RON430

OK, yet another fuel mileage thread. I'll bet you thought they were just about over? In case you don't know what Autocar is, it is the UK equivalent of AutoWeek. A weekly car enthusiast mag. It's a bloody fortune to subscribe to here but I do and just got the May14 issue. Here's the article:

"Petrol Price Could Double In 12 Months

Petrol prices could hit 8 pounds ($16) a gallon by the end of the year, a leading investment bank has predicted. Oil prices are currently hovering at around $120 (60 pounds) a barrel, but "the possibility of $150-$200 (75 to 100 pounds) per barrel seems increasingly likely over the next six to 24 months," said Argun Murti, a strategist at Goldman Sachs.

Oil was just $100 a barrel at the beginning of the year, so this would represent a doubling of the price within 12 months. The forecast increase would equate to more than 8 pounds ($16) per gallon at the pump for UK motorists, and nearly 9 pounds ($18) per gallon for diesel."

Now, a lot of these threads have the extremists, and I would prefer to not pander to either. By that I mean those who view this as fearmongering and are convinced once the speculators get burned oil is going back to $20 a barrel versus those who are convinced civilization is on the brink and are preparing to pedal to work. I hope not to be in either category but simply one who hopes oil does retreat to lower levels (eventually) but is definitely planning on being prepared to cut consumption with my future vehicle purchases. For those of you who really want your fuel bill to be bigger than mine, well, you should be able to pick up those 5 and 600hp uberpanzers at a good price.

I put $68 of gas in the tank of my GS last time I filled up and the thought of that becoming $136 is scary. Fearmongering or not. I don't think it will be the end of civilization but I will definitely go home and kick something after I fill up if it gets near that rate in the next 12 months. Obviously, we have people here who can make bold, and probably dumb, statements about what they are going to do going forward, yeah! more hp!!!!!, but I am only waiting for a better mix of available models to jettison both GSs. There just isn't as much pleasure to be gotten feeding a GS430 as there is displeasure every few days at the pump. And yes, I have run the numbers, and Doug has also run the numbers and sent them to me, on fuel expenditure versus gas price versus vehicle mileage and no, I won't end up on food stamps with $9 a gallon gas in Cali (we are right at 4.25/4.35/4.45 in NoCal right now so if it doubles say $9, diesel will be in the $10 to $11 dollar range) but I will go absolutely bat nuts putting $135 or $140 bucks in a tank of gas. And that isn't even what the poor folks who like to be taxed, a lot, on their fuel are going to pay in Europe.

Now, here's the caveat. Oil prices are very volatile. Duh. In early May we were still running up and we did finally get to the $135/barrel range before pulling back so maybe their analyst would revise his projection. The runup to $150/barrel wouldn't surprise me and I still expect to see $5/gal here in Cali. What I didn't expect was the price to runup as soon as it did. We are only at the first week of June after all and our traditional highs are still a couple of months away.

Note to those reading the article. Sorry about jumping back and forth between pounds and dollars but that was the way the story was written. Oil is still priced in dollars so they cycled back and forth. The exchange rate used in the article, and by me converting any numbers that weren't converted, was $2 to the pound.

gengar

Yes, of course an investment bank says that. They're leading the way in speculation of oil futures and would have the most to gain from continued bubbling.

RON430

Well, if you believe they lead the way in speculation on futures, then you must feel they know what they are talking about? If the speculators can make money forcing it to $130, just think how much they can make forcing it to 150 or $200?

Does the current price in oil feel like a bubble? In many ways, yes. Does the current price feel like a bubble that is ready to pop? Not really. If reserves numbers start steadily increasing then that is a potential but they haven't. As long as their is more worldwide demand than there is supply, up she goes.

gengar

If an investment bank is heavily invested in company X, and they say company X's stock will double in a year, you will give that credibility only because that bank is heavily invested in the company? Of course not, that'd be ridiculous. Anyone who is discerning will consider it a conflict of interest just as it is here.

In order to make money off a bubble, people are needed to be left holding the bag when the bubble bursts. It's just like housing recently or tech stocks in the late 90s. Those that get in early enough want to drive speculation, drawing in those in the general population lacking common investment sense. And it's those people who are the ones that wind up paying off the big banks and other early investors.

