On Gas Prices

With gas prices increasing and prognosticators anticipating many more increases, it’s time A Frank Angle about the situation. Here are a dozen points everyone should know.

1) Presidents do not sit in the Oval Office thinking of ways to increase gas prices.

2) Politicians saying they can control gas prices is verbal flatulence.

3) The oil drilled in the United States enters the global commodity market – thus not for the United States. In other words, the Keystone Pipeline and Drill Baby Drill do not lower prices at the pumps.

4) The world commodity market determines the price of oil

5) Speculation in both directions is how the commodities market works – which is one reason why it is also called the Futures Market.

6) The supply and demand for oil influences the commodity (oil) market. For those who don’t know, usage Asia and the emerging markets is growing.

7) World situations (as Iran, Syria, Libya, etc) affect the commodity market because commodity brokers do not like uncertainty.)

8] The number of refineries operating and the operating margin affects prices.

9) Prices differ state to state because of different amounts of state taxes.

10) The amount a person spends depends for gas on three factors: the price per gallon, the vehicle’s miles per gallon, and the miles driven. Which one is out of the control of the consumer?

11) Politicians saying they can control gas prices is verbal flatulence.

12) Presidents do not sit in the Oval Office thinking of ways to increase gas prices.

76 thoughts on “On Gas Prices

  1. Good list of reasons. I think of oil and gasoline prices as a leading indicator for a variety of things. When prices are rising the world economy must be doing better, something is wrong in the Middle East, or some constraint is in play like when Katrina knocked out a bunch of refineries. It is also an indicator of where the US economy is going. My view is if the gas price hits $4.00 to $4.25 that hurts folks hard enough like in 2008 a recession occurs. Right now I see confliciting forecasts: price will go up a lot, or as Europe softens the price of oil and gas will drop.

  2. There are some Conspiracy Theory people on the left that think that the Big Oil Companies and Big Business are purposely raising the Prices to hurt the economy and make the President look bad.

    • Larry,
      Conspiracy theories are what they are. Of course, given that prices were comparatively low when President Obama took office, that could mean the same actions put him in office … but I understand you point. Thanks for commenting.

  3. Even if the President could so something about the crazy gas prices, he wont too damn busy campaigning instead of caring what really needs to get done in the U.S.. Not a fan of Obama..never will be. I mute him when I see him on any channel!

    • Kellie,
      Sorry – but “even if the president could” is no validity because he can’t. Then again, any current candidate saying the can when they can’t is another matter. Thanks for commenting.

  4. Your assessment and points about oil prices are spot on. My country, Norway, is one of the largest exporters of oil and gas, but still the gasoline prices are twice as high as in the States. The fact that we are self-sufficient doesn’t lower prices. Only subsidies would prevent the global commodity market to dictate the prices.

    • Otto,
      Thanks for verifying. I should add country-to-country to #9. And as we know, Venezuela has lower gas prices because of their heavy government subsidies. Thanks for commenting.

  5. I like how you added 11) & 12).

    Reminds me of a scene from ‘Blazing Saddles’:
    “What’s your crime?”
    “Rape, murder and rape!”
    “Hey, you said rape twice.”
    “Yeah, I like rape!”

    or sumpin’ like that.

    • Sekan,
      Your Blazing Saddles reference made me laugh. To be honest, I started with those four as the pillars, then built between them. Great to see you again, so thanks for commenting.

  6. Factors which go into gas prices: price of crude oil, refinery capacity, demand, taxes. Factors which go into the price of crude: supply, economic uncertainty, political stability in oil producing nations, world demand. Limiting demand requires higher MPG in automobiles and creating the context where there is incentive (and ability) to buy those automobiles, creating a more effective public transportation infrastructure, etc. Create incentives to increase refinery capacity and stability. Given the number of factors and the number of influences within those factors, there’s plenty of opportunity to draw thick black lines to what a President is doing to influence gasoline prices, and why we’re better (or worse) off under a peticular set of policies.

    • Mo,
      Whereas I see your points, the influence of public policy such as the items you mentioned (as effective transportation), that while that may financially impact citizens, the impact is on the global commodity market is minimal, if at all. However, reducing our reliance on oil is a different matter. Thanks for sharing your thoughts.

