Social Question

JLeslie's avatar

What's your guess about gas prices in America?

Asked by JLeslie (47994 points ) February 2nd, 2011

Gas is getting expensive again. Oddly, I have not heard much about it in the news, or among friends. I already see my grocery bill going up also.

Do you think there is any real reason for the prices going up? Or, they are just doing it because they can? How high do you think they will go in the next 6 months? A year?

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59 Answers

MissA's avatar

Give the activity in Egypt…it’s on its way.

YARNLADY's avatar

They will slowly but surely continue on the increase.

zenvelo's avatar

we’ re a hair under $3.50 a gallon for 87 octane here in the Bay Area. I think we’ll be at $3.75 by Memorial Day.

ETpro's avatar

This is an easy one. TV and the Internet take pictures of the American lifestyle everywhere these days. Most of the near 7 billion people on Earth want that same sort of creature comfort for themselves. To supply that, we only need 4½ Earths. Since we aren’t likely to discover the replica Earths in any reasonable travel distance, the demand for what resources there are left on this one Earth will continue to rapidly increase, and the price will do likewise. Those countries like the US that keep energy prices artificially low so their citizens can personally consume much of the world’s resources without realizing the cost of doing that will drop that practice or bankrupt themselves.

Pleasant dreams, everyone. :-)

CaptainHarley's avatar

The Federal Reserve is printing more money in an effort to keep the government from going bankrupt from all the “stimulus” money that’s been doled out. When you print more money, the value of money goes down. That is called inflation. It’s not so much that prices are going UP, as that the value of money is going DOWN. And it’s only going to get worse. : (

cockswain's avatar

@ETpro nailed it.

@CaptainHarley Don’t you think the Fed is printing money to combat deflation?

CaptainHarley's avatar

LMAO @cockswain

No.

If diamonds were as common as coal, what do you suppose they would be worth?

cockswain's avatar

Well, the diamonds would be worth less than they currently are, so you’d have inflation. Part of the Fed’s charter is to control inflation, and one way they accomplish this is by controlling the money supply.

CaptainHarley's avatar

@cockswain

Supposedly, yes. But inflation results from too much money in circulation, and that is definitely what’s happening right now. Stick around. It’s going to get a lot worse. I pray that I’m wrong, especially since I live on what is essentially a fixed income, but I honestly don’t think that I am.

cockswain's avatar

But why would the Fed intentionally print money if it knows inflation is actually on the rise? Perhaps the table on this page will allay your fears. In 2009, we actually had deflation for half the year. In 2010, the rates were still around 2%. Hardly runaway inflation.

CaptainHarley's avatar

@cockswain

All I can say is, just stick around. We’ll see what happens.

ETpro's avatar

@CaptainHarley Fact is @cockswain is quite right, and while deflation may sound cushy, especially to someone living on a fixed income, it’s a real bummer if it takes hold and gets out of control. Controling the money supply as the Goods & Services supply fluctuates is why we need a central banking system, and why all other industrialized countries have some form of central bank as well.

CaptainHarley's avatar

@ETpro

[ See last comment ] : )

cockswain's avatar

All I can say is, just stick around. We’ll see what happens

You mean you’re just guessing? I thought you had a reason.

meiosis's avatar

The cost of oil is going up globally and it has little to do with US fiscal policy, and lots to do with simple supply and demand. As @ETpro says, the rest of the world is trying to improve their lifestyles, and in today’s world that means increased demand for oil. Increased demand + relatively fixed supply = increasing prices. It’s the free market way.

CaptainHarley's avatar

@cockswain

“In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.[1] When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy”

“Reasons,” but you are unwilling to listen, so I suggest that we adopt a “wait and see” attitude.

tedd's avatar

How did this get onto the topic of inflation?

@CaptainHarley Diamonds are actually incredibly common, they’re just confined to a handful of mines worldwide. If the diamond companies released ALL of their diamonds in stock to the market… their price would drop 10x.

