the lowest bang for buck on the market in terms of fuel efficiency.
Gas prices are as unpredictable as an episode of Game Of Thrones, but according to the Department of Energy, they won’t be eating into our wallets this summer when we’re all trying to get to vacation spots.
According to a new report, prices will actually drop over the next several months, from $3.66 per gallon in May to $3.46 per gallon in September and will level out at around $3.57 per gallon during the peak summer months. The drop comes from a drop in the price of Brent crude oil, which is down about $2 per barrel from this time last year. Unfortunately for the West Coast, prices will be highest on that side of the country.
Across the globe, prices rose in the U.K. on Monday ahead of the possibility of a break in supplies by Russia; tensions between the gas exporter and Ukraine have mounted recently and analysts are warning of the advantages of stocking up on Norway supplies.
“If the market is starting to seriously consider a drop in Russian flows later in the summer, it would be ideal to take advantage of Norwegian spare production capacity and inject high volumes of gas into storage now,” an analyst said.
The U.S. and Canada have been huge contributors to global supplies due to production levels being the highest analysts have seen since the 1970’s.
I wish my GPA looked like those gas prices (@iGoodPosts) April 14, 2014
These 4 dollar a gallon gas prices really make you question yourself about if you really need to even go anywhere.
After gas prices dropped to under $3.20 per gallon in many states back in September, we are seeing prices trickle up again.
With the exception of a few small dips, gas prices have been rising steadily since early February and have passed $4 per gallon in some parts of the country. According to GasBuddy, the national average is $3.59 per gallon, an increase of 3 cents per gallon from this time a week ago.
Motorists in a handful of states aren’t seeing gas prices go up much–people in Montana, for example, are seeing a decrease at the pump. The rest of us, however, are watching those numbers rise a few cents per gallon just as Spring Break kicks off for our kids. People in California are being hit the hardest, with gas prices exceeding $4 in some cities. Los Angeles motorists are paying a whopping $4.28 per gallon.
No surprise there, but unfortunately, analysts expect gas prices to keep going up for a little while.
If you’re wondering why you’re feeling the squeeze at the pump yet again since there are no hurricanes looming that could damage oil pipelines in the Gulf, it’s possible that an oil spill that occurred near the end of March is at least somewhat responsible for the increase.
An oil spill in Galveston Bay, Texas happened on March 22 when a ship hit a barge filled with oil. An estimated 168,000 gallons of oil was spilled into the ocean. A contributor for Forbes predicted that the oil spill would drive up gas prices at the time of the spill.
As you can see from the chart below, the national average has increased by 9 cents per gallon in the three weeks since the spill.
Oil refinery maintenance could also contribute to rising fuel costs, but analysts believe that things will get better at the pump around June. “Hotspots could certainly develop in any state over the next month or so as refiners finish maintenance, so motorists should be prepared for it, but once June rolls around, we will begin to see relief,” said Gregg Laskoski, senior petroleum analyst for GasBuddy.
There is great news this week for the average Joe! Gas prices are down and will continue to fall…for now. The national average price for a gallon of gasoline is now $3.42, down from $3.59 on September 1st.
This average price is the lowest it’s been at this time of year since 2010, according to AP. Last year at about this time drivers were paying 37 cents/gallon more than they are this year, on average, because Hurricane Irene and refinery and pipeline problems disrupted gasoline production in August and September. California prices rose sharply in late September, then hit a record $4.67 per gallon in early October.
Fortunately for us, there are no such problems this year. However, California drivers are again paying the highest average price, outside of Hawaii and Alaska, at $3.95 per gallon, according to AAA, OPIS and Wright Express. The lucky people of South Carolina drivers are paying the least, at $3.11 per gallon.
Reportedly, Even high oil prices haven’t stopped gasoline’s decline, as oil briefly topped $112 in late August as a U.S. threat of military action against Syria made the market nervous about Middle East supplies. Even though the price of oil has since fallen, it still remains above $100 per barrel, but gasoline has actually dropped to its lowest price since January 31st. In fact, Friday, oil fell 16 cents to close at $102.87 per barrel on the New York Mercantile Exchange.
But, Tom Kloza, Chief Oil Analyst at GasBuddy.com and Oil Price Information Service, which tracks retail and wholesale gasoline prices, remains cautiously optimistic.”It’s a layup for me to predict lower prices until Columbus Day weekend.”
Wholesale gasoline prices have fallen faster in recent days than pump prices, so drivers can expect to pay even less as the pump prices catch up. HIstorically, gas prices tend to decline soon after Labor Day. However, despite the recent drop, the national average is unlikely to fall back to $3.29 per gallon, which was this year’s low, set in early January. That is, unless the price of oil falls under $100 per barrel, GasBuddy’s Kloza said.
