The Oil Drum | OPEC says pumping more won't bring oil price down

75 comments on OPEC says pumping more won't bring oil price down

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realist on October 31, 2007 - 6:36am

Interesting stats. Lets take someone earning $15k and drives 30 miles each way. The average one way commute is 25 minutes. I'm guessing that it represents 10% of the population based on the graph. Take home pay is $1062 - rent(500) - insurance (75) - food (300) leaving $187 to pay for gas. If he uses an average car (25mpg) that means 48 gallons. The pain threshold is $187/48=$3.90 per gallon (crude $130).

Not far from my original estimate of $4.10, except that now we are talking about 10% of the population instead of a worst case.

If this person moves closer and commutes 10 miles each way (without paying a higher rent), they will save $130 per month with $3.90 gas. If they need to pay a higher rent, we may see more car campers or uninsured drivers.

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graywulffe on October 31, 2007 - 10:00am

Interesting analysis.

However, I believe the pain threshold is even lower. Car maintenance, for example, is a real cost and expensive. So even ignoring the likelihood of a monthly payment on a vehicle loan, a monthly value for maintenance would lower the pain threshold. If the maintenance is cheap, say $25/mo, then the PT is knocked down to $162/48, or $3.38 per gallon.

Sixty miles a day seems high. I believe it's more like 45 miles for the average commuter (DOE stats). This would put the PT back up to 3.38/(45/60) = $4.50/gal. However other costs are likely higher. Shows how sensitive this calculation is to a myriad variables. It would be interesting to see a more detailed accounting.

-best,

graywulffe in CVO, OR

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75 comments on OPEC says pumping more won't bring oil price down

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