As far as the oil, gas in America is about 3x cheaper than it is in Europe. Prices for it will be going up, but it frankly has nothing to do with inflation.

john65pennington's avatar

Their goal is $4 a gallon this summer for regular. i still say that some rich Arab lost a lot of money at a casino and making us pay for his losses.

CaptainHarley's avatar

You cannot intelligently discuss prices without discussing inflation of the money supply. When the government prints too much money, you wind up with too much money chasing too few goods, that, boyz ‘n gurlz, is called “inflation.” Read about Germany during the Wimar Republic after they lost WW I… it took a wheelbarrow full of marks to buy one loaf of bread. Had the value of bread changed? No. Only the supply of money, which Germany printed far too much of.

tedd's avatar

@CaptainHarley The reason the marks were so useless had nothing to do with how many they printed… it was because the government had nothing to back them up with. And its Weimar.

And inflation has a tiny, very ignorable effect on the change in gas prices over a 6 month, or 1 year, or really even a 10 year period. Hate Obama and the Democrats as much as you want, they have not printed enough money for inflation to have a significant effect on the price of ANYTHING .

cockswain's avatar

@CaptainHarley No one is disagreeing about the definition of inflation. For what reason do you think the Fed printed money? Because they thought, “man, we could really use some good ol’ inflation right now to screw things up’?

CaptainHarley's avatar

@cockswain

Where have you been? The Fed has begun “easing” the money supply already, and will continue to the tune ( THIS time ) of over one trillion dollars.

CaptainHarley's avatar

@tedd Annnnnd… the US Federal Government has exactly what to “back up” their fiat money?? Gold? Hardly!

tedd's avatar

@CaptainHarley Working industry, GDP, and employment in the 90% range….. All things the Weimar republic lacked.

cockswain's avatar

@CaptainHarley I hadn’t heard that. Can you provide me with an article to read about it?

cockswain's avatar

@JLeslie I’m really sorry for doing this to your thread.

JLeslie's avatar

@cockswain No problem :).

CaptainHarley's avatar

@cockswain

You might want to read either this article or any of the others like it. I realize that there are different theories of economics and that some of the apparent disagreements in this thread may be due to that.

http://www.heritage.org/research/reports/2010/10/the-feds-qe2-and-the-economy-sailing-to-safety-or-a-ship-of-fools

cockswain's avatar

I just read the article.

The Heritage Foundation is a research and educational institution—a think tank—whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.

That’s their mission statement, so right away you know they have a clear bias. Doesn’t make what they are saying wrong, but it explains why they attack Obama’s “failed” policies so much without mentioning Bush signed the first stimulus. Nor do they mention the Fed’s involvement with the Obama administration to try to select the correct strategy for dealing with the recession. The author seems intent on laying the blame squarely on his administration alone. What this means to me as I read it is that I have to be careful how to interpret the contents since the author wants to bias me towards a conservative viewpoint. Which I did my best to do.

While the economic theory I was putting forth is probably Keynesian (I’m not certain honestly), QE2 doesn’t seem too far off by comparison:

With a funds rate effectively at zero already, the Fed must use other tools. In particular, the Fed can purchase longer-maturity U.S. government bonds, mortgage-backed securities, or other financial instruments to increase the quantity of banking reserves directly. This is quantitative easing, and the purpose is to increase the supply of banking reserves to encourage banks to lend while putting downward pressure on longer-term interest rates to improve the incentives to borrow.

That is roughly what I was saying.

I get the impression that this is risky though, and the Fed is going to gun the engine then slam on the brakes at the first sign of life. So if the Fed does it right, we’ll get out of the mud, then get blasted by high interest rates to counter the inflation.

So when you say “wait and see” I guess we’ll see if the Fed decides to reign back inflation by targeting interest rates or the money supply (like Volcker did in the late 70s-early 80s).