This could happen as long as tensions in the Middle East don’t flare up again, and if the hurricane season remains tame. Fortunatley, U.S. oil production is expected to hit a monthly rate in October that the country hasn’t even seen since 1989, and, Saudi Arabian exports typically rise in late fall and in winter as the country uses less oil to generate electricity for air conditioning. This generally makes global supplies higher, but last year gas prices didn’t start going down until mid-October. There are many reasons for this fall’s drop in price, experts say:
For one thing, refiners are allowed to switch to cheaper blends of gasoline in the winter months as clean-air rules are relaxed. Also, gas demand declines in the fall after the kiddies go back to school and summer driving ends, and supplies rise, at the same time, because refiners are still making gasoline as they continue operations to make heating oil for winter and diesel and jet fuel for shippers.
And, this year, refineries have been relatively problem free (knock on wood), as there haven’t been hurricanes, or unexpected problems, explosions, etc. at refineries or pipelines, like there were last year.
Should conditions remain perfect for cheap prices, as they look right now, we could have one of the cheapest driving seasons we’ve seen in a very, very long time! Happy driving!
Many motorists have noticed something different when filling up their cars lately–gas prices at the pump are slowly going down. According to GasBuddy, a website that monitors gas prices around the country, prices have dropped to as low as $3.08 per gallon in South Carolina. See where your state’s gas prices are here.
According to an analyst for Gas Buddy, Patrick DeHaan, prices are going down because of a decrease in demand. “Kids are back in school, and people aren’t taking vacations or doing as much discretionary spending,” he said. “In Northwest Indiana, people aren’t spending as much time on their boats in Lake Michigan. There’s less vacation travel, and people aren’t going to visit their lake cottages.”
It makes sense that prices are going down some now that summer is over, and DeHaan also says that price should continue to drop. “Looking forward, we’re likely to see additional relief at pumps in the months ahead, and it’s quite possible that by the time we’re observing Thanksgiving that gasoline prices will be 20 or more cents per gallon lower,” DeHaan said. That’s great news, particularly for those in Southern states, as a 20 cent drop on current prices would mean that gas would be less than $3.00 per gallon.
According to AAA, the national gas price average has been over $3.00 per gallon for more than 1,000 days. The national gas price average is currently at $3.47 per gallon, so maybe we will come close to ending that streak by the end of the year with a little luck and barring any hurricanes in the gulf or other issues.
A lot of Twitter fans are starting to take notice of the drop in gas prices. How much have gas prices dropped in your area? Respond below.
@LovinLuke25 Thanks! Everyone loves seeing those gas prices drop!
If you are going to be traveling, especially this weekend, you can plan on seeing gas prices at the pump ranging anywhere from 10 to 20 cents more per gallon. With this being a peak time for travel in the U.S., the rise in gas prices could have an impact on what people are planning on doing when it comes to planning those Summer vacations.
According to GasBuddy.com, the average cost per gallon, in the United States, is approximately $3.59. That is already a 17 cent increase, per gallon, compared to gas prices this time last year. With the expected rise, the pumps will be showing prices that are inching closer and closer to the $4.00 mark.
Short-term, we’re going to see the average go into the $3.60, $3.70 range. You’re looking at some markets that were closer to $3 a gallon, like the upper Great Lakes, and they’re going to go back up and be closer to $4. -Tom Floza, chief oil analyst at GasBuddy.com.
With oil prices rising and the political uproar happening in Egypt, we can expect gas prices to rise not only in the coming weekend, but throughout the coming weeks, as well. Egypt isn’t a producer of oil itself, however, Egypt is in control of the Suez Canal which is a major artery that transports millions of gallons of oil per day; gas that is used all over the world.
There is a lot of unrest in Egypt, that is affecting it. Crude oil prices are around $100 a barrel. -Fran Mayko, AAA Southern New England
Oil prices are volatile as always. The situation in Egypt isn’t making things easier as the violence in the country is causing the price to go up.
Reuters reports that oil prices jumped by $2 on Friday – the biggest weekly gain in a year. One of the big reasons for the price increase has been the recent unrest in Egypt as a result of President Mohamed Morsi being ousted by the military after weeks of protest. Following the successful takeover by the military, pro-Morsi forces have been clashing with the protesters in bouts of violence.
The violence in Egypt has spurred oil investors to start speculating that the price of oil would increase. This is usually due to fears that the unrest will disrupt the distribution of oil in the region. As of now, however, there’s been no disruptions as the ports in the Suez Canal are operating as normal.
Of course, it’s not only the unrest in Egypt that has the price of oil going up. Investors are also looking at the U.S. economy and its slow recovery. The big news was that 195,000 jobs were added to the economy in June. The better than expected news spurred investors to see good things on the horizon.
Even with the good news, there is still room for caution though. The dollar is rising alongside rumors of the Federal Reserve pulling back its stimulus support later this year. Those two scenarios could be bad for oil investors, and prices, but they’re staying cautiously optimistic on the news of a healing economy.
