Newsflash: The Market Works
September 6th, 2006 | by Craig |The free market works, and the media is amazed.
Seriously, does this surprise anyone that when the alternatives become economical, then people will buy them?
If I were on the sinestra side of the aisle, I’d be cheering for high gas prices, and hoping they go even higher.
But that’s just me, taking things to their logical conclusion.
6 Responses to “Newsflash: The Market Works”
By Chad on Sep 6, 2006 | Reply
Actually, if I owned a high-performance car, I’d be ecstatic. Why? Because I would no longer feel ripped off for paying $1.20 for $1.00 worth of gas. As gas prices increased, the price gaps between the 87 octane and 92 octane has remained constant, and now $1.07 buys $1.00 worth of gas.
And no, I’m not kidding.
By Craig on Sep 6, 2006 | Reply
I know you’re not kidding.
Honestly, though, if I owned a high-performance car, I probably wouldn’t be all that worried about the price between Premium and Regular.
By Walter Greenspan on Sep 6, 2006 | Reply
In the last 5 weeks, the wholesale price of gasoline has declined 70c/gallon, that’s 30% from its early August peak:
At the end of today’s (Wednesday, September 6) trading, wholesale gasoline closed at $1.6400, extending the downtrend that began about 5 weeks ago in early August:
……………….Wednesday..Wednesday…….net…………%…..
…………………August 2….September 6…change…..change..
Gasoline……..$2.3377…….$1.6400…..-$0.6977…..-29.8%
Heating oil…..$2.1294…….$1.9110……-$0.2184…..-10.3%
Combined Product
Value………….$94.68………$73.43……..-$21.25…..-22.4%
Crack Spread+$18.87……+$ 5.93………-$12.94…..-68.6%
Crude oil………$75.81……..$67.50………-$ 8.31…..-11.0%
Natural Gas….$7.799……..$6.810………-$0.989……-12.7%
The above calculation of the crack spread (gross refinery operating margin) assumes that each 42-gallon barrel of crude oil yields 25.2 gallons of gasoline and 16.8 gallons of heating oil and other distillates, such as jet fuel.
Also, please note that retail gasoline prices tend to be at a $0.75 to $1.25/gallon premium to the wholesale gasoline price as traded on the New York Mercantile Exchange, which would mean that a wholesale price of $1.64/gallon would indicate a retail price of $2.39 to $2.89, depending on where in the U.S. the retail pump might be located.
By Dani on Sep 7, 2006 | Reply
Another article in the Gazette yesterday about the Jack 2 well in the Gulf of Mexico brought home a similar point. The folks from Chevron said that, with oil near $70 a barrel, exploration in more difficult areas was now worthwhile. Now our crude oil reserves may be up by 50% thanks to market forces.
A bit different than a discussion I had a few days back with someone who advocated capping gas prices to keep Big Oil from getting our money. I said I could show him my mom’s gas ration coupon from WWII, since he obviously hadn’t seen one before.
By Walter Greenspan on Sep 7, 2006 | Reply
Correcting the Wednesday, Septmber 6 price of natural gas in the immediately preceeding table:
……………….Wednesday..Wednesday…….net…………%…..
…………………August 2….September 6…change…..change..
Natural Gas….$7.799……..$5.994………-$1.805……-23.1%
By Gman on Sep 7, 2006 | Reply
I love it, I love it, I love it!!!!!!!
The market works, even on behalf of the sinestra…
Market incentives=
Conservation
Exploration
R&D
Alternatives
Choice
Gov’t intervention=
No conservation (control the price, increase consumption)
No exploration
No R&D
No real alternatives
No Choice
I’m scratching my head….