Economics is a dark art.

cockswain's avatar

That article says nothing about the cost of food.

CaptainHarley's avatar

Of course it does. Why would people need food stamps if the cost of food wasn’t going up?

If you are automatically going to discount any source I quote, I suppose I’ll just go back to my statement about having to wait and see. And as I also said before, I subscribe to the Austrian school of economic thought, whereas most of what those on here seem to base their comments on is the Keynesian school, whether they realize it or not.

cockswain's avatar

Why would people need food stamps if the cost of food wasn’t going up?

Uh, because they are unemployed?

If you are automatically going to discount any source I quote,

I provided a critique of the first article, to which you only responded with a link from which I was supposed to derive an ambiguous conclusion that you derived.

I don’t see where you mentioned anything about the Austrian school of thought before that last post.

Besides, the first link you posted was supposed to show me another school of thought. It isn’t clear to me if it did or not.

At this point I’m not sure if you think you’re fucking with me or smoked a joint.

CaptainHarley's avatar

43 MILLION unemployed??

LMAO! I wouldn’t “fuck with you,” now would I? Tisk!

cockswain's avatar

I guess I just took this sentence at face value: More than 14% of the population drew food stamps in November to purchase groceries as high unemployment and muted wage growth crimped budgets.

CaptainHarley's avatar

Contributing factors.

ETpro's avatar

@CaptainHarley Inflation probably will be a contributing factor here in the US. If history is any guide, inflation will blossom with the recovery. But even if you made it a point to buy oil and gas only with gold, the number of ounces needed would keep going up. We are facing wildly increasing demand and slowly dwindling supply. In the face of that, inflation will remain only a minor factor except in places where it runs as wild as it did in the Wiemar Republic.

CaptainHarley's avatar

No, the number of ounces needed to buy gas would either remain the same or would actually drecrease, my friend. That’s because you would have bought the gold with less-inflated dollars. It’s the number of DOLLARS which would keep going up. Now… if the actual SUPPLY of gas went down, then yes, the privce would go up no matter what you used to buy it, dollars, gold, silver, platinum, or toiletpaper.

If the supply decreases in an inflationary era, the actual cost AND the cost increase due to inflation BOTH go up and you are in serious doo-doo!

CaptainHarley's avatar

A little video about inflation that you might enjoy:

http://inflation.us/videos.html

meiosis's avatar

@CaptainHarley do you accept that by far the largest component in the increased cost of petrol is the global oil price, which has absolutely nothing to do with the US inflation rate and everything to do with free market supply and demand?

CaptainHarley's avatar

Not really. OPEC, if in the US, would be definted as an organization in restraint of trade. : )

ETpro's avatar

@CaptainHarley Sorry, but the logic behind that video is ridiculous. Inflation drives all prices up. Specific price spikes such as sugar or wheat happen not because inflation is able to target a particular commodity, but because of supply versus demand.

The only rational thing they warn of is the fact that the causes of the recent crisis have not been addressed, and will repeat.

CaptainHarley's avatar

@ETpro

As I stated earlier, I sincerely hope you’re correct, but that’s not going to keep me from preparing for the worst.

ETpro's avatar

@CaptainHarley I certainly wouldn’t want anyone to fail to prepare for the worst, because if history is any guide, the worst is what we often get.

While you are right that money supply does impact prices, it is most obviously not the only factor, and it’s usually not the most profound. Remember the Arab Oil Embargo of 1973? Angry at US Support of Israel in their occupation of the Sinai and Golan Heights, OPEC drastically cut back oil production and shipments to the West. The price in real dollars spiked suddenly from about $12.50 a barrel to nearly $100.00 a barrel. After the Nixon administration placated the Arab states by brokering a partial Israeli withdrawal in 1974, OPEC ramped up production and shipments, and the price of oil per barrel dropped to between $25 and $30 a barrel.

