Gas Price

HD333 · Apr 27, 2011

Credit Card Piad off montly REI or LLBean for redeemable points.

Anyone carry around a lot of cash anymore? I couldn't fill my tank with what I normally have in my pocket.

legalskier · Apr 27, 2011

Have you noticed how gas prices rise much faster than they fall?

Why gas prices go up much faster than they come down
By Bob Sullivan
*** The quick rise/slow fall phenomenon will feel familiar to most consumers, who often explain it with this conventional wisdom -- greedy retailers take advantage of temporarily high prices as long as they can to sock away a little extra profit. Economists tend to scoff at conventional consumer wisdom, but basic economic theory holds no explanation for the sharp rise/slow fall price pattern. Twelve years ago, economist Sam Peltzman -- a free market advocate not known for consumer-friendly research -- conducted a vast study of price "shocks," which could have dispelled these complaints as yet another whiny consumer myth. Instead, it fueled the fire. His review of 77 consumer goods that had been subject to abrupt price increases – including gas -- led Peltzman to write a paper called simply "Prices rise faster than they fall." "The title summarizes the main result: the person in the street is right and we are wrong," Peltzman wrote.(PDF) In fact, the results were so vexing he called it “a serious gap in a fundamental area of economic theory."
Consumers might call it price gouging; economists like Peltzman have settled on a more neutral term: "asymmetric price adjustment." And while economists have conceded this time that whiny consumers happened to be right, they aren't yet ready to sign up for their conspiracy theories.***
Link: http://redtape.msnbc.msn.com/_news/...-prices-go-up-much-faster-than-they-come-down

It goes on to discuss concepts like framing prices, imperfect competition, local oligopolies, search costs, and gasbuddy.com. An interesting read.

SkiFanE · Apr 27, 2011

HD333 said:
Credit Card Piad off montly REI or LLBean for redeemable points.

Anyone carry around a lot of cash anymore? I couldn't fill my tank with what I normally have in my pocket.

Me. I love cash. Security. ATMs I go to are free, so I stock up. Will never be one of those folks that uses a debit to buy a $1.15 bag of chips. Always have backup cards, but don't use them except on the 'net, grocery store or not enough cash. Rarely use a credit card, always a debit, Points aren't worth it to me. Plus noone knows where I was or what I bought, I like to keep the marketers in the dark.

ctenidae · Apr 27, 2011

legalskier said:

Interesting, especiallyif you look at the gap between wholesale and retail prices- with every price spike, the gap, which is the retailer's margin, compresses. Just eyeballing it, you could make an argument that the slower drop helps the retailer recover the profits lost at the runup. It'd be interesting to see, if the numbers behind the graph are available.

If the "gouge" is pretty small, then it could certainly be excused as a risk premium to cover the volatility danger. If it's larger (and it may well be), then it does look a lot more like gouging.

tjf67 · Apr 27, 2011

http://m.theatlantic.com/business/a...mines-the-price-of-gas-a-visual-guide/237968/

Yo C is this pretty accurate?

ctenidae · Apr 27, 2011

tjf67 said:
http://m.theatlantic.com/business/a...mines-the-price-of-gas-a-visual-guide/237968/

Yo C is this pretty accurate?

Yup- not bad. Simplistic, but good as far as it goes.

dmc · Apr 27, 2011

ctenidae said:
Interesting, especiallyif you look at the gap between wholesale and retail prices- with every price spike, the gap, which is the retailer's margin, compresses. Just eyeballing it, you could make an argument that the slower drop helps the retailer recover the profits lost at the runup. It'd be interesting to see, if the numbers behind the graph are available.

Sometimes they keep pace sometimes they don't...

ctenidae · Apr 27, 2011

Interesting that EIA research shows now, or little, evidence of asymmetry, at least through 2003.
http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2003/gasolinepass/gasolinepass.htm

Aside from the accuracy of the model, what do these results indicate about retail gasoline pricing? Perhaps one of the most revealing aspects of this analysis is what the results do not show: there is so little difference between actual retail gasoline prices and the forecast created from spot prices and observed lag patterns that there is no evidence of significant influence on aggregate retail prices beyond the spot price level. In other words, despite allegations of competitive irregularities in retail markets, it appears that most of the movement in retail prices (on a national and regional basis) is predetermined by previous movements in spot prices.