After all of this, Americans will be mostly concerned with one question – will gas prices go up? Well, the price of oil is intrinsically tied to the price of gasoline, but maybe we could see a fluke this year? Maybe we’ll see some relief at the pump? Unfortunately, that’s not the case as we were already seeing back in early June that the price of gas was going to increase again this summer.
As the title indicates, while the Memorial Day weekend may mean the beginning of summer fun, it also means that gas prices have, once again, gone up. This, naturally, means, those road trips families have been planning are going to cost more than they did a mere two weeks ago. As the chart clearly reveals, at the start of may, national gas prices were hovering around the $3.51 mark, and now, they are over $3.60.
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While that 9 to 10 cent increase per gallon may not seem much, a dollar-per-ten-gallons increase can take its toll, especially on those who dream of taking long, National Lampoon’s Vacation-like trips to amusement parks on the other side of the country.
Over at HowStuffWorks, there is a comprehensive explanation for these yearly gas increases, but it can be boiled down to this basic concept: the increase in road travelers means a higher demand for that precious oil means, like in all things related to supply and demand, increased prices. Basic fundamentals of economics aside, that doesn’t make the news about increased gas prices any easier to stomach. That being said, the principle behind the increase also provides a clue for how to reverse the process: decrease the demand. Take shorter, less gas-demanding trips, or do something that doesn’t even require a combustion engine.
Of course, this means forfeiting long trips to Wally World, but then again, the disaster that was the Griswold trip should be all the salve you’ll need for whatever disappointment the gas price travel blues bring. At least you’ll be avoiding those potential crises.
Google Maps is the go to app for most smartphone owners, especially on Android. One of the original mapping services, MapQuest, is still hanging in there though. Their new app may even prove to be most useful for travelers this holiday season.
MapQuest announced that its new Gas Prices app is now available on both Google Play and the App Store. The best part is that the app is completely free so users can check up on local gas prices without having to pay a dime. Here’s what users can expect to get out of the app:
Find the cheapest gas price in your area
Prices frequently updated
Sort gas stations based on lowest price or distance from you
Add stations as Favorites, and check which one has the lowest price in an instant!
Supports many fuel types: Regular, Mid-Grade, Premium, Diesel, and even E-85
Launch the MapQuest Navigation app to get voice-guided directions to a station
As expected, MapQuest ties the new app into their own dedicated maps service. It’s strange that they created an entirely new app just for the gas prices when they could have just integrated the feature into their maps app.
So does MapQuest have a chance of competing with already existing gas price apps? GasBuddy is obviously the most popular app, but it relies on user reports. Without those reports, the gas prices may not be updated as frequently. MapQuest is promising frequent updates without the input from others. Beyond that, there’s not much difference between the two.
It’s really up to whatever maps app you currently use. Gas Buddy uses Google Maps whereas MapQuest Gas Prices obviously uses MapQuest. It does seem strange that Google hasn’t made their own Gas Prices apps or integrated it into the current release of Google Maps. Maybe a Google Now update can add the feature.
Drivers in New Jersey and Pennsylvania will get a shock today when they pull in to Lukoil filling stations and find that the advertised price per gallon is over $8.
But that price has been set to draw attention to the fact that Lukoil is “killing” their franchises by charging outrageous prices that won’t allow for owners to compete with neighboring gas stations, owners say, and is simply for show. The actual price at the pump is far lower at around $3.79 per gallon.
“We are doing this because we are dying,” said Khaled Kezbari, owner of three New Jersey Lukoil stations. “Lukoil is charging us costs higher than the retail market. How can you compete? You cannot compete in the market like that.”
Sal Risalvato of the New Jersey Gasoline, Convenience, Automotive Association said, “They essentially sell the very same gasoline to stations in close proximity of each other at different prices in order to game the market and compete with other gasoline brands,” Risalvato said. “In doing so, the price may differ by as much as 25 cents a gallon, and place one retailer and the retailer’s customers at an enormous disadvantage over another station.”
Because franchise owners have no choice but to take out inflated prices on the customers, their sales have been dramatically affected. Kezbari says his stores alone have suffered around a 3,000 gallon loss per day as customers seek gasoline elsewhere.
However, he does admit that many of his customers are loyal ones to his franchise and are understanding about his position. His hope is that they will use their voices to complain to the company about the inflated prices.
Waze, the ridiculously handy navigation app that uses real-time traffic data to get you where you need to go on time, has just added a new feature that helps you save on gas, too.
Waze, in case you’re unfamiliar with it, is an app that uses travel data of other users to help you get around traffic snarls along your route. When you’re commuting, you open up Waze on your smartphone and let it plot your route. It then uses data provided by other users in real-time to spot bad traffic and route you around it (or, if you get stuck in traffic, it uses that to help fellow commuters avoid your fate).