RON430

As long as you bring it up, let's look at real estate. There was a classic bubble. When you have prices for something just continuing a rapid rise with no retrenchment well outpacing inflation, you have to hold your breath. What happened was that the inventory of houses for sale started to increase but demand for them wasn't there. Then people started to realize they had gotten into property's assuming they could constantly refinance because the price would never stop going up. Once the unsold houses significantly exceded demand, prices had to fall. People started to think about walking away from properties where more was owed than they had equity and of course, some of the properties were bought with adjustable mortgages that reset to higher rates and the owners then could not refinance nor sell. Classic. And the bubble popped as supply far outstripped demand.

Now oil, as the article pointed out, let's forget the mindless notion that it is just being pumped and dumped by the analyst, went from $100/barrel at the beginning of the year to $135 in May, now back to around $126 or so. I don't remember exactly but as I recall the world supply of oil is around 84 million barrels a day and the demand is something like 86 million barrels a day. That isn't a bubble regardless of who you might fancy is making a profit off of it. So the key to watch is reserves. If the reserves of either crude or distillates start to steadily creep up, you can make a case for a bubble pop eventually. If reserves don't creep up then believing that the price has been caused by speculators is, well, just speculation.

The analyst was just stating the fact that whatever gasoline was selling for at $100 a barrel (say $8 gallon in the UK), it will be selling for 50% more at $150 a barrel and 100% more at $200 a barrel. If you prefer to think of that as pumping and dumping, fine. But it's just mathematics and not very advanced mathematics at that. So we have already gotten a 30% increase since the beginning of the year. Getting to $150 a barrel doesn't look that difficult anymore. Getting to $200 might take longer. An economic slowdown might help as well as strengthening of the dollar but a very bad sign is when oil goes from say 120 to 135, then pulls back to the 125 range and then heads back up again. That's not acting like a bubble but a consistent, sustainable trend. And it is not acting like a market driven by speculators. But one thing I can guarantee you, I will see $9/gallon gas in Cali before I see $2.25 gallon gas.

lobuxracer

iTrader: (2)

Right, but at the same time we have Lehman Brothers saying oil will fall to $70 - $80 a barrel in the next two years.

There is only one thing certain - change is afoot. Which way, how long, and where we will eventually arrive are all in question, but change is the only constant here.

Here's an interesting counterpoint read.

What part of this sounds just like 1 - 5 year ARMS? Or worse yet, Black Friday 1929 all over again...

RON430

The author keeps saying that 60% or the price of oil is proven to be speculation, indicating it should be selling at $50/barrel, but he gives no support for that other than to reference himself. At least the poor shlub that Autocar had was talking about price increases from $100 a barrel and it has moved up roughly 30% in five months. Your source may be right in his just as vested interest in the popping of the bubble but all we have to do is wait to see. Maybe the safe play is making plans for your future based on oil at $50 a barrel in the next 12 months. Personally, I feel better planning on $150 a barrel.

I don't play with oil futures, in fact I haven't played oil at all for about eight months, just too freaky. But I sure don't see the downside of a) the mfrs bringing out models with higher fuel efficiency (and by and large the automakers feel there is more support for oil at current levels than they believe in a bubble about to pop) and b) getting a car to drive that gets over 30mpg. Worst that happens if you guess wrong on that plan is you have a car to drive that is even cheaper when gas retreats after those no good speculators die a certain death. Of course, feel free to go get that F150, Ford would welcome the sale.

But, and let me put this up one more time for those of you haven't quite focused on it, the article I put up was from Autocar and the impact in Europe is a whole bunch worse than it will be in the US. You can raise the argument that they make their own problem with taxes but take all of that and the speculation out of the equation and just think what it would be like to live anywhere where gas was $16 a gallon. Okay, maybe that is fearmongering and while I haven't exactly gone out and put money down on a Vespa, I don't really have much interest in the majority of cars that right now get real world average of less than 22 mpg. It isn't a lot of fun at $4.50 a gallon right now.

lobuxracer

iTrader: (2)

OK, so I work about an hour a week to pay for gas to commute. It used to be a half hour. Yeah, it sucks. But at the same time, I get paid based on ability to produce, so I focus on producing more.