Of course, one has to wonder if the word has changed since the run-up in 2008. I pulled the EIA's weekly spot and retail gasoline prices adn looked at the average margins. The data's not the cleanest in the world, perhaps (couple months missing, and one report starts the week 4 days after the other for some reason) but it's interesting- average margin is $0.62, with a standard deviation of 9 cents, so fairly stable. Biggest margins were in 2006-2008 at $0.70 to $0.74.

Margins increased from 0.415 in 1990 to 0.671 in 2011 (to date), with the steepest increases from 1990 to 1994 (20 cents total).
My analysis indicates that retailers are not gouging their customers. So, they've got that going for them.

tjf67 · Apr 27, 2011

the first report shows that retailers margins are going down. Your report states differantly. In any event it seems we have more price increases @ the pumps for a while to come. Joy joy

riverc0il · Apr 27, 2011

ctenidae said:
.........3300
Margins incareased from 0.415 in 1990 to 0.671 in 2011 (to date), with the steepest increases from 1990 to 1994 (20 cents total).
My analysis indicates that retailers are not gouging their customers. So, they've got that going for them.

Also, compare this to pretty much any other point of sale margin in the country and even at the highest margin, gasoline is still far below almost any other point of sale margin in the industry. 1/3 margin is pretty standard for a lot of merchandise. Clothing and tchotchkes? 50-60%. Coffee.... 90%. No one complains about gouging on coffee but even the lowest price cup of joe is amongst the highest margins available. Gas to make your body go? High margin. Gas to make your car go? Lowest margin possible without being a total loss leader. Folks complain about the gas prices but then walk into the store (where the real margin happens) and by $2 bottles of soda and a pack of ciggs.

I don't think anything gets me going like a discussion on public perception of gas prices, bring it. And goodness forbid any company should make profits at the top end of things, even if you can excuse the poor gas station owner. It is not like our entire economy (read: our jobs and all of our modern "stuff") isn't based on for profit companies making money. :spin:

I personally can't wait until we hit $5 a gallon. We'll be able to buy non-hybrid 50 MPG small sedans before you know it.

tjf67 · Apr 27, 2011

riverc0il said:
Also, compare this to pretty much any other point of sale margin in the country and even at the highest margin, gasoline is still far below almost any other point of sale margin in the industry. 1/3 margin is pretty standard for a lot of merchandise. Clothing and tchotchkes? 50-60%. Coffee.... 90%. No one complains about gouging on coffee but even the lowest price cup of joe is amongst the highest margins available. Gas to make your body go? High margin. Gas to make your car go? Lowest margin possible without being a total loss leader. Folks complain about the gas prices but then walk into the store (where the real margin happens) and by $2 bottles of soda and a pack of ciggs.

I don't think anything gets me going like a discussion on public perception of gas prices, bring it. And goodness forbid any company should make profits at the top end of things, even if you can excuse the poor gas station owner. It is not like our entire economy (read: our jobs and all of our modern "stuff") isn't based on for profit companies making money.

I personally can't wait until we hit $5 a gallon. We'll be able to buy non-hybrid 50 MPG small sedans before you know it.

You can't compare coffee margins it is discresionary. Margins in power producing and coal mining sector r similar. Its something we need and much more scrutinized.

You hoping for 5 dollar per gallon gas is just strange.

riverc0il · Apr 27, 2011

tjf67 said:
You hoping for 5 dollar per gallon gas is just strange.

The point is that increasing gas prices past public comfort (even if it is an easily managed bump for most people) drives innovation. 40 MPG is the new standard on compact cars (non-hybrid). It is theoretically possible that gas could reach $5 and it will be cheaper to drive than it is today if innovation (and public perception/outrage at high gas prices) keeps pushing tech to improve.