Waze 3.2, which went live in the App Store this morning, promises to bring the same real-time updates to gas prices as well. When you need gas, let Waze know and it will help you find the cheapest place along your route to refuel. Then, while you’re filling up, you update the prices on in Waze, and it passes the information along to other drivers.
In addition, Waze has partnered with gas stations all over the country to provide exclusive discounts to Waze users. Check out the videos below to see Waze’s real-time gas prices feature in action.
But wait, there’s more! In addition to providing real-time gas prices, Waze 3.2 adds several new features, including the ability to set waypoints and to submit incident reports via voice control on the Android version of the app.
Check out a few screenshots of the new update in action below:
Gas prices, while still relatively high, are a bit lower than they have been over the past few months. This could result in more people are filling up the family car and heading out for fun, adventures, and sunburns over Memorial Day Weekend. According to AAA, the average gas price in the United States if $3.67, which, when compared to where it has been, is not too shabby, especially for prospective travelers.
All of this handy information was compiled by the folks who put together the IBM Social Sentiment Index, which aggregates information culled from various social networking sites, including message boards, tweets, and blogs. Apparently all of the chatter indicates that people are ready to hit the road this weekend. This, of course, is definitely a good thing, as it helps dump some much needed money into the economy.
Those of you living on the West Coast are probably shaking your heads right about now, and that’s understandable. Prices on that side of the country at still hovering around $4.22, though analysts seem to think that costs will drop toward the lower end of the spectrum throughout the summer. It’s a good start, though it’s still not fantastic.
However, despite all of this talk about lower prices and extensive travel over the holiday weekend, people on Twitter are still feeling the pinch at the gas pumps. In fact, the way some of them talk, you’d think all of this hoopla over lower prices was just an elaborate rouse to get you out of the house with wallet and credit card in-hand. And if you listen to the boys and girls over at Fox News, the lower prices are the sign of an impending economic crisis. It would seem those people are never happy. Check out some gas-related Tweets below.
Financial planning firm Credit Sesame has just released a new infographic which describes gasoline prices and usage rates around the world.
First off, a gallon of gas is 6 cents in oil-rich Venezuela. The lowest price I can recall in the U.S. was 84 cents, when I was like 7, during the Reagan administration. Six cents is much cheaper than the cheapest of bottled water in this country. Six cents is cheaper than a stick of gum. Six Swedish Fish are six cents. Ridic.
Regardless, prices aren’t so bad in the U.S., as compared to the rest of the world. A gallon costs $9.63 in Turkey and $9.16 in Italy. Granted, people in those countries don’t drive nearly as much as those in the U.S. or Canada, which see average gas prices of $3.94 and $5.68 respectively. Gas in China is $4.54 a gallon, similar to what it costs in the U.S., though Americans use about 39 times more.
The biggest gas consumers are the U.S., Canada and Australia, which has to do with the sheer vastness of the land masses. Also, driving is a cultural thing in these countries. One of the reasons mass transit might not be so popular, is that people like their cars. And one literally can’t just drive 8 or 30 hours straight in many European counties – there isn’t enough space. In the U.S., gas is most expensive in California, at $4.19 a gallon, and cheapest in Oklahoma, at $3.48.
“We can’t afford a situation where speculators buy up oil, creating the perception of a shortage, driving up the prices, then flip it for a quick profit.” – President Obama, today
Last week we talked about the hidden issue that greatly contributes to high gas prices. We determined that the classic factors of supply and demand were not to blame for the price hikes in and of themselves, but that a hyper-inflated sense of “demand” is artificially created by speculation in oil commodities.
High-volume trading in oil commodities markets creates the sense that there is a higher demand for a commodity than actually exists. In other words, people are not buying as much oil as it looks like in a bare assessment of supply vs. demand. They are simply parking their money in oil futures because it seems to be a sure market. And, as long as they continue to pump money into that market, the prices will continue to rise.
This kind of investment behavior is actually illegal in the United States, due to its volatile effects on a market that so many people depend on – in this case, oil. Mutual funds, for example, have historically been restricted from investing more than 10% of their holdings in commodities. However, some investment companies have found a way around these legal impediments by setting up offshore corporations that do the investing in commodities for them, then buying stock for their funds in those offshore companies. It is a shell game. And this game artificially hikes up prices at the pump.
ExxonMobil CEO Rex Tillerson said recently that he estimated that such speculation contributed an extra $30 to the price of a barrel of oil. Oil currently is $104 per barrel. That’s about 29% of the cost of oil that is artificially added due to illegal market manipulation. A very simplistic calculation of gas prices tells us that, if this kind of speculation were stopped, gas would only be $2.84 a gallon.
Even the oil minister for the United Arab Emirates has said that he felt the price of oil was too high.
