Gas tank half empty or half full?

Crude oil has been at or near $70 a barrel recently. Compared to $40 a barrel late last year, it's a lot. Compared to $140 a barrel last summer, it's a drop in the bucket. I'll bet I know which way you think of it. We're all having trouble adjusting to the idea of paying more than $3 a gallon for something that cost 30 cents a gallon in the 1960s. But as I write this Tuesday night, I anticipate that AAA will put Honolulu average regular at $3 before I wake up in the morning, and if it doesn't do it Thursday morning it will do it soon. You may read or hear news reports which attribute rises and declines in crude oil prices to such factors as the recession, unrest in Iran, and trouble in Nigeria. The weekly Wednesday federal report on gasoline stocks can always be expected to have some effect one way or another. But these are ephemeral considerations. But we're back to market machinations, where the real driver is not just demand for oil but demand for oil futures, which some investors like to move to when the stock market is sketchy. In this respect it's about money rather than petroleum. There being only so many oil futures contracts, when more people want to buy them the price of them goes up. Last summer at that $140 a barrel peak, analysts estimated that everything north of $100 and some of what was below it was demand for oil futures rather than demand for oil. The easiest way to hedge your exposure to this, if other factors make this an option for you, is to replace your car (while prices are low due to dealer desperation) with one that is less thirsty than your current vehicle.

Comments

[Russ Robinson]

The single most important 'driver' of crude price today is the value or lack of value of the U.S. dollar. During May '09 the price of crude rose more (in one month) than it had during the previous 120 months.
The average price for May was $59 per barrel.

On 6/18/09 - $71.37.
On 6/22/09 - $66.92.

Why the turndown? Because the foreign economic news shows that they are doing worse than the U.S., strengthing the dollar.

The basic problem is that we can no longer afford to run our economy on imported foreign oil! Sending hundreds of BILLIONS of dollars out of the economy each year.

The U.S. has 4% of the worlds population. The U.S. burns 20% of the world's oil! By using more and more of its GDP to outbid the world. What a PLAN!

Hawaii has abundent natural sources of energy. Geothermal (on the BI), the tropical sun, the trade winds, waves from the Pacific, heat from the surface of the ocean (OTEC). All of these can make HYDROGEN.

What can Hydrogen do?
Replace foreign oil for all marine surface transportation.
Replace foreign oil for electric generation in the existing plants now in use.
Produce fertilizer (N + H + heat = ammonia) to sell to the mainland.
This can be done with 'off the shelf technology' in Hawaii, by Hawaiians, for Hawaiians - keeping the $$$$ in the US economy.
All it takes is a PLAN!

"A fool with a Plan - will overcome a genius with no plan - every time." - T.Boone Pickens

[Peter Kay]

Howard, did you ever do the math on the replacement theory? We considered a Prius over my wife's 18 mpg Nissan Pathfinder and found that it would take over 10 years until the Prius paid for itself.

I'd be curious what numbers you penciled out.

[A car that pays for itself EVER based on fuel savings is of some interest. But to an extent it's risk management. Whatever calculations we do, we can't know how high fuel prices will go. Unquestionably, though, most of the benefit of people doing that is to the Republic. The effects on individual pocket books is small, which is why so many people, despite complaining of high gas prices, still drive massive SUVs that don't fit in the average Hawaii parking place, assuming one gets in and out from time to time. HMD]