Archive for the ‘Gasoline’ Category
When is a crime not a crime?
Enron Corp.’s 2001 collapse revealed the extent of its manipulation of spot gas prices. Twelve years later, European Union regulators may discover energy traders never learned the lessons of the scandal.
BP Plc (BP/), Royal Dutch Shell Plc (RDSA) and Platts were visited by EU inspectors last week over allegations they “colluded in reporting distorted prices” to manipulate the published prices of oil and biofuel products, the European Commission in Brussels said after the raids.
While ENRON was a scandal due to manipulation it was the accounting — which was fictitious — that brought the company down.
Of course when you’ll lie and cheat about one thing you’ll do the same with something else; right? We’ve already established what you are; now we’re simply arguing over how big of a liar, cheat and fraud you might happen to be.
But look at what an “energy consultant” has to say:
“We’re making exactly the same mistakes we did with Enron, just with a different commodity,” Robert McCullough, an energy consultant, said by telephone from Portland, Oregon. “The same manipulation we saw in electricity and gas pricing is what we’re seeing in oil.”
They’re not crimes, they’re not felonies, they’re not things that should land you in prison for bilking people, they’re “mistakes.”
We will NEVER solve any of these problems — not in the energy markets, not in the land title business, not in the lending business generally, not in student loans, not in colleges, not in board rooms, not on Wall Street generally — until we call things what they are.
A shark is a shark. A rattlesnake is a rattlesnake. An alligator is an alligator.
And a violation of black-letter law, whether in land titles, front-running, intentional misrepresentation by a company or anything else is a crime, not a mistake.
You want to know what drives me to want to say “screw this!”, turn off the computer and decide to raise a few goats and chickens instead of innovating, building and employing, and which has destroyed my interest in the latter over the last decade and a half?
THAT is what has done so and will continue to do so — and until it stops my position, and that of many other entrepreneurs, on this point will not change.
Hurricane Sandy is another reminder of just how incredibly fragile the thin veneer of civilization that we all take for granted on a daily basis really is. Many of the hardest hit areas along the Jersey shore and the coast of Long Island have descended into a state of anarchy. More than 7 million people live on Long Island, and millions more live along the Jersey shore and right now they are getting a taste of what life would be like during a total economic meltdown. At the moment, there are still approximately 4.7 million homes and businesses that do not have power. Officials say that some of those homes and businesses may not have their power restored until the weekend of November 10th and 11th. Meanwhile, it is getting very cold at night. This weekend the low temperatures on Long Island are supposed to dip into the upper thirties. There have been reports of people diving into dumpstersbehind supermarkets in a desperate search for food, and there have been other reports of roaming gangs of criminals posing as officials from FEMA or Con Edison and then robbing families at gunpoint once they have gained entrance into their homes. If people will behave like this during a temporary emergency that lasts only a few days, what would they do during a total economic collapse? That is a frightening thing to think about.
Most gas stations along the Jersey shore and on Long Island are either totally out of gasoline or they don’t have any power to operate the gas pumps. It is estimated that more than half of all gas stations in New York City are closed at the moment, and officials say that more than 80 percent of all gas stations in New Jersey are not able to sell gas right now. So needless to say, the lines at the gas stations that remain open are horrific.
It is being reported that some people are waiting in line for hours for gasoline in some areas and that state troopers have actually been deployed at every gas station along the New Jersey Turnpike and the Garden State Parkway.
The following is how one New Jersey mayor described the situation…
“Gas lines are stretching for a couple of miles,” said Anthony Ammiano, mayor of Freehold, N.J., who recalled the oil crisis of the 1970s. “It’s like the Jimmy Carter years. It’s a flashback of bad memories.”
There have even been reports of people literally fighting each other over gasoline…
“It’s so crazy. Cars are pulling up and people are fighting each other. There is no gas around here,” said Mena Aziz, who manages a Gulf Express station in Bay Ridge, Brooklyn. “It’s been so busy.”
According to Breitbart, there have been continuous reports of “fistfights and people bringing guns to gas stations” on Twitter. The following are a couple of examples…
— Camila Xavier (@camilaxavier) November 1, 2012
You know things are bad when you ask the gas station attendent “when do you think you’re going to get more gas?” and he just laughs at you.
— Prede (@predederva) November 1, 2012
Unfortunately, authorities are projecting that the gas shortage may last for another week at least.
How angry and frustrated will people get by that time?