President Goes On Offensive
Now President Obama is addressing this issue and others related to it, such as fraud and manipulation in the oil markets. According to CNN, the president’s plan will call for increased regulation of commodities markets to monitor fraud that hikes gas prices. The president will call on Congress to:
boost spending on technology to improve oversight and surveillance of energy markets
increase by six times the money spent on surveillance and enforcement staff of the Commodity Futures Trading Commission to better deter oil market manipulation
increase from $1 million to $10 million civil and criminal penalties against firms that engage in market manipulation
in an effort designed to limit energy market disruptions, give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position
In a White House press conference today, President Obama outlined the steps above that he is asking of Congress. Quotes from the conference included:
“When gas prices go up, it’s like an additional tax right out of your pocket.”
“There are politicians that say that if we just drilled more then gas prices will come down right away. What they aren’t saying is that we have been drilling more.”
“Even as we’re tackling issues of supply and demand, we still need to work extra hard to protect consumers from factors that should not affect prices of a barrel of oil.”
“Today we’re announcing new steps to strengthen oversight of energy markets.”
“Imagine if the NFL quadrupled the number of teams, but did not increase the number of refs.”
President Obama pointed out that commodities markets regulators are currently operating with equipment and software that is inferior to the firms they are charged with policing. His call to Congress to increase spending in this regard was to better outfit the regulators that keep these markets from controlling the oil supply.
To be clear, commodities trading is supposed to be a tightly controlled, well-regulated affair with strict rules. What President Obama and others have pointed out is that investment firms are deliberately gaming the system, not through legal means, but by cheating and out-teching their overseers. In doing so, they are making profits for their investors at the expense of every person who pumps gas.
Another Opinion
Recently, I went looking for other viewpoints on this matter. I wanted to know if someone else had a contrary take on this that should be presented. I found just such a candidate at the website Oil Prices Today. In an article called “The Forces Driving Oil Prices Today”, an unbelievable argument for speculation and higher oil prices was made.
Regardless of what traders do on a daily basis, supply and demand is the single most important factor in determining the price of commodities over the long-term. A quick look at how the market reacts when the Energy Information Administration releases new inventory supply numbers is one of the best ways to see this in action. Major supply disruptions or even news stories that imply a possible future problem have historically resulted in turbulence or heightened buying activity.
All this means is that supply and demand shifts would more radically affect oil prices than speculation would. That sounds fine, except that speculation IS demand. It is an artificial demand that drives up prices for profit-taking.
Are rising oil prices good or bad? The answer depends on your relationship to the commodity. If your only exposure to the oil market is on the consumer side, expensive fuel is a clear negative. It drains your budget and drives up the cost of food, air travel, shipping, etc. On the other hand, if you hold an interest in a company that produces gas and oil related products or services, you’ve likely enjoyed some impressive returns in your portfolio.
Sure, rising oil prices is bad if you buy gas. But if you are an oil commodity speculator, it’s great news!
For those of you who find yourselves shaking your head each time you pass your local service station, one way to cushion the effects of market volatility on your daily life is to adopt an oil-neutral stance. This is a simple strategy almost anyone can adopt where you invest a small portion of your portfolio in gas and oil related stocks to create a hedge against rising prices at the pump.
If you don’t want to get hosed by oil prices, invest in oil yourself. Except, your stock prices will then be just as vulnerable to the activities of unscrupulous, illegal commodities traders. Unless…
Aggressive investors who have a considerable amount of trading experience and are willing to take on more risk can participate directly in the oil futures trading market using services such as Options Express and Interactive Brokers.
So, you can always become one of the sharks, trading in the oil futures market yourself. If you can shut your conscience off long enough. If you can drive past a gas station and not care about the people standing there making life decisions in front of the pump while you steal their money. Remember that list of negatives, up above?
It drains your budget and drives up the cost of food, air travel, shipping, etc.
Hey, at least you’ll be part of the problem, not suffering from the problem.
Illegal oil commodities futures trading is happening, and some of that activity could even be making its way into your own 401K. You could be getting money from the misfortunes of others. If you are, what do you think will happen to your 401K when that illegality is finally rectified? Responsible corporations should speak with their investment professionals to ensure that they are not feeding this gas price frenzy with their own retirement investments.
Almost a third of your gas money goes to these pirates every time you fill up. Think about that next time you wince at the pump.
I’m going to admit something to you that may affect how you read this article. Call it full disclosure; call it conscience. You need to know this before we jump into this subject.
I dropped out of high school Economics. There, I said it. I dropped that class and took a study hall. And I did it because of a girl. She had study hall first period and I wanted study hall too. Well, that and the fact that my Econ teacher was nearly senile. Most of us had difficulty in that class. She had a knack for skipping around, teaching from the wrong chapter without realizing it. We flipped pages and looked at each other, desperately trying to keep up. But really, that was just my excuse. It was really the girl.