      • Don’t mistake incremental and long term influence (political) for minimal influence. Uncertainty in our budgeting process, the economy and public spending what not absolutely affects short term monetary rates adversely affecting exchange rates making the commodity more expensive or worse, reducing confidence in the American Dollar pushing investments to oil which directs the commodity cost sharply upward.

        • Mo,
          The effect of fluctuations on the value of currency is across the global market … yet noted. Yet, aren’t gasoline prices in the US comparative low?

        • To my mind, it’s less the cost – it’s the rapid increase (inflation) that causes problems. And while currency fluctuations is across the global market, it affects where money goes for investments. When the USD is uncertain or unfavorable, money goes to oil futures.

        • Mo,
          Here’s what I was pondering later yesterday. There are factors that affect gas prices, and the oil commodity market is one of them …. and then there are factors that affect the oil commodities market, which in itself is a complex list. Just a thought … and yes, healthy debate is good.

  7. Fine post Frank! I agree with all you said, and have nothing to add to your 12 (10) points. I just wish your post could be front page on every newspaper and website in the country.

    • Tim,
      Thank you – because you read many “papers” from throughout the country, would you be my advocate for this post? Meanwhile, here’s great timing. I just heard Speaker Boehner’s and House Minority Leader Pelosi’s new conferences. Regarding gas prices, each of them did a great job of delivering verbal flatulence. Thanks for sharing.

  8. Amen. Just goes to show ya what a bunch of gigantic bullshitters folks like newt G are, claiming they have a quick fix for rising gas prices. I’m riding my bicycle everywhere I can.

    • Hansi,
      Interestingly, if we could flip the parties in power around, and have increasing gas prices, I wonder if their talk would be the same as it is now? BTW – in several other comments I said something about two news conferences I heard from the leaders the House – which supports your point. Thanks for commenting.

  9. Alright. You simply must be right, even though you didn’t sight sources.

    Fox News is blaming Obama. Even though prices spiked under Bush’s admin.

    ‘Course, Obama likely shouldn’t have said that he liked priced being around $4. Not speculation. I heard him say it.

    If you say that’s neither here nor there… you will be right. Just sayin’.

    So, what made it spike? How can it be brought back down? Is it feasible to once again become a stand alone nation? A nation who depends on itself and its own resources rather than sending its oil off to be used on the global market?

    • Dink,

      Of course Fox News is blaming Obama … as our some Republicans. Yet as I heard the entire news conferences today of both Speaker Boehner and Leader Pelosi, both were about political spin – not reality!

      Why should any US oil producer keep drilled oil in the US, thus not get a higher price on the global market? Meanwhile, what caused the spike, the answer is within the points in the post.

      When I did my nonpartisan homework for this post. Yes, I didn’t site my sources, therefore I admit, I must be wrong … and I’m just sayin’.

      Dink – Thanks for sharing your thoughts. I’m just a little edgy today … so please excuse it.

      • Sure thing Frank.

        I think you mentioned recently that edgyness can happen to anyone.

        Just so you know. When I said that you must be right, I wasn’t being sarcastic. I really am prone to think that you are right.

        • Dink,
          Many thanks for the clarification! Just another example of how two-way respect goes a long way!!! So retract any of my intended sarcastic tone. But hey – gotta leave it up for posterity.

  10. Appreciate that you bookended with 1 and 2.
    Want your gas costs to go down?
    Use less. That;s about your only choice.

    As for the thoughts on it being a commodity, it is affected by both the producers and the speculators. A while back, a Latin American country (I forget which), undercut OPEC to increase sales for a quick economic bump, and there was a race to match at the lowest price.
    OPEC sometimes cuts production just to increase the price. Sometimes speculators bid the price up and inflate it artificially to increase their profits.

    • Guapo,
      Your point goes along with my point #10. Interestingly, the US demand is not the issue – it’s the global demand – especially Asian demand. And yes – the flow from the suppliers/producers is part of the equation. Let’s face it – they do control the initial flow. However, oil is a commodity and the commodity market works based on futures – interestingly, speculation up and speculation down – yet we only emphasize speculation when the pricing trend is upward. Thanks for sharing.

  11. This is great! One thing I hate is when people blame things on a president (whether I like him or not) when there are so many factors determining an outcome. It’s crazy!

  12. #10…bingo! Put on your big boy pants, open your door and see what’s parked in your drive way. Now, close the door and stop bitching about having to pay for a decision you made.

    (I don’t mean you personally, Frank!!!)