Regarding discretionary vs non-discretionary, I call BS. That might apply to people on the edge or in poverty. They will drive any car they can and take any job they can and they feel the pinch. For the rest of us, MPG is discretionary just us much as coffee is discretionary. A bit of a stretch but take my point, not the literal wording. Most folks have some control over where they live, where they work, length of commute, and MPG of their vehicle. That all contributes and they are choices made. Heck, we could all bike to work. We make lifestyle decisions and many of those decisions are expensive. We need cars and make them non-discretionary by choice so ultimately I don't see the difference.

deadheadskier · Apr 27, 2011

riverc0il said:
The point is that increasing gas prices past public comfort (even if it is an easily managed bump for most people) drives innovation. 40 MPG is the new standard on compact cars (non-hybrid). It is theoretically possible that gas could reach $5 and it will be cheaper to drive than it is today if innovation (and public perception/outrage at high gas prices) keeps pushing tech to improve.

I think rooting for higher gas prices to push for better transportation fuel economy is a bit short sighted. This is a MUCH larger issue than how much it costs someone to drive their car to work or a ski area.

Oil is a part of everything in our lives.

Proctor & Gamble announced yesterday they are raising the price of Diapers by 7% in addition to many other items. 100% attributable to the cost of oil. Will $5 gas result in more efficient diaper design? How about paper towels?

And if it does, will our short term sacrifice truly reap rewards? I drove a 16mpg Ford Explorer ten years ago. Gas was a buck a gallon then. Driving a 48mpg Prius today at $3.85 isn't a better deal, both for my wallet and what the vehicle is capable of doing for me.

Life is short. I'm willing to accept my wallet getting punched in the balls only so much with the hope of things getting better in the future. Getting crushed on every expense in life that $5 a gallon would bring so I can have more 50 MPG transportation options five years out in the future? Sorry, not interested. I'm rooting for $2 gas so I can save $2K in transportation costs alone next year and spend those savings on a vacation with my wife.

snoseek · Apr 27, 2011

^^^ Yeah expensive gas would hurt in the short run but I have to agree with Riv on this one. It also creates an opportunity for a great and sustainable economic boost right here in the U.S., while have the potential to stop exporting so much wealth to unfriendly and unstable places.

Everyday cost will hurt-yes they will, especially for low income and fixed income.

I drove trucks for many years. Six years ago I bought an 03 HX Civic for this very reason. My question is why can't they make non-hybrid civics now that average 45 mpg (every time) like they could with that model? as consumers we need to demand better.

Glenn · Apr 28, 2011

snoseek said:
My question is why can't they make non-hybrid civics now that average 45 mpg (every time) like they could with that model? as consumers we need to demand better.

Part of it is safety, part of it is what consumers want. Safety = weight. Comfort = Weight. You could easily make a smallish car with a modern 4 cyl that gets great MPG. But you'd have to get it to conform to crash standards. Ever ride in a car that has no sound deadening? In a college, a buddy gave me a ride in a track prepped, probably 'sorta' street legal M3 Lightweight. Sweet car. Raw. Loud as hell and really cool if you're a gearhead. I couldn't drive it to VT and back every weekend though.

drjeff · Apr 28, 2011

snoseek said:
My question is why can't they make non-hybrid civics now that average 45 mpg (every time) like they could with that model? as consumers we need to demand better.

Because the people that spend most of their time living in the area defined by Virginia and Maryland over the years have felt it necessary for them to help regulate how a car manufacturer should design and build a product.

Chances are though, if the folks in Washington got out of the way, that market demand would take over and you'd get an equivalent product to the market from atleast one manufacturer. And if the demand for that product was great enough, then you'd see other manufacturers working to build something better, that the public wants, thus giving the consumer more choice and keeping the pricing competitive.

Should a certain few folks that live in DC really be trying to exert as much influence over what they think that the consumer should want/buy? Or should the consumer get to choose (via their purchase or lack of purchase) what they want to buy and as such influence businesses as such??

Heck, in a sense we see this in the ski industry. The consumer via demand (or lack there of) has cuased some resorts to alter their closing dates, whereas other ski areas (predominately out West) have their opening/closing dates defined not by market demand, but by government issued permits

SkiFanE · Apr 28, 2011

deadheadskier said:
I think rooting for higher gas prices to push for better transportation fuel economy is a bit short sighted. This is a MUCH larger issue than how much it costs someone to drive their car to work or a ski area.

Oil is a part of everything in our lives.