There are vast stretches of the Jersey Shore and the coast of Long Island that will never be the same again. The following is an excerpt from a comment that a reader of mine from Long Island left on one of my recent articles…
I live in Massapequa NY …..No power to 95%. almost every home south of Merrick Road ( 1.5 miles from open water ) has been flooded. No electricity, no supermarkets in immediate area, no gas (approx 80% of gas stations closed on Long Island).
This was not just another storm. It was a life-altering event for millions of people.
Unfortunately, just as we have seen after every other major storm in recent years, looters are taking advantage of the chaos caused by Hurricane Sandy.
According to the New York Post, a number of arrests for looting have already been made on Long Island…
In the Rockaways, lowlifes were sneaking into clothing stores and cleaning out pizzerias. Two men and a woman were arrested for robbing a BP gas station on Beach Channel Drive, three men and one woman were cuffed for pillaging a Radio Shack on Beach 88th Street, and two people were arrested for raiding a clothing store near Beach 86th Street, cops said. Stores were emptied along a two-block stretch of Mermaid Avenue in Coney Island. Seven people were busted.
Over on Coney Island, looting appeared to be out of control during the immediate aftermath of the storm…
Thieves broke in to the badly damaged Mega Aid Pharmacy on Mermaid Avenue and reportedly stole more than 10,000 pharmaceutical items, including prescription drugs.
“The water went away and these people started walking down the streets and just robbed stores,” a pharmacy worker told HuffPo’s Andy Campbell.
Manager Stan Gutkin said the major heist essentially “breaks the business.”
Looters reportedly also targeted banks, other shops, and other pharmacies.
And residents are noticing.
“People are turning on each other — they’re attacking each other,” Ocean Towers resident Dena Wells told Campbell.
Amazingly, a number of not-so-smart looters have actually been displaying their looted goods on Twitter. Just check out the shocking photos in this article.
But most people living in the areas that were most affected by Hurricane Sandy are decent people that just want some assistance. One resident of Hoboken, New Jersey became so frustrated that he inflated an air mattress and used it to float down to city hall in an attempt to get some answers…
Nearly 20,000 people have been trapped at home in the New Jersey city of Hoboken, just across the Hudson River from New York City, amid accusations that officials were slow to deliver food and water.
One man blew up an air mattress and floated to City Hall, demanding to know why supplies had not reached residents – at least a quarter of homes there are flooded and 90% do not have power.
Just like we saw after Hurricane Katrina, the response by the federal government and by big aid agencies such as the Red Cross has been very slow. In fact, Staten Island Borough President James Molinaro has gone so far as to call the Red Cross an “absolute disgrace” and is urging people that live in his area to quit giving money to them…
“You know, I went to a shelter Monday night after the storm. People were coming in with no socks, with no shoes. They were in desperate need. Their housing was destroyed. They were crying. Where was the Red Cross? Isn’t that their function? They collect millions of dollars. Whenever there’s a drive in Staten Island, we give openly and honestly. Where are they? Where are they? I was at the South Shore yesterday, people were buried in their homes. There the dogs are trying to find bodies. The people there, the neighbors who had no electricity, were making soup. Making soup. It’s very emotional because the lack of a response. The lack of a response. They’re supposed to be here….They should be on the front lines fighting, and helping the people.”
If this is how angry and frustrated that people become over a temporary disaster, how angry and frustrated would they get if there was a total economic meltdown that was permanent?
Sadly, the truth is that what we are seeing during the aftermath of Hurricane Sandy is just a very small preview of what is coming on a national level.
Our economy is a complete and total mess right now, and things are going to get a whole lot worse.
When unemployment starts skyrocketing again and large segments of the population realize that there is no hope for a turnaround, many of them are going to totally give in to despair and become very desperate.
And as we are seeing along the Jersey Shore and on Long Island right now, desperate people do desperate things.
That is why I am constantly pounding on the need to prepare for what is ahead. There are signs of social decay all around us, and most Americans are not equipped to deal with the pressures that come with a major emergency. When things totally fall apart, you don’t want your family to be totally unprepared and surrounded by millions of angry and desperate people.
Hopefully Hurricane Sandy will serve as a wake up call for millions of American families. Time is definitely running out, and we all need to get prepared while we still can.
Do not be lulled by the siren call of inflation – The slow decline in living standards. Gas is up 100 percent over last 8 years while income has fallen.
Inflation has a slow methodical way of eroding the purchasing power of what sits in your bank account. The Federal Reserve is doing all it can to create asset inflation to allow banks to offload inflated assets onto the market so they can repent for the financial sins created during the credit bubble. Unfortunately there are unintended consequences for this. The first consequence is the fact that most Americans have seen their income drop in the last decade. So even if prices stayed the same, their purchasing power has fallen. Yet prices in many key items have actually gone up. By going into full debt mode, the Fed is trying to weaken the US dollar and because of this, the price of goods sold on global markets has gone up. The end result is that many working and middle class Americans find that they are purchasing less for more.
