Wednesday, May 23, 2007

more on gas

How short is memory? I tried this question out on someone recently and got some strange answers. How long has it been since gasoline prices locally, or anywhere for that matter, were below $1 a gallon (in nominal terms that is). Never? Decades ago? The answer: December of 2001, which really isn't that long ago. Almost hard to imagine these days.

I actually thought of the question while filling the tank with my FuelPerks points of course. I don't actually buy much gas so I wind up with a sizable discount when I fill the tank. For all the success Fuelperks seems to be at the moment, imagine what it would be if the price of gas was close to $1/gallon. That is not a prediction in any way, but the discount accrues the same no matter. Percentage-wise it's a big difference: at $3/gal. a 50 cents per gallon discount is 17% off, at $1/gal. its a 50% discount. Some people may even perceive that would will be getting gas for free at that price.

Maybe asking about the elasticity of demand for gas is the wrong question. Maybe there is a cross-elasticity out there worth noting. From Governing is this snippet from North Dakota of all places saying that high gas prices are causing people to buy less lottery tickets? Anyone have data on whether that is happening here?What else could start to hit lottery revenue? I mentioned before that casino revenues have to have some impact on lottery revenues... large or small we will have to see. What about bingo revenue? Still a question worth asking.

Since it is Wednesday, the weekly updates on national oil markets are out. In the sea of government data out there, the people at the Department of Energy who put out This Week In Petroleum are by far the only ones with any sense of humor whatsoever. To explain gas prices this week they actually start out with a quote by Shakespeare:

What's in a name? that which we call a rose

By any other name would smell as sweet;

I personally would love to put out a report with a quote by Shakespeare. But what you see in one of their weekly charts is simple. People can yell and scream about the big oil companies unfairly ramping up prices, gouging if you will... but in the end you can't really get around the fact that the demand for gasoline is 9.433 million barrels per day.. which I think is the highest for any May week ever. They have also done everyone a service by coming up with the definitive inflation adjusted calculation of gas prices going back in time. So what was the lowest gasoline price (at the pump, and a national average) in the last quarter century? 77.6 cents per gallon in December of 1986. Just think, the Iggle might have to pay some people to use their gas at that price.


Blogger EdHeath said...

Getting closer to a magic (if moving) number: $3.29. I'm not sure what the prize is or who to give it to, but it can't be a good day for an administration that has ignored fuel conservation and increasing income inequity.
Meanwhile, today's NYTimes has a story about how the oil companies are claiming the price of gas will stay high because of uncertainties they have about demand. See, they don't want to increase refinery capacity if biofuels are coming.
It always seemed to me that at least some of the time the oil companies control all means of production and distribution (vertical integration). What does profit margin as set by a competitve market mean then?

Thursday, May 24, 2007 7:10:00 AM  

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