Monday, October 19, 2015
Cheap Gas - For Now...
The price of gas is at all-time lows. How long will this last? Until the last Bubba has bought a gas-hog. When that happens, gas prices will go right back up to $4 a gallon and beyond.
Traveling across county, we've seen the price of gas plummet in recent weeks. The lowest we saw was $1.80 a gallon at the Flying-J (with the discount card). But in many markets, gas is under two bucks a gallon or close to it.
And as a result, a lot of folks are eschewing smaller cars and moving up to SUVs and trucks again. Ford is moving its Focus plant to Mexico to make more room for SUV production. It is the same pattern, repeated again and again.
Historically, gas was cheap in America until the 1973 Arab Oil Embargo. Overnight, the price of gas doubled from about 25 cents a gallon to 50 cents. If that sounds like a pitiful amount of money, bear in mind that 50 cents in 1973 is the equivalent of $2.79 today. As you can see, gas prices today are far lower than in 1973!
But of course, that was not the last oil shock we've experienced. We had others in the 1970's. By 1979, we had to ration gas to even and odd days, so you could only buy gas on certain days. And many stations limited how many gallons you could buy at a time. Everyone had a gas can in the trunk "just in case".
In the 1980's, gas fell and rose again, reaching a nadir of about 79 cents a gallon during the Clinton years. During the Bush (II) years, prices went up, peaking at about $5 a gallon in the last months of his Presidency. Was it any coincidence that his VP was once an executive at Halliburton? Perhaps.
Since Obama took office, gas has been up and down again and again. Refinery capacity is the problem, we are told, even as oil prices fall. Californians, who shout down any new refinery, but insist on special gas, end up getting screwed as the three refineries that make special California gas all go off-line for "maintenance" at the same time. Sounds like some sort of Enron scam, of course. But who is to blame, the oil companies for dicking around with "maintenance" or Californians, who voted themselves into this pickle in the first place?
Today, the price of oil is at rock-bottom prices - perhaps historical lows. With every OPEC country cheating on its caps, the availability of cheap US fracking oil (and gas) and the release of Iranian crude, the world is once again flooded with oil.
Here in the US, most of our imported oil comes from Canada. But for some reason, we don't have aircraft carriers patrolling the coast of Canada to protect our oil interests. We patrol the Persian Gulf, to protect the oil interest of our European allies.
Meanwhile, the Russian economy continues to melt down, as it is 100% reliant on the export of oil and gas, and low oil prices mean the Ruble is in shambles.
What could possibly cause the price of oil to go up again? Well, a nice nasty little war in the middle-east would do, for starters. Oh, and who is trying to up the ante there? Russia, of course. If they can start a multi-country conflagration, the price of oil could skyrocket, and the Russian economy would once again recover.
So our low oil prices - and low gas prices - may not be around for long. And if you look at the historical record since 1973, middle-eastern politics has driven the price of oil up and down numerous times over the last five decades. Low gas prices won't be here for the long haul.
Compounding this is the depth of the Bakken reserves. From some accounts, while there is a large amount of oil there, it is only enough to meet the needs of the US economy for a few years. So in a decade or so, you may see wells capped and all those nice flat fracking sites in North Dakota turned into housing developments or something.
Sadly, human economic memory appears to last only about 18 months or so. Many people I talk to today actually believe that events that took place during the Bush Administration ($5 gas, the meltdown of the economy, bankruptcy of GM) actually took place during and were caused by, the Obama Administration. Of course, political predisposition accounts for a lot of this.
So the average Bubba is out buying the lowest gas-mileage car possible right now, and the car companies are scrambling to figure out how to sell these monsters while still meeting CAFE requirements. And once again, our fleet economy will actually go down, and just in the nick of time, gas prices will go up, and once again, "News at 4!" will interview said Bubba at the pump while he says, "who could have foreseen gas prices going up so high? This has never happened before!"
Same old shit. Different day.