I remember back in 1977 when I worked in a bicycle shop as a mechanic. I spent the first hour and a half of every day earning lunch at a whopping $1.65 an hour. Lunch just happened to be my transportation cost since I was riding my bicycle to work (well, OK, I was riding 450 miles a week then too). Then I got to the "big time" where I made $2.35 an hour, and I spent about 7 hours a week working to pay for gas to work 6 or 7 days a week. Or I could take the bus for about half of that.

I rather prefer where I am today, and even if gasoline doubled, I'd still be working 2 hours a week for my commute, not 7.

RON430

I don't have a big commute but if it doubled here in the US, I wouldn't really care how many hours I had to work to put that $140 in the tank of my GS, I think I could find better things to do with the bucks than feed my Lexus habit. And that is what it is about for me.

Personally, I believe there is a variety of factors at play on the price of oil and the brightest guys in the room feel that oil at over $100 a barrel is unsustainable. That's actually fine with me. I have more uses for funds than I have sources and I guess I have just gotten old enough that sucking gas through a straw to sit in traffic doesn't provide me the thrill that it obviously provides others. The Europeans are going to feel it worse than we will but that isn't much comfort, I find that misery really doesn't enjoy company. But then, I have the wherewithall (not sure how many hours a week I work for that) to go out and buy a new vehicle that hopefully meets all my requirements and gets good mileage. The problem has been with the price of gas we had the mfrs a lot more concerned about providing idiots with Hummers than anyone a reasonably sized car wtih an efficient drive train. If the oil speculators get me the size car I want with good mileage, then the world needs more speculators. After looking at the sales figures today, I don't think I have to worry about the mfrs thinking it's a good thing for every soccer mom to drive that Suburban or F150. Whether gas doubles or not, who knows? One sure way to find out, just hang around.

LexFather

Which is fine for those that do not commute but America was built on cheap gas, roads and suburbs. Those that do drive who bought their homes on $1.50 and $2.50 gas now don't have just traffic to bish about but now filling that ride up.

I see not just a shift in vehicle purchase but in living as well. Expect more dense living areas instead of sprawl (Going up, not out). More live/work/play areas in the states and continued redevelopment of downtown areas.

You see all these "firms" do is make money. They literally "Say" something will go up and have already bought it. Then it goes up. If they say "oh it will go down" they sell before it does.

You cannot beat them, nor the FED.

We have not seen a dramatic increase in use of oil in a YEAR, so why has gas in American risen so high, so quickly? Demand here is flat and actually barely tailed off.

The dollar has also dropped in value and well gas prices are still rising. America used to be one to pesuade with ease. Well that no longer is the case, not with other and possibly BIGGER players at the table.

We need to stop relying on foreign oil if we still want to consume the most!! We need to drill, find alternative energy and build more refineries.

Its amazing we have all bished about gas prices for sometime now and WASHINGTON HAS DONE NOTHING!!!

mmarshall

If gas prices double, we'll all not only be over a barrel, but IN one.

RON430

I know bit has been out of the UK for quite a while but I have been waiting for his comments. I spent an extended time in England and if we come close to these prognostications, I can see many things from my time there being repeated here. I don't know exactly the impact on density but I wouldn't argue with your point. People will be drawing to areas where they can work, live, get entertained, etc., all without a lot of car travel involved. You cannot make any argument against the US revolving around cheap oil and personal transportation. Heck, look at a map. In WWII, those bomber raids all the way from Britain to Germany were about the same distance from NoCal to SoCal. The size of this country is staggering in real terms. But the fuel may just be too doggoned expensive for the type of mobility we enjoyed in the past. I don't want to get too many of these threads going that all revolve around the same thing but if you look at the airlines reporting you can see some big changes are going to happen there as well. The vacations that average people were able to take are going to be a thing of the past.

