Tuesday, May 27, 2008

The price of Gas

It cost us $53 to fill up the mini-van on 5-26. Gas was averaging $3.80 a gallon. Some commentators are already projecting significantly higher prices and saying that we will look back with nostalgia at $4/gallon gas.

Why has it come to this? An emotional part of me says that we are getting our come-uppance after gorging when gas was less than a dollar in the 90s. However, as widely reported there are a combination of factors.
1) the concept of peak oil
2) increasing demand in the US and more importantly rest of the world
3) no major oil field discoveries (except Brazil) and constriction in supply in areas with oil due to socio-political issues
4) aging infrastructure for transporting and refining oil
5)speculative trading

As reported in the Wall Street Journal on 5-27-2008, it is still unclear if the rise in gas prices can be quantified as a bubble. The uncertainty mainly arises due to a difficulty in figuring out the fundamental value of a commodity. However it does appear that speculation and trading sentiment has driven the price of oil at least a few points higher than it should be.

What are the options for the Joe-Schmo's? Very few. It is amusing to a feeble mind though to see people rushing to ditch their less fuel efficient vehicles for ones marginally better. People almost seem to disregard the fact it does not matter whether you pay for a new car or pay more for gas on an old one, it is still money out of the door.

Perhaps an analysis on gas usage through a site like mpghead would be in order as also a perusal of the government benchmarks for fuel efficiency.

Personally, I have been hard pressed to get anything consistently over 20mpg on a mid-side car when I have rented one. So I will continue to limp along on my 15mpg Jeep until the inconveniences of a faltering air conditioner prove to be too much.

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