The cost of filling up the car
Some seem to think that the oil bubble somehow popped and has moved on. That is not the case. Demand for fossil fuels remains strong and thanks to a weak US dollar, the price of gas is still high:
The cost of one gallon of gas is up over 100 percent from only eight years ago. Has the typical household income gone up by 100 percent in this time? Of course not. In fact,household incomes have fallen. Since the recession hit, the typical American has seen their net worth crushed by nearly 40 percent. With our commuting and auto based culture, having gas go up by 100 percent is definitely going to leave a dent in your wallet. Yet some still want to deny that there is no purchasing power loss in the US.
Do you eat?
The price of food has also gone up:
Over the last decade the price of food has far outpaced the growth in income (which actually fell). At the height of the recession the cost of food was rising at a 6 percent annual rate. That is completely unsustainable. Even earlier this year the cost of food was rising at a 5 percent annual rate. This would be fine if household incomes were keeping in line but they have not. So two very key items in food and energy are certainly seeing the impact of inflationary pressures.
Read the rest at My Budget 360
It’s no secret (at least it shouldn’t be) that gasoline sales have plunged. Here is a chart from my April 6 post Another Plunge in 3-Month Rolling Average of Petroleum and Gasoline Usage for Jan, Feb, March 2012
Jan-Feb-March 2012 petroleum and gasoline usage vs. the same three months in prior years.
Every month for quite some time, the rolling average of petroleum and gasoline usage has been trending down. The question is “Why?”
Some pin this on car mileage improvements but that answer is easy to discredit. Fuel efficiency has been rising for more than a decade, but the plunge did not start until the Great Recession in 2007.
However, the Great Recession is over, yet gasoline sales have not rebounded. Is this an indication another recession is on the horizon? That the recession never ended? Something else?
Transportation and the New Generation
Inquiring minds are reading a Frontier Group study Transportation and the New Generation: Why Young People Are Driving Less
From World War II until just a few years ago, the number of miles driven annually on America’s roads steadily increased. Then, at the turn of the century, something changed: Americans began driving less. By 2011, the average American was driving 6 percent fewer miles per year than in 2004.
The trend away from driving has been led by young people. From 2001 and 2009, the average annual number of vehicle-miles traveled by young people (16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita – a drop of 23 percent. The trend away from steady growth in driving is likely to be long-lasting – even once the economy recovers. Young people are driving less for a host of reasons – higher gas prices, new licensing laws, improvements in technology that support alternative transportation, and changes in Generation Y’s values and preferences – all factors that are likely to have an impact for years to come.
America’s young people are decreasing the amount they drive and increasing their use of transportation alternatives.
- According to the National Household Travel Survey, from 2001 to 2009, the annual number of vehicle-miles traveled by young people (16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita – a drop of 23 percent.
- In 2009, 16 to 34-year-olds as a whole took 24 percent more bike trips than they took in 2001, despite the age group actually shrinking in size by 2 percent.
- In 2009, 16 to 34-year-olds walked to destinations 16 percent more frequently than did 16 to 34-year-olds living in 2001.
- From 2001 to 2009, the number of passenger-miles traveled by 16 to 34-year-olds on public transit increased by 40 percent.
- According to Federal Highway Administration, from 2000 to 2010, the share of 14 to 34-year-olds without a driver’s license increased from 21 percent to 26 percent.
Young people’s transportation priorities and preferences differ from those of older generations.
- Many young people choose to replace driving with alternative transportation. According to a recent survey by KRC Research and Zipcar, 45 percent of young people (18-34 years old) polled said they have consciously made an effort to replace driving with transportation alternatives – this is compared with approximately 32 percent of all older populations.
- Many of America’s youth prefer to live places where they can easily walk, bike, and take public transportation. According to a recent study by the National Association for Realtors, young people are the generation most likely to prefer to live in an area characterized by nearby shopping, restaurants, schools, and public transportation as opposed to sprawl.
- Some young people purposely reduce their driving in an effort to curb their environmental impact. In the KRC Zipcar survey, 16 percent of 18 to 34-year-olds polled said they strongly agreed with the statement, “I want to protect the environment, so I drive less.” This is compared to approximately 9 percent of older generations.
The trend toward reduced driving has occurred even among young people who are employed and/or are doing well financially.