I sure don't want to sound any older than I already am but when I was growing up, it wasn't that unusual to not know anyone who had ever been in an airplane. And now families got seemingly unending schedules of one trip after another with the entire family. Those days are probably at an end. Personally I have been whining like a four year old at a wake about the lack of cars that interest me. I may give somewhat on room but I really want much better mileage than I see available today, and it is taking bloody forever for the mfrs to do anything. I sure wish I hadn't gotten involved in that Acura thread and speculated on an RL-h. What a marvelous opportunity that is for Acura if they could at all pull it off. Especially as Lexus is just too smart than all of us to make an ESh. Morons.

And, as I have said, I don't believe the fearmongers anymore than the pollyanna's in this thing. I don't think there is one cause for the price of oil and I don't think there will be some miraculous bubble pop that will return us all to $40/barrel oil. My plans are made longer term than that and if the mfrs give me the product, I will definitely get the checkbook out.

If you want to get out of the usual blustering, there is info available in more depth and detail than that little story in Autocar (I still can't believe Autocar ran it, scary stuff. After I read it to my wife she was ready to go get rid of both GSs, good thing it was 10PM.). Here's a more balanced outlook about what is going on from Bloomberg.

Oil Is Steady Near Two-Week Low After Bernanke Currency Remarks

By Mark Shenk

June 4 (Bloomberg) -- Crude oil was little changed near a two-week low after falling yesterday on signs the U.S. will stop cutting interest rates in a bid to bolster the dollar.

Energy and metals dropped after Federal Reserve Chairman Ben S. Bernanke said the Fed is working with the Treasury to ``carefully monitor developments in foreign-exchange markets'' and is aware of the effect of the dollar's decline on inflation. The falling dollar has helped lead commodities including oil, gold and corn to records this year.

``Bernanke is finally acknowledging that the weak dollar is a problem,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``If steps are taken to strengthen it we could see the commodity markets turn sharply lower. The first thing to do to support the dollar is to stop cutting interest rates.''

Crude oil for July delivery rose 23 cents to $124.54 a barrel at 8:53 a.m. in Sydney in electronic trading on the New York Mercantile Exchange. Futures reached a record $135.09 a barrel on May 22. Prices are up 88 percent from a year ago.

Yesterday, prices fell $3.45, or 2.7 percent, to settle at $124.31 a barrel, the lowest since May 15.

Oil closed below the Bloomberg Trender support line yesterday for the first time since the first week of May, indicating oil may be poised for a sustained decline. The Trender is a technical study that signals a price's direction based on the speed and variance of past changes.

Dollar's Gain

The U.S. currency traded at $1.5443 per euro at 6:03 a.m. in Tokyo, after increasing 0.6 percent yesterday and touching $1.5411, the strongest level since May 14. The dollar traded at 105.08 yen, following a 0.6 percent gain yesterday.

``The rapid growth in the emerging markets and the associated sharp rise in their demand for raw materials have been, together with a variety of constraints on supply, a major cause of the escalation in the relative prices of oil and other commodities,'' Bernanke said in a speech to the International Monetary Conference in Barcelona, Spain.

Billionaire investor George Soros told Congress an oil price ``bubble'' is working with fundamentals in the market that may lead to a recession in the world's largest economy.

``The rise in oil prices aggravates the prospects for a recession,'' Soros said in testimony prepared for delivery yesterday to the Senate Committee on Commerce, Science, and Transportation. ``The bubble is superimposed on an upward trend in oil prices that has a strong foundation in reality,'' he said. ``To be sure, a crash in the oil market is not imminent.''

U.S. Supplies

The committee is holding hearings on potential energy price manipulation. Congressional leaders are pushing the Commodity Futures Trading Commission and other agencies to step up efforts at overseeing the markets for fuels such as gasoline as pump prices force consumers to drive less.

Prices also fell on signs U.S. fuel supplies rose last week and speculation that U.S. and Asian demand will decline. U.S. gasoline demand fell 4.7 percent during the Memorial Day holiday last week, a sign motorists are cutting consumption because of record prices, MasterCard Inc. said yesterday.

Malaysia will end price controls on gasoline, a minister said yesterday. Indonesia, Taiwan, Sri Lanka and Pakistan have decided to raise fuel prices as the cost of subsidies mounts.

``The fuel supply and demand numbers will be the focus in tomorrow's report,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``If gasoline and distillate supplies increase by 2 or 3 million barrels, we should move a lot lower.''

