The hot topic this week is the possibility of $5.00 gas here in the US. With tensions in the Middle East and inflation on the rise we want to pose this question to our readers.
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As always, we would love to hear what you have to say on this topic. Please leave a comment below.
Every Success,
The MarketClub Team
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In 1951, a gallon of gasoline cost an average of 20 cents (two dimes). The current melt value of two 1951 dimes is $5.02.
In 1961, a gallon of gasoline cost an average of 25 cents (one quarter). The current melt value of a quarter from 1961 is $6.28.
The average cost of a gallon of gasoline today is $3.69.
In real money, the price of a gallon of gasoline has decreased, and it should. With better technology oil companies are more efficient.
The cost of a gallon of gasoline is not going up, it is the purchasing power of the US Dollar going down. When the supply of paper money increases faster than the supply of gasoline, the price of gasoline in paper money rises.
Inflation is an increase in the money supply. A common consequence of inflation is an increase in prices.
I still cannot believe that 99% of the population understands money.
Thanks Aaron, You are absolutely correct that money is depreciating, not gasoline appreciating.
Adam....Greetings...
Where do you foresee the price of Oil going in the short term (next 3 to 5 trading sessions)??
At what price should we be looking to get into the market?
Thanks,
Hugo.
The problem seems to be that - and it is right not to fault them - the price at the pump has become completely separated from the law of supply and demand. The price at the pump is now the spot price. This can be seen because the world is awash in oil and yet the price keeps going up. When the credit markets froze in '08 - and so the traders - is when the price fell back to 35/barrel.
This 'market' behavior is then couple with an inelastic demand that is supplied by an oligopoly.
The futures markets were created so that producers requiring certain commodities could guarantee availability into the future at known prices and thus smooth out and better predict their costs. Pure speculation was secondary and is now quite the majority of the contracts be traded in the oil markets.
With a commodity such as oil, which has become essential for the survival of today's economies, it seems to me that it has come time to decouple the front-end speculation from the pricing of finished goods.
Now having thought about this, we don't want to introduce over-regulation or restriction on the market. With only a few refineries actually needing barrels of oil delivered, I think the best way to cure the dilemma would simply be to require anyone trading oil futures to take delivery once in awhile and on a regular basis if they want to continue to trade those futures. And it doesn't need to be alot. With just the few refineries and other assorted producers involved then, I don't think that (because they are producers) that they are going to be interested in driving up the price of the commodity and I don't think too many speculators are going to want to take delivery of even one barrel ever. They are then free to speculate elsewhere or actually get into the oil business.
Capitalism is amoral; that's why a strong republican democracy is designed to protect the individual rights of "people" (vs. corporations) under the Constitution (a Chinese "firewall," as it were). There's nothing wrong with Capitalism, as long as the people that government are obligated to protect are, in fact, protected from the inevitable abuses and not influenced by corporations (which has happened with PACs and incredibly, the Supreme Court ruled that spending anormous amounts of money is protected “speech” under the 1st Amendment— the perfect basis for creating a dualist society, because those without money or access to power are excluded from the democratic process).
What most people are not told is that in the United States, MORE oil was drilled and recovered in 2011 than in ANY previous year-- but it was sold overseas, where the price of gas is higher. So the mantra, "Drill baby, drill" is only uttered by those whose political biases trump facts (remember those annoying little things called "facts," which many people prefer to ignore).
There has been a rise in the price of oil. Several months ago, it was $87/barrel-- now it's close to $110/barrel. Will it continue to increase? In the long-term, yes; in the short term (i.e., w/in 1 year), who knows. It predominantly depends on several things: First, whether Iran continues to cut off supplies with other countries (England and France were more symbolic than effective); second, whether OPEC decides to override Iran and keep the output at or above current exports; and third, whether there's a significant pullback in the markets and investors flock to stocks, etc. or decide to cash in. If the former, oil is not a bad investment (summer is coming up, oil companies' stocks are low, and oil prices will rise with the overuse of gas guzzling vehicles; and winter typically raises the price of heating fuel).
But the key is finding the right company to invest in. I used a Zack's recommendation and wish I had not. Had I done a bit more research, I would have realized that their recommendation had consistently increased over the past year and it was at its one year high when I purchased the stock (a nearly $1BB company that has good financials, potentially profitable oil leases, etc.). The old adage, “Buy low, sell high” always applies. I’m looking for a solid website that provides (a) analysis and (b) stock recommendations and would appreciate any leads.
I’ve set a sell order on the oil stock I bought, but have already lost 10% over the past couple of weeks. It reminds me of putting my faith in large brokerage houses, which decimated my investments by 85% while collecting commissions while churning my stock account. Ergo, I strongly believe that all of us should learn the stock market (and other investments), since I can probably lose less money than a broker with an agenda. (Sorry, last paragraph was off topic.)
JLZ
Please do your self a favor and read OIL 101 before you comment on capitalism
Higher Prices will kill an economy, but I don't think we need to worry about it - Helicopter Ben will pump enough money into the economy to keep us going.
Of course higher prices will kill a recovery here in the U.S. but it has almost nothing to do with driving. It is the effect it has on everything else. Food in my local area has gone up 10% in the last 5 days alone. And gas is only up to $3.65 around here.
It's inevitable, as China and India consumes more protein life will continue to change dramatically for us. At what point will Washington think we need an energy policy.
cut back on luxuries...be thankful for life...and..of course.. the free market system
Hi there,
Here in Turkey, we have been consuming the most expensive gas of the world for years. The economy still is growing much faster than the European Union's economy.
The issue being voted on leaves no room to qualify. I have absolutely zero sympathy for the US consumer!!! Being Cdn and paying that or more now, has not affected my standard of living. Yes, higher pump prices will pull away from other purchases but life goes on. I'm assuming that higher gasoline prices means higher cost of crude per barrel. Returning to the $150 range serves no one, as the news reports, and could jeopardize the fragile global recovery. Having said this, any calamity is possible, but a $5.00 gallon is probably down the road if at all.
Keysrone=100 years of secure energy. Maybe we could then live without mideast oil and could save a lot on military expense (not just $ btw).
Meanwhile I am thinking "bigger garden"
raise the taxes. DA! What is the tax rate on gas ? If you say something about the president you are a RACIST! Impeach him, you will have rich business owners and how can you buy anything if you don't have a job. If they don't provide. OH, the government. Wake up! The time is NOW! WE need Canada's oil and open up our drilling for jobs. Who pays the few environmenlist They complain and get the donations to live on. You all suffer.
People are getting use to an inadequate Gov. And greedy corp. we,ll do the best we can
Someone wants to remove Obummer from office.
That someone increased the price of gas...
Is it Soudi Arabia?
Higher fuel prices will only affect the little people (IE; 99% ers). Yes, in that sense "the economy" will be negatively affected.
However, the broader stock market is another story. It was recently disclosed that foreign central banks are being guaranteed no capital losses by the US central bank when they convert US currency reserves into US multinational stocks. Several foreign central banks have publicly acknowledged the arrangement.
Therefore, I believe that the damage done may not be fully reflected by the S&P and DOW.
When I compare gas price in Europe at + USD 9/gallon to what US costumers pay shame on You. We all have to get used to drive pygmy class cars to get a decent mileage.
The days of the gas guzzlers are over.
There is enough oil in Alaska to take care of our needs for a long time to come. You can talk of the pristine conditions in Alaska, but with horizontal drilling and other methods available today, we should take that oil, NOW!
What recovery?
Exactly! The "recovery" can