Proctor & Gamble announced yesterday they are raising the price of Diapers by 7% in addition to many other items. 100% attributable to the cost of oil. Will $5 gas result in more efficient diaper design? How about paper towels?

And if it does, will our short term sacrifice truly reap rewards? I drove a 16mpg Ford Explorer ten years ago. Gas was a buck a gallon then. Driving a 48mpg Prius today at $3.85 isn't a better deal, both for my wallet and what the vehicle is capable of doing for me.

Life is short. I'm willing to accept my wallet getting punched in the balls only so much with the hope of things getting better in the future. Getting crushed on every expense in life that $5 a gallon would bring so I can have more 50 MPG transportation options five years out in the future? Sorry, not interested. I'm rooting for $2 gas so I can save $2K in transportation costs alone next year and spend those savings on a vacation with my wife.

I'm with rivercoil on this one (although can't say I'd be jumping for joy at $5 lol). Our entire economy is based on cheap oil. Sprawl depends on it. The ONLY way to stop it is to make it painful. Govt tax $ should be spent on public transportation (besides stinky diesel buses) rather than wider/more highways. I look at these huge Walmart trucks knowing they are sucking diesel in order to get cheap plastic crap from china to the stores, if that spring 2011 plastic garden gnome is now $4.50 instead of $3.99, I won't cry.

My hope for $5/gal gas is that $2-3 of it goes to taxes, not to oil companies. I'd feel it like everyone else, I'm not immune. But I'm willing to suck it up because I think it's what is needed long term. Those in poverty that depend on a car, I do feel for them, they will probably be the most impacted. I'm sure the gov't will create some efficient program to help them out :evil:

tjf67 · Apr 28, 2011

deadheadskier said:
I think rooting for higher gas prices to push for better transportation fuel economy is a bit short sighted. This is a MUCH larger issue than how much it costs someone to drive their car to work or a ski area.

Oil is a part of everything in our lives.

Proctor & Gamble announced yesterday they are raising the price of Diapers by 7% in addition to many other items. 100% attributable to the cost of oil. Will $5 gas result in more efficient diaper design? How about paper towels?

And if it does, will our short term sacrifice truly reap rewards? I drove a 16mpg Ford Explorer ten years ago. Gas was a buck a gallon then. Driving a 48mpg Prius today at $3.85 isn't a better deal, both for my wallet and what the vehicle is capable of doing for me.

Life is short. I'm willing to accept my wallet getting punched in the balls only so much with the hope of things getting better in the future. Getting crushed on every expense in life that $5 a gallon would bring so I can have more 50 MPG transportation options five years out in the future? Sorry, not interested. I'm rooting for $2 gas so I can save $2K in transportation costs alone next year and spend those savings on a vacation with my wife.

We call that junk punched around my parts. you know like "I want to junk puch that dork".

ski_resort_observer · Apr 28, 2011

drjeff said:
Heck, in a sense we see this in the ski industry. The consumer via demand (or lack there of) has cuased some resorts to alter their closing dates, whereas other ski areas (predominately out West) have their opening/closing dates defined not by market demand, but by government issued permits

This is a myth propagated by misinformation in part I see on ski forums. I still see where people post that JH closes cause of the elk. The movement of elk are not near the ski resort, it's B/T NF lease can be changed or adjusted anytime. This is especially true for the isolated destination resorts like Telluride, JH, Whitefish, Sun Valley where the majority of guests fly-in. Resorts along the I70 corridor in CO or in the Wasatch above SLC have a large ski market within easy driving distances so they can stay open without giving money back.

Another factor is that most resorts out west do not have the snowmaking we have in the east. At JH the lower terrain has lost alot of it's snow this time of year so you might have snow on the upper mtn but the lower mountain is basically devoid of snow.

Ski resorts close with snow on the trails due to lack of business, just like here in the east. During the 17 years I was working out west by the middle of March the business levels tanked. If your near a population center you might have some business but lack of lower terrain snow makes it hard to stay open.

Nick · Apr 28, 2011

ctenidae said:
I've had just as much. Moves slower, though. Probably more due to rain and fog, but hey, correlation looks like causation, right?

Yeah, i haven't seen any changes in my daily ride through Worcester.

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