To believe that world oil prices world oil prices durring the Arab Oil Embargo were controlled solely or even substantially by the US money supply, you would have to believe that the USA suddenly printed trillions of dollars of extra Oil Only currency in 1973, then suddenly removed most of it from circulation in 1974. It frankly makes just as much sense to say that alien invaders controlled the price of oil by talking to us through telepathic fillings that the Alien Dental Conspiracy installs in our teeth, thus making all oil companies, refineries and filling stations jack up their prices nearly 800% in 1973 then drop them again in 1974.

CaptainHarley's avatar

I guess we’ll see, yes?

incendiary_dan's avatar

The biggest factor is physical reality: the easily accessible reserves of oil are being depleted, and demand is increasing. Mexico’s largest field reported diminishing returns last year, for instance. Many suspect OPEC is hiding similar reports in their countries’ fields. On top of that, soil depletion has led to a lot of crop failure, as has drought in many areas, and that is compounded by the oil supply depletion, as most of the food grown in the U.S. is grown using petrochemical fertilizers (since the land has largely been depleted since the 1930s). Plus, 98% or so of the American food supply is owned by fewer than half a dozen corporations. We have no control over it, for the most part.

Any way of life based on hyper-exploitation of resources is doomed to crash eventually. Putting it off with techno-fixes only ends up making the crash worse in the long run, since they increase resource/ecosystem depletion overall, as we shall see. I prefer to see it sooner so the average person has a better chance of adapting.

And unlike @CaptainHarley, rather than prepare for the worst (though I do that anyway, survivalist that I am), I anticipate using the situation to make steps towards reclaiming sane, self-sufficient, and sustainable ways of life for as many people as possible. It’s an opportunity to take back our food sovereignty (not that we have much of a choice) and put in place food production that builds soil, rather than depletes it. It’s an opportunity for us to remember that small, independent human communities are capable of managing their own affairs, just as we have for 99% of our history on this planet.

CaptainHarley's avatar

Here is a short cartoon which goes a long way toward explaining our current predicament re inflation and the Federal Reserve System: http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded#

WARNING: Some may be offended at this, particularly those who work for Goldman/Sachs! : )

4m6in3's avatar

Eight Botched Environmental Forecasts

Google Ngram – End of cheap Oil since 1950, which was much more frequent in the 1970s and 1980s than today.

mattbrowne's avatar

It will mainly depend on economic growth in China and India influencing overall demand for crude oil.

And the willingness to finally end the unethical treatment of our common atmosphere as a free resource. In the US gas is too cheap compared to Europe. We need higher taxes on all forms of fossil fuel to counterbalance the damage done to our atmosphere. These taxes should only be used as incentives for renewable energy usage and renewable energy research. Overusing our atmosphere for free is a socialist approach we need to terminate asap.

So expect $4.50 in 2012 and $5 in 2014. Unless there’s another major worldwide economic crisis.

meiosis's avatar

Count yourselves lucky – here in England unleaded petrol is £1.27 per litre, which is around $7.75 per gallon

meiosis's avatar

@4m6in3 The Google Ngram you linked only goes up to 2000. It looks quite a bit different, and totally ruins your point, if you do the same search up to 2011

mattbrowne's avatar

@meiosis – Same thing in Germany. But I think it’s us in England and Germany who are lucky. We are ready for the future. Higher prices fuel innovation. The people in the US are unlucky. We need to think long term, not short term.

ETpro's avatar

@incendiary_dan Link’s broken. I tracked down this. Is that the article you intended to point to?

incendiary_dan's avatar

@ETpro Yep, thanks. Strange, the link appears almost the same, but I guess it cut off the www or something.

ETpro's avatar

@incendiary_dan It looked like it grabbed a referrer. Did you click to it from a newsletter or news aggregator?

incendiary_dan's avatar

@ETpro I’m gonna guess I got it from someone’s Facebook.

ETpro's avatar

@incendiary_dan Aha. That would explain the referrer ID being appended to the URL string.

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