    • Alex,
      Our personal decisions are important. For instance a member of Congress recently stated how outraged he/she was at that last fill up – but what they didn’t say is the type of vehicle – which a reputable source says is a Hummer.

      BTW – I deleted you second comment and edited this one for you. Many thanks for commenting!

  13. “1/12) Presidents do not sit in the Oval Office thinking of ways to increase gas prices.”

    You’ve dashed all my hopes of a juicy conspiracy theory :-( :-( :-(

    Also, could I have permission to use the phrase “verbal flatulence” in my blog?

    • Abtwixt,
      Welcome first-time commenter as it is always good to see new bloggers. BTW – please check your blog’s Spam folder because I think my comment has found a home in there.

      Sorry that I have dashed your hopes for a conspiracy theory, therefore, YES – use verbal flatulence! Thanks for commenting and hope you return.

  14. for #’s 1 and 12 – are there really people who think presidents want to increase gas prices? could you instead have written “presidents don’t have to ability to directly reduce gas prices”?

    also, consider for 13 – the rise and fall of gas prices does not always follow the rise and fall of the price of oil. there are times when opec raises prices, but pump prices fall based on those other issues, such as speculation.

    • RMV/Brains,
      Because there are people who believer the president is responsible for rising gas prices, surely he must be thinking of ways to do so. Bottom line is your point – presidents don’t have to ability to directly reduce gas prices – or maybe have very little effect on the price. Interestingly, the rise in gas rises seems to be delayed regarding the price of oil. Thanks for sharing good points.

      • there’s a talk radio host in philly who constantly tells listeners to stop complaining about gas prices because it’s all about supply and demand, like anything else. he says regularly that if you don’t like the price, take a bus, don’t drive, which is essentially a good practice, but he’s misinforming people. obviously, my phone calls to correct him have been ineffective.

        • Brains,
          Typical radio talk is about getting listeners, not about being accurate. I stopped listening to them long ago … a greatly limit time with sports talk as well. For years my father-in-law would complain about the talk shows, and I kept saying stop listening. I’m not sure if he has totally stopped, but I am confident that he has reduced his listening time.

  15. Great post, made for good reading. Sorry my comments so short. I guess feeling tired still getting over being sick. I bet it will be nice to have your wife back cruising sure sounds like fun.

    • Debra,
      Glad you appreciate it … and I tried to look at it in a factual view, thus trying to limit my political view because that list is applicable no matter who is in the White House. Thanks for visiting.

  16. Wow! This caused a lot of comments! Prices are going up here too but our politicians are so silly they set up something called ‘The Consumer Watchdog’ (paid for by tax payers of course) which is apparently keeping an eye on the oil companies making sure the consumer is not being ripped off. As you can imagine, The Consumer Watchdog is a complete waste of space.

    • Spiced,
      This post has been active regarding comments. The interesting thing about this post is that it is very applicable to other countries as well because the oil market is global! I also came across the cost associated with a gallon of gas (at least in the US), which I’ve included in the current Opinions in the Shorts (just posted). Although I haven’t stated this, but gas pricing and energy policy are different subjects. Whereas energy policy is more political and debatable, gas pricing is more straight forward – although most people (in my opinion) have many misconceptions regarding this topic. Thanks for commenting and for sharing what is happening in Australia.

    • Kay,
      Interestingly, in this post I aimed to stay away from opinion and stick to the point of gas prices. However, others are the ones who strayed off the focus – but that’s ok. Gas prices may be one of those topics that people think they know, but actually have misconceptions. Thanks for visiting.

  17. I suspect that as long as the price of gas in measured in dollars, the only way for it to go is up, along with inflation. We should be trading one bushel of wheat or corn for 1 barrel of oil. Of course that would never happen because the bankers would get knocked out of the loop. As far as the citizenry of the World though, I would think barter would serve everyone’s needs in this case. Too bad, it is not practical answers that our bought off politicians seek.

  18. ‘verbal flatulance’ – like that ! … (2) AND (11), I see – like & like!

    I like your (5) and (10) very much – much.

    Thank you for leading me to this one, Frank :)

  19. Pingback: Flashbacks: On Politics | A Frank Angle

  20. It’s a sad commentary on the US that folks don’t understand this–but they don’t. Too many stupid people in America.

    In Ecuador gas is about $1.48 a gallon. Seriously! The benefit of living in an OPEC nation.

    Hugs from Ecuador,
    Kathy

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