The Oil Drum

That's possible.

I think it is partly because gasoline has been priced quite a bit below its inherent value. This is because the retailing of gasoline is hyper-competative. In most places there are dozens of nearby gasoline retailers all selling the exact same product and all advertising their prices on big signs for all to see. The result is that gas is very cheap relative to what it can do for you. Now that the price is rising, people complain because they were used to something cheaper, but it is still a bargain.

Peaople who use gasoline on a discretionary basis mostly (like for vacations, joy-riding etc) recognize that its still a bargain and aren't inclined to cut back. To the extent that higher gas prices cause some people to use less, it makes the use more enjoyable for those who continue to use (by reducing congestion).

People who have put their self in a position where they are required to use substantial amounts of gasoline just to accomplish the daily necessities of life are going to be squeezed, but can't give up the gasoline so they have to give up something else.

Re: shift in the demand curve

We can get to marginal elasticities in a later course  

Shift to the Right

Shifts in the Demand Curve

When there is a change in an influencing factor other than price, there may be a shift in the demand curve to the left or to the right, as the quantity demanded increases or decreases at a given price. For example, if there is a positive news report about the product, the quantity demanded at each price may increase...

Have a good one,

Dave

It's true that the poor have very little opportunity to change their consumption in the short run, but they have plenty of ways to change it in the medium term: They can move closer to work, get a job closer to home, start carpooling, start bicycling to work, etc.

For these changes to get made, though, gas prices need to stay high long enough for these changes to make sense. A year might be the relevant period for signing a new lease.

That seems right, in general. But in my neighborhood construction projects continue and some are accelerating their plans. One large, mixed use project that was to be phased is going ahead all at once:

http://www.saulcenters.com/properties-metro/va/clarendon/index.htm

Another, that is currently held up by NIMBY lawsuits will include a lot of affordable housing (60% of median income qualify) within 2 blocks of metro

http://www.1bc.org/dp_template.html

Other developments are also going forwarded and more in the hopper waiting approvals. I hear similar things from other localities that have transit access and established plans for walkability.

It's amazing given the increase in construction costs, but that's what is happening so far in areas like where I live it seems.

More people moving from car dependent areas to places like this would affect the elasticity of demand over the long term.

If you read my article Unhappy Motoring, you will see that I discuss miles driven and touch on the ethanol explanation. There are claims of fewer miles driven.

best wishes,

Dave

I believe the weekly data from DOE comes from actual data supplied by a sample of refiners. We used to get them from our domestic affiliate for our system the day before the report. If you knew other players in the game who had similar info from their own systems, you could make a slightly educated guess a little early. But in reality, the week to week swings are really pretty trivial volumes (1-2% of the total in primary storage. Secondary/tertiary/auto tanks have quite a lot of stock as well).

Longer term info is based on data supplied by all the players added up IIRC. If you are really interested, I'm pretty sure DOE has their methodology described somewhere in that huge website. I doubt there has been any improvement in data collection. Still, if you are trying to see the forest, look at the rolling 4 week averages. Tends to take some of the noise out.

These swings are not that unusual compared to other periods. We just don't have as much slack in the system anymore to catch up quickly.

Also, keep in mind we didn't really "shoot up far above norms". We were a few million bbls high then over shot a little low. At 10 MMBD production +imports, the swing is no more than 3-4 days production. And the variation to the "5 year band is less than 1 day's production.

My gut is that the warm Dec we had led to heating oil prices crashing down dragging crude with it. OPEC cut production and actually made the cuts instead of lying which was the historical norm. Refiners starting making/tanking gas for spring since heat demand was low (shifted production into spring mode). Then a normal to cold Jan came and drew heating oil stocks. They switched back to making heat and then the shutdown season hit. The excess gas piling up faded away as a result.

Right now, we're building gas stocks even with lower than usual refinery % operated. That's bearish for price and futures have dropped from $2.4 (June contract in late May) to sub $2.2 (July contract). Players are assuming that if refiners can keep up with only 90% operating, when we gat back to a normal 95%+ in summer, supply will surge. We'll see.

Re: live for the day

I agree. The best explanation for all this is lies in the psychology of groups under threat. Americans are partying like its 1999 (to quote the musician/analyst Prince).

GDP growth is not mirrored by average wages, which according to the New York Times (here), were an inflation-adjusted $17.44/hour in February and are now falling. In late 2001, the average wage was $17.24 (again, adjusted). Each gallon of gasoline bought today as opposed to in 2001 is obviously costing people money. Yet they buy more and more. How can this go on?

Hourly wages for the rank and file — who make up about four-fifths of the work force — rose 6 cents in May, to $17.30. But this increase has been swallowed by inflation, according to economists’ projections of inflation rates for May.

After peaking in February at an inflation-adjusted $17.44, the real average hourly wage has begun falling again, as it did from 2003 to 2005. In fact, the current economic expansion, which began in late 2001, has had some of the weakest wage growth of any modern expansion. In December 2001, the average real hourly wage for workers was $17.24.

Stagnant wage growth has not stopped consumers from spending, and that spending is helping to keep the labor market going strong, economists said.

I think it is due to easily available credit and people's apparent willingness to accrue (unsustainable) debt. The credit debt is not "real money". Only the minimum payment is "real money". And since I am poor, I am only too aware of the difference.

Of course, I am dealing with the short run, as the economists say.

abelardlindsay

I had a short conversation with a woman with a Winebago-type vehicle at a barbeque joint last summer. She and her husband were waiting for the social security check to get fuel to move. Since the government doesn't include fuel price inflation in the consumer price index, I'm sure they are screwed even worse today. Wonderful life, living in a cheap trailer park in a bad part of Houston.

At any rate, I'm not sure its a concious choice being made by folks. Right now GMAC and Ford Motor Credit are offering a $5,000 rebate to anyone who purchases a gas guzzler, no matter your credit status or income. For Joe Sixpack, who is already over his head in debt, it looks like a way to pay the light bill and have a sexy truck. It doesn't look like the trap closing a little tighter. Its the same with the suburban house. The fact that both adult members of the house have to stay employed and that one or both of them may have a 20 or 30 mile commute doesn't enter in to the purchase decision-its a new, shiny house and the kids can go to an all white school district. After a year or two the 2nd mortgage as an ATM sets in, and the poor slobs are swallowed by debts.
What I'm saying is that its a series of impulse decisions and bad judgements. Television is their only news source, and they flip the channel at any news that doesn't feature Paris Hilton. They get home after 3 hours of commuting and 9 hours of work, dealing with the kids and mowing the grass at the McMansion and a "reality show" helps 'em relax, and Glenn Beck helps 'em hate and focus blame on everyone but their own poor decisions. Their parents aren't any help, their own poor decisions put them in a RV without the funds to drive away until the social security check arrives.
Aristotle said 2500 years ago that most people were natural slaves. He thought that moderation in all things was the key to freedom. Its an excellent ideal, but I've never figured out how to moderate-with me its William Blake's "Too much, or not enough" and "The road of excess leads to the palace of wisdom" (these are some of the proverbs of hell from The Marriage of Heaven and Hell).
I do know that for my own personal peace I have to be kind and compassionate to people, and since I'm blessed with a brain (or maybe cursed), some small measure of articulateness, and a f@#kin' guilty liberal consience, try to be politicially and socially active. Its probably just pissing into the wind, oh well.