So, with all that I am about to lay on you, I want you to understand that you can find all this information yourself. I want you to look these things up, get them reduced to simple English, and make up your own mind. I want us to step out of the politicization of it all and get to a real answer. Because, friends, we’ve been lied to. We’ve been told something that simply is not true. We’ve been told this lie by both political parties and every candidate for as long as we can remember. And their sneaky little lie is based on a kernel that used to be true (here comes the “he dropped out of economics” part), and sometimes still is.
Supply and demand.
On your first day in any economics or business class, you learn about supply and demand. They are the two great forces in business. They are what keep a capitalist economy going. Shoot, they are what keeps a communist economy going, for that matter. They are as inescapable as laws of nature. The relationship between scarcity and demand is so basic, that we can seldom see past it to other factors.
If the price of orange juice goes up, we presume a supply and demand issue is at work. Was there a late freeze in orange country that reduced the supply of oranges? Was there a natural disaster that took out processing plants, trucking, etc? Was there a sudden revelation about the magical cancer-fighting properties of orange juice? Does it simultaneously raise your IQ and lower your cholesterol?
If I have 4 apples and there are 40 people wanting to buy apples, I am at an advantage. I can almost name my price. If I have 40 apples and only 4 people are buying, the price is going to drop. It’s Economics 101. I was there long enough to get that. It was on page one.
So, when the price of gasoline hits $4.00 per gallon, as it surely will soon, we can safely assume that something is happening in the supply of gas. We know that demand is rising. People on the radio and television tell us all the time that the Chinese are making cars at a breakneck pace. Even as we try to shave our gas demand, they are ramping up their own.
In my lifetime, there have been multiple instances where the price of oil has spiked. In two of those cases, 1973 and 1979, the spike was caused by international issues. The Arab Oil Embargo in 1973 and the Iranian Revolution in 1979. There were domestic government decisions that factored in to both these cases, but the overall economic factors were the same. In both cases, issues of supply and demand were at work. We simply were not getting – or expecting to get – the oil we needed. At-the-pump prices shot through the roof. People lined up at gas stations to get gas, draining the hoses, hopping on their bumpers to get the last little bit in.
The 1980s saw a “glut”. Oil prices fell to almost a third of their crisis heights. This glut was actually an aftershock of the ’79 issues. Reserves had been cranked up. Conservation efforts had been put in place. Again, it was a matter of supply and demand.
But, there is something funny afoot in our latest gas price hikes. Step back with me to 2008, the year of the last presidential election.
Drill, Baby, Drill!
Matt Taibbi recalls the 2008 presidential campaign season this way:
That summer, as the presidential campaign heated up, the accepted explanation for why gasoline had hit $4.11 a gallon was that there was a problem with the world oil supply… John McCain insisted that ending the moratorium on offshore drilling would be “very helpful in the short term,” while Barack Obama… argued that federal investment in hybrid cars was the way out.
It was in this season that cries of “Drill, Baby Drill!” went up. The answer was simple: Drill in the Gulf. Drill in ANWR. Frack in Canada and pipe it down. And the merits of all of these things were discussed. Some wanted to get away from oil altogether, and as fast as possible. They framed it as a matter of national security. Then-candidate Barack Obama offered a novel idea: let’s do all of it. If we increase our domestic production (supply) AND raise efficiency standards and invest in alternative forms of energy (demand), we could crack this gas price nut once and for all. It was all about getting off foreign oil, controlling our own destiny.
However, as Taibbi points out, the candidates were dancing around the real issue:
But it was all a lie. While the global supply of oil will eventually dry up, the short-term flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the short-term supply of oil rising, the demand for it was falling — which, in classic economic terms, should have brought prices at the pump down.
So, if demand was decreasing, and supply was increasing…? Maybe this was the part where I took a study hall. It was later that I learned that my Economics teacher never would have taught me the real reason gas prices spiked. That’s because there had never been a commodities market in the kind of shape we saw in 2008 before.
Commodities
Commodities markets are a mystery to most people. We kinda understand stocks. We have gotten pretty good at mutual funds, no problem. But phrases like “pork bellies” and topics like “soybean futures” are not where we typically feel comfortable. But commodities in general, and especially the market forces around commodities, are very much a part of our everyday lives. You don’t have to memorize any definitions about this; there won’t be a test. Afterward you can head off to study hall with me. But listen to how this man very simply explains commodities and the speculation on those commodities.
Get all that?
Commodities have fixed amounts. There is little or no question about supply overall because the supply is averaged out over longer periods. That was the original purpose of the commodities market, actually: to help level out from year to year the volatility of agricultural markets that were so weather-sensitive.
But the freedom to invest in commodities markets has become very attractive as the dollar has fallen. Investors want someplace they can put their money that is going to be insulated from falling demand.
Are you ready for the next piece of that puzzle? Though our friend in the video talked mainly about food prices only mentioned it briefly, oil is a commodity. Can you see where this is going already?