Brent Crude

Gasoline stockpiles probably increased 825,000 barrels from 206.2 million barrels the prior week, according to the median of 14 responses in a survey of analysts by Bloomberg News. Supplies of distillate fuel, a category that includes heating oil and diesel, probably increased 1.68 million barrels.

The Energy Department is scheduled to release its weekly report on inventories today at 10:35 a.m. in Washington.

Brent crude oil for July settlement declined $3.44, or 2.7 percent, to $124.58 a barrel on London's ICE Futures Europe exchange yesterday, the lowest close since May 15. The contract reached a record $135.14 on May 22.

General Motors Corp. said yesterday that it will close four truck plants, make more small cars, and may drop its Hummer brand of large sport-utility vehicles.

Gasoline exceeding $4 a gallon represents ``a structural change, not just a cyclical change,'' Rick Wagoner, chief executive officer of the largest U.S. automaker, told reporters before its shareholders' meeting in Wilmington, Delaware.

Iranian President Mahmoud Ahmadinejad said yesterday oil prices have been artificially inflated by ``capitalists'' and that crude oil remains plentiful. Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries.

OPEC is prepared to boost oil supplies should the market require it, Kuwaiti Oil Minister Mohammed al-Olaim said in remarks published by state news agency KUNA.


At least I felt it was informative until it got down to Ahmadinejad and OPEC. I would sooner marry the guy from GS in the Autocar article than believe either of them. But if you can put your notions of who is to blame for the price of oil and what will happen in the future, could you just think about what it would mean here to have gasoline at say, $9 gallon like I posted earlier? My brain knows that eventually that will happen, maybe not this year, maybe not this decade. But it will happen. So the fillup of the GS that cost me $68 and made me want to kick the cat I don't own would now cost $136. That just blows me away. And rather than blame Congress or W or speculators or whoever, I would rather turn to the man in the mirror to figure out what I have to do to live in that world. Just saying I make enough money to keep driving all I want and that traffic should get a lot lighter (OK, so I'm never going to be serious all the time - there has to be some silver lining) I just choose not to devote that much of my resources to feeding a vehicle that gets 18 or 20 mpg. My bad back keeps me out of Prius and Civics but the tradeoff is going to be how much the extra room is worth to me. But like 1Sick posted, if these come anywhere near being true (the gas price predictions) then the world, and especially the US, is going to go through some changes.

CK6Speed

iTrader: (1)

I think I can handle gas prices under $6 a gallon. At $6+ I'll start to feel a major pinch and have to seriously think about adjusting my life style. If gas prices double which would be about $9 a gallon I think I might just be screwed. I mean, I wont go homeless, but that is a lot of money going to gas. It probably wont just be gas either for me since fuel prices affects nearly everything in my area. My electricity bill will probably jump from $150 a month to $300, food prices will go up, forget about traveling out of state as airfare will probably be $2000 round trip for one.

LexFather

Well what this has made me think about is my consumption as a whole, from using energy efficient bulbs to conserving trips and clipping coupons

Some of this is our fault, we took cheap gas for granted and just used energy as we pleased. A fundamental shift has to change in the way we think. Its not a bad thing, just the next great possible challenge for this country.

Not war, but energy. I have no doubt in my mind the brilliance and passion and minds of America can make it happen, BUT, will the govt/big business allow it to happen?

What we are not mentioning is just how the price of EVERYTHING has risen as everything has some sort of relation to the usage of gas/oil.

Och

iTrader: (3)

At this point I cant wait for gas to double, tripple, or better yet quadripple. Maybe then something will be done about it. At this point all we do is keep bishing, and gas keeps slowly and steadily creeping up. I'm lucking out because my business requires very little driving, and my wife has a gascard from work, but many families are really hurting, and so do businesses. For instance my parents construction company has about ten trucks and vans, and gas prices are really affecting their business. I dont know how long these high fuel prices can be sustained by US economy before it crashes... It is bound to crash, and at this point I wish the prices would just quadripple overnight and let crap hit the fan. US economy crashes, and all "emerging" economies that depend on US economy will follow, and then OPEC and Wall Street speculators can go drown each other in their oil.