- The average young person (age 16-34) with a job drove 10,700 miles in 2009, compared with 12,800 miles in 2001.
- From 2001 to 2009, young people (16-34 years old) who lived in households with annual incomes of over $70,000 increased their use of public transit by 100 percent, biking by 122 percent, and walking by 37 percent.
Generation Y is not the only reason behind the plunge. Please consider Mean Duration Long-Term-Unemployment.
From 1980-2010 the average length of unemployment is between 15 and 20 weeks. Now it is 40. The unemployed are not driving to jobs they do not have.
Labor Force vs. Those Not in Labor Force
Labor Force Analysis
- Between 1980 and 1990 those not in the labor force was relatively constant while the labor force grew at a steady rate.
- Between 1990 and 2007 the labor force grew faster than those not in the labor force.
- Since 2008 those not in the labor force is in a strong uptrend while the labor force has been flat.
Nearly 9 million have dropped out of the labor force since November 2007 while the labor force itself is flat. It is safe to assume that group of dropouts is driving far fewer miles on average than they were before.
The mass retirement of boomers, much of it forced retirement is also in play. By forced retirement I mean those who exhausted unemployment benefits and retired to collect social security benefits even though they really want a job.
Timing is such that we can safely rule out cash-for-clunkers as a significant reason behind the plunge. Likewise, improvements in fuel mileage have continuous over decades and cannot account for a sudden plunge.
Reasons for Plunge in Gasoline Sales in Order of Importance
- Huge rise in those “not in labor force”
- Boomer demographics and retirement (much of it forced)
- Chronic long-term unemployment
- Changing social trends in younger generations, no doubt accelerated by the recession and student debt
- Declining real wages leave consumers with less discretionary spending cash (think shorter vacations closer to home)
- High price of gasoline
- Increase in online shopping means fewer trips
- Improved fuel rates and cash-for-clunkers
What About Car Sales?
Points two and three are a subset of those “not in labor force”. Looking ahead, points 1 through 4 (especially points 2 and 4) will help put a cap on car sales.
Thus, those looking for auto sales’ reversion-to-the-mean plus an overshoot, may have seen the overshoot already.
Mike “Mish” Shedlock
No really? I needed a laugh this morning….
The indexes for food, energy, and all items less food and energy all increased in March. The gasoline index continued to rise, more than offsetting a decline in the household energy index and leading to a 0.9 percent increase in the energy index. The food index rose 0.2 percent as the index for meats, poultry, fish, and eggs increased notably.
We’ll get to that household energy thing in a minute….
But from the standpoint of the leading presentation, all I can say is “duh.”
Incidentally, the unadjusted price change in all items last month was 0.8%. That, my friends, is a shocker. Leading the charge was meats, poultry, fish and eggs (animal products) which anyone with a brain has seen in the supermarket.
Energy commodities, again unadjusted, were up 7.6% this last month. Motor fuel was the screaming leader with an 8% increase, while piped gas was down 0.9%.
Other screamers in the number were appliances (up 0.7% last month, 9% annually) with laundry leading with 1.1% and 11.5%, respectively. Apparel was up big as well, although that move looks to be all “right here and now” rather than trend, so whether it’s a one-off remains to be determined. And for those who claim that health insurance costs are leveling off and won’t play hell with the United States, well, the numbers say otherwise — 1.3% last month and 11.3% annual, which is above the 9.3% that we’ve historically recorded over the last 30 years.
Does it cost you hundreds of dollars just to get to work each month? If it does, you are certainly not alone. There are millions of other Americans in the exact same boat. In recent years, the price of gas in the United States has gotten so outrageous that it has played a major factor in where millions of American families have decided to live and in what kind of vehicles they have decided to purchase. Many Americans that have very long commutes to work end up spending thousands of dollars on gas a year. So when the price of gas starts going up to record levels, people like that really start to feel it. But the price of gas doesn’t just affect those that drive a lot. The truth is that the price of gas impacts each and every one of us. Almost everything that we buy has to be transported, and when the price of gasoline goes up the cost of shipping goods also rises. The U.S. economy has been structured around cheap oil. It was assumed that we would always be able to transport massive quantities of goods over vast distances very inexpensively. Once that paradigm totally breaks down, we are going to be in a huge amount of trouble. For the moment, the big concern is the stress that higher gas prices are going to put on the budgets of ordinary American families. Unfortunately, almost everyone agrees that in the short-term the price of gas is going to go even higher.
When you are on a really tight budget and you are already spending several hundred dollars on gas each month, you certainly do not want to hear that gas prices are going to increase even more.