In 1936, Congress empowered the Commodity Futures Trading Commission to place limits on speculative trades in commodities. If speculation was allowed to run unchecked in commodities markets, the very things our friend in the video described would happen. Food prices would skyrocket. Gas prices would spike. Stick with me.
Beginning in 1991, certain investment firms began to secure letters of exception from the SFTC to allow them to trade heavily in commodities.
By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country’s commercial storage tanks and the Strategic Petroleum Reserve combined.
Then, in 2008 when the housing bubble burst, tons of money poured into these markets that was never intended to be there. Investment companies moved their customers’ money from housing-related stocks and funds – including mutual funds for 401K plans of large companies – to commodities.
In fact, so many oil futures were bought that there was not enough oil to cover them all. The value of future oil was now bought. That’s demand. But it’s demand on paper, not you and me at the pump. But it drove prices up and we ended up paying at the pump, dearly.
That was in 2008. What has happened since then?
Oil production in the U.S. is now at the highest it has been in 8 years. The political question about who deserves credit for that aside, it remains that we are producing more oil than since before we invaded Iraq.
The effect of uncontrolled futures trading in oil has caused such a volatility in the market that gas prices have gone from $3.22 a gallon just before Christmas to $3.92 a gallon last week. And every penny of price increase gets the oil companies $200 million dollars in profit.
As the Washington Post reported recently:
Earlier this year, the chief executive of ExxonMobil, Rex Tillerson, estimated that speculation was then contributing an extra $30 a barrel to the price of oil.
But wait. Wasn’t all of this illegal? Did the law get changed? No. But there are ways around those laws. For example…
By law, mutual funds are supposed to derive 90 percent of their income from investments in stocks, bonds and other securities, under the regulatory supervision of the Securities and Exchange Commission. So to get around that prohibition and offer commodity funds, some clever securities lawyers in the mutual fund industry came up with the idea of setting up shell companies in the Cayman Islands for the sole purpose of investing in commodity futures and swaps. By selling shares in the offshore subsidiary to their sponsoring funds, the mutual funds are able to meet the requirement that they only invest in securities, and can also pass the subsidiary’s profits on to mutual fund investors without paying a corporate profit tax. And because these are subsidiaries of mutual funds regulated by securities regulators, they escape oversight of the Commodities Futures Trading Commission.
There is no better proof of all this than this chart. Keep in mind, this is not a chart of oil prices. These are at-the-pump prices.
See that huge dip in 2008? That’s the one you’ve been hearing about in the presidential races. People like to imagine that things were just peachy at the pump before Obama and the current administration messed it all up. I’ll withhold comments about the current administration, but the chart shows the truth. Things were messed up at the pump long before. Then, when the bottom fell out of the market, when Lehman lost everything, when investors ran from everything in sight, gas prices fell too.
This is a market-driven price bubble, not a supply/demand driven one.
So, as this presidential race heats up, don’t buy all the hype about hybrid cars or domestic drilling, no matter what your opinion of those things may be. Those are old supply and demand arguments. I only wish they had an effect on what we pay at the pump. The reality is that investment companies have rigged a side game of betting on the gas you and I pump and that is what is driving our prices up.
I’ll let you form your own opinion about what needs to be done to stop people from gambling on your gas.
According to a study by financial firm Mint, gas prices are affecting household economies nationwide, and Americans are experiencing the financial strain. The average household in the U.S. burns through 1,100 gallons of gasoline annually. And while residents in some states are paying over $4 per gallon at the pump, they might not be feeling it as much as those residents in states with low median incomes. The following chart sheds some light on the situation nationally:
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Interestingly, gas prices proportionate to income are the best in Colorado, and the worst in Mississippi, where residents spend 10.7% of their annual incomes on fuel.
With the price of gasoline on the rise almost daily many consumers have decided to fork over the extra cash and upgrade to an electric vehicle. There is a lot of buzz around electrics today, but my angle has always been that they cost way too much and offer way too little. However, as the market becomes more competitive and the government offers more incentives to buy these vehicles, prices are becoming more affordable, especially with the promise of saving some money at the pumps.
It’s also worth noting that there is a lot of brand loyalty out there, and many who are still die-hard fans of the big three, namely Ford, Chevy, and Chrysler. In the spirit of American craftsmanship I thought it would be nice to showcase what they have to offer consumers in the way of green, affordable transportation.
Now, there are some limitations here. Ford is offering the Focus as an electric and Chevy has their popular Volt, but Chrysler is lagging behind, as usual and their electric hasn’t arrived yet. What will it be? It won’t exactly be a Chrysler at all, but for the purpose of the article it will serve. Chrysler aims to offer a hybrid from their newest partner company Fiat. The Fiat 500 Electric could be offered as soon as this year.
