That Took Long Enough

I have been warning that gas prices have to move up. Refinery margins are getting killed, oil prices are rising, and gasoline prices are flat. Some are convinced that it is just manipulation to get a favorable energy bill passed. Well, if so, a command decision has been made to cease. I am just shocked that it took so long:

Gas price guessing game

Gasoline prices crossed the $3 threshold in the Twin Cities again on Wednesday, defying the traditional autumn retreat and stirring talk of $4 a gallon for next summer’s family vacations.

“This is very strange,” Toews said. “We started tracking gas prices in 2000, and we’ve never seen it go up this time of year.”

Price increases are happening across the country as gas prices start to catch up with crude oil, which hit a record $94.74 a barrel in New York on Wednesday after the U.S. Energy Department said inventories were at a two-year low, then settled at $94.53.

I think it’s going to get really ugly in the spring. Oil prices are so high that refiners aren’t going to produce enough gasoline to refill the tanks, and when demand picks up in the spring, hello $4 gasoline.

8 thoughts on “That Took Long Enough”

  1. Well Robert, if its hits a $100, and you ever come to napa valley, I have money for dinner…


  2. Diesel in Houston is already over $3. I violated my 15 gallon per week rule to fill up at $2.599 before the station got the Thursday afternoon price increases. While picking up a sandwich down the road, I saw a station jack up the price $0.15 while I was in the sandwich shop.

    Even the Qatari oil minister thinks prices are decoupled from supply and demand. On another post I have delared it tulipomania .

  3. You and me both. There are probably a fair number of things that could be put in the -mania category at the moment. At least houses, for the moment, don’t seem to be one of them!

  4. Actualy, I think houses will do fine, and oil will come back down. In the longer run, we will adjust to more scarce oil, which will result in a cleaner and more prosperous world.
    For some reasn, having oil does not lead to a productive society. it seems to rank up there with warm weather.
    In the long run, countries with a work ethic, contract law, sense of fair play, free speech, good government, etc. will always prosper. They adapt, adjust.
    $4 gasoline? That brings it back o 1979 levels. People actually adjusted back then.
    We have the technologuy nearly in hand to radically reduce oil consumption, the PHEV, We certainly right now have cars that can double our fleet averages.
    The future for most oil nations? Dark. There is not a single one you would want to live in (excepting Canada), double that if you happen to be a woman, religious or ethnic minority, intellectual, academic, journalist etc,
    The OECD nationsm, in contrast, will just get better in years ahead.

  5. housing will do fine? 3000 square foot houses built in suburbia will be fun to heat/cool as energy prices look likely to only go up. As well there’s the fact that house prices increased well past the rate of inflation.

    Then there’s affordability. Up until suicide mortgages became common one’s mortgage should be 2.5-3x one’s yearly income, and the saver should have had 20% down. 10% for rare circumstances. Being able to have 10-20% down ensured that the buyer had an actual stake in the house, as well as showing that the were fiscally responsible.

    0% down IO home loans was simply a cheap way to gamble on house price appreciation via a nice little pyramid scheme. People keep moving up, and home builders created mcmansions to ensure that people had somewhere to move up to and the game seemed good. Until one can’t complete the new layer at the base and it comes tumbling down.

    With it becoming increasingly hard to get qualified for a loan (stated income is dying, and downpayments of at least 3% are pretty much universally required). This greatly errodes the pool of qualified buyers leaving people trying to get out of upwardly rising suicide loans without anyone to sell to.

    Most people fiscally responsible enough in this environment to have 3-20% down are generally less willing to catch a falling knife. And house prices just aren’t going up right now. 250k homes nationwide are in forclosure. Eventually the banks are going to have to clear them from their books, and they’re going to be taking losses.

    In Texas, in the 80’s they had to bulldoze perfectly good lots of houses because no one was going to move in and otherwise they’d just grow mold and become a hazard. This time it’s not just Texas that’s overbuilt.

  6. I timed my gas purchase well. At 5pm the price went up to $2.699 and this morning it is $2.7599 pretty much everywhere. Madness.

    As for homes – I read somewhere that if you took out Florida, Las Vegas, and Southern California, that accounts for 90% of the sub-prime problem. When we bought our first house, 20% down was standard. We rented until we could afford the 20%. Loosing the rules is what led to the housing boom.

    I was here in Houston in the mid-1980s. It was brutal. The state insurance commissioner had TV commercials urging people NOT to burn down their homes. But the problem then was high interest rates combined with job losses in the petroleum sector. You can still get a 30-yr fixed rate mortgage at around 6%. With unemployment under 5% it isn’t people without jobs. Borrowers swept up in the problem bought too much house at too low an interest rate for their budget.

    Heating and cooling isn’t the issue. North America is self sufficient on energy for electricity and natural gas. We can use ground effect HVAC systems, PV solar, and other modestly priced systems to supplement our energy usage. We can also move to time of day electric billing to balance demand.

    As B. Cole said, we have PHEVs, electric cars on the horizon. We are investing in coal to liquids, biomass to liquids and other strategies. What does Saudi Arabia, Venezuela, Nigeria, have other than oil?

    Given my choice, I’d rather live in the US than in any oil-rich state. We will beat them. The thug regimes will collapse on the dung heap of history.

  7. most oil nations? Dark. There is not a single one you would want to live in (excepting Canada)

    Don’t forget Norway. From what I’ve seen during visits to Scandinavia, I’d be willing to try riding out the coming crises there.

    Unless melting ice sheets cut off the North Atlantic Drift. In that case… I have no idea where I’d want to be in that case.

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