A lot of Americans are moving or are getting different vehicles just because of these outrageous gas prices. The following comes from a recent Mercury News article….
Katherine Zak, of South San Jose, is searching for an apartment near her new job at Facebook in Palo Alto, partly to cut down the cost of driving. Jeff Benson, of Raymond in the Sierra foothills, typically drives 60,000 to 70,000 miles a year and has traded in his 19 mpg Ford Taurus for a Fusion that gets 33 mpg. And David Thomas says his commute from San Jose to San Francisco is getting so expensive that he and his fiancee are hunting for a house near a BART station in the San Mateo-San Bruno area to shorten his commute and lower his $400-a-month gas bill.
The price of gas is going even higher even though energy consumption is sharply declining in the United States. Just check out the charts in this article by Charles Hugh Smith. Americans are using less gasoline and less energy and yet the price of gas continues to go up.
That is not a good sign.
Certainly any decrease that we are seeing in the U.S. is being more than offset by rising demand in places such as China and India. As emerging economies all over the globe continue to develop this is going to continue to put pressure on gas prices.
So just how bad are gas prices in the U.S. right now?
Just consider the following facts….
-The average price of a gallon of gasoline in the United States is now $3.53.
-The average price of a gallon of gasoline is already higher than $3.70 in Connecticut, Washington D.C. and New York.
-In mid-January 2009, the average price of a gallon of gasoline in the United States was just $1.85.
-The average price of a gallon of gasoline in the United States has risen 25 cents since the beginning of 2012.
-Never before in U.S. history has the price of gasoline been this high so early in the year.
-The Oil Price Information Service is projecting that the price of gas could reach an average of $4.25 a gallon by the end of April.
-The price of oil just keeps going up. The price for West Texas Intermediate is about 19 percent higher than it was one year ago.
-The price of gasoline is also reaching record highs in many areas of Europe as well. For example, the price of diesel fuel in the UK recently set a brand new record.
-In 2011, U.S. households spent a whopping 8.4% of their incomes on gasoline. That percentage has approximately doubled over the past ten years.
But the price of gas is not the only thing making driving much more expensive these days.
All over the country, our politicians have been putting up toll booths. Most of the time these toll booths are going up on roads that have already been paid for.
After paying an outrageous amount for gas and after paying the outrageous tolls on many of these toll roads, many Americans wonder if it is even worth it to get up in the morning and go to work.
Unfortunately, a couple of new bills in Congress right now would reportedly allow even more highways to be made into toll roads.
It is almost as if they want to force us all to stop driving our cars.
America used to be the land of the open road, but that era is rapidly coming to an end.
Another thing that could put upward pressure on the price of gas is the situation in the Middle East.
Iran has already stopped selling oil to companies in the UK and France, and there is the potential that war could erupt in the Middle East at any time.
If war does erupt, or if commercial traffic through the Strait of Hormuz was interrupted for even a brief time, that would send the global price of oil through the roof.
Approximately 20 percent of all oil sold in the world passes through the Strait of Hormuz. If the flow of oil was halted, that would change the global economy almost overnight.
So is there any good news?
Well, there is one thing that would likely bring down the price of gas substantially.
A global recession.
Remember what happened back in 2008.
Just like we are seeing right now, the price of gas really spiked early in that year.
Eventually, the price of oil hit an all-time record of $147 a barrel in mid-2008.
But then the financial crisis struck and the price of oil fell like a rock as you can see from the chart below….
So could that happen again?
There are a ton of other parallels between 2008 and 2012.
In both years, we saw global shipping start to slow down dramatically.
In both years, the U.S. was getting ready to hold a presidential election.
In both years, many economists were warning that a great financial crisis was about to strike.
Back in 2008, the epicenter of the financial crisis was on Wall Street.
This time, the epicenter of the financial crisis will probably be in Europe.
Keep your eye on Europe. A disorderly default by Greece (and potentially even an exit from the eurozone) is looking increasingly likely.
But the problems in Europe are not going to end with Greece. The entire eurozone is going to be greatly shaken by the time this thing is over.
So yes, if we see another major global recession that will be great news for the price of gas, but it will be really bad news for the millions of people that lose their jobs and their homes.
Unfortunately, we live at a time when the world is becoming extremely unstable. The great era of peace and prosperity that we have been enjoying is coming to an end. The global financial system is going to experience a tremendous amount of chaos in the years ahead and that is something we will all need to prepare for.
For now, the price of gas is a major concern for millions upon millions of American families.
Someday, however, we will wish desperately that we could go back to these days.