First of all Ford claims you’ll never need an oils change or need to burn any fuel, I like it already. It basically looks like any other late model Focus, which isn’t exactly handsome, but it has come a long way since the model was first introduced. The interior features a standard cloth composed of 100% recycled material. Even the foam cushioning is derived from a biological plant oil-base. This could be interesting? Actually the interior stylings look really nice.
Apps, apps, apps. Ford offers them for the Focus. You can optimize charging and maximize range with an array of apps for your phone which allow you to remotely adjust air conditioning levels, charging option, and heater temperatures before you even leave your parking spot. It will be ready to roll. Another nice feature is designed into the brake rotors, which actually operate as a power generator when breaking is engaged. Basically, it charges every time you stop…bonus!!!
The best part is, it offers charging times nearly half of its major competitor, the Nissan Leaf. The car is packed with features and offers a lot in the way of environmental friendliness and curb appeal. The real downside is the nearly $40,000 starting price, ouch! I wish I had time for more, but we have to move on the the Volt.
The Chevy Volt is a little different because you still have the option to extend your driving range with a gasoline motor although it only boasts 83 horsepower and requires premium fuel. Impressively the electric motor sports over 270 lb. ft. of torque. The electric motor will only carry you about 36 miles on its own, but when coupled with the gas engine it extends that range about 350 miles.
I see two downsides to the Volt already. First off, on top of charging you still have to stay on top of things like cooling systems and oil changes. I don’t like that. It also features a very small range, 36 miles on the electric motor. Secondly, like the Focus it costs $40,000. But this is deceiving, many readers have written in telling me about wonderful government incentives to purchase vehicles like the Focus and Volt.
Again the Volt has some decent curb appeal and offers just as many modern and stylish features as the Focus Electric, but also offers leather and heated seats. Very Nice if you live in the colder climates! Of course both Ford and Chevy offer you great navigation options which I am sure many of you already know about. Sorry to be brief, but we have to move on to the Fiat 500, our substitute for Chrysler’s lack of effort or partnership, if you will.
So I am at a disadvantage here, Chrysler has yet to bring the Fiat 500 Electric to our market here in America. All I can really do is tell you a little about what the Fiat 500 currently offers consumers and hope that Chrysler will be proactive in giving us a real competitor for Ford and Chevy’s offerings; sooner rather than later, hopefully!
First off, Fiat is currently offering their base model in a lease for zero down and $199. per month. They have my attention there, low lease rates are just as good as money saved at the pump, in my opinion. The vehicle does offer mileage in the high 30’s as well so it’s reasonably economical anyway. Of course you’ll have to perform the standard engine maintenance on this one, oil changes, coolant, etc. Major negative here: not American, sorry Chrysler, you lose again!
The interior is not as plush or friendly as what the Focus and Volt offer by any means, it definitely has a utility-based appeal though. I guess what you get with Fiat 500 is affordable economy all the way around. Like I said, Chrysler is absent in this category, so they offer their Fiat brand partner. It’s an economical solution, but Motor Trend can do a better job than me, so check out the following video:
As gas prices have continued to climb, topping $4 in many parts of the U.S., one fuel retailer is harnessing to power of social media to bring in customers.
Murphy USA, a gas station chain located adjacent to Walmarts and Sam’s Clubs, is offering a deal on gas if you check-in using Foursquare. In all of its 1,000+ locations, a check-in will save you $2 off a purchase of $20.
If there was any way to promote Foursquare check-ins right now, it would be with gas deals. Americans are losing their minds over the high prices at the pump.
@foursquare foursquareCheck in for cheap(er) gas! RT @MurphyUSA Gas Prices are on the rise again; so are our sweet @foursquare Specials – $2 off $20 gas purchase!2 hours ago via Twitter for Mac · powered by @socialditto
Murphy USAGas Prices are on the rise again, but so are our sweet @Foursquare Specials – $2 off your $20 gas purchase when you check-in!4 hours ago · 214 likes · 69 comments
What seems like a pretty cut and dry fun little deal is receiving some interesting feedback on Facebook. The above post has already received a bunch of comments and the vast majority aren’t positive. Many comments ask “What is Foursquare” while one asks “How do I check in LOL?” Many state that they feel left out of the deal because they don’t have a smartphone, and ask if they can still get $2 off. Well, if that worked then Murphy would have just lowered the price of gas for everyone, wouldn’t they?
It seems as though people have a disconnect between coupons and location based deals like this. Nobody would ask for the same deal an actual coupon holder received if they didn’t have the paper coupon themselves. Maybe they aren’t seeing the check-in as just that, a virtual paper coupon.
Last year, Internet Business Director for Murphy USA Casey Petersen spoke about check-in strategies for business. At that time, they were using Whrrl to “engage customers and build loyalty.”
Check-in deals are most likely only going to increase in frequency moving forward. Hopefully they can help people to find savings in everyday activities and allow businesses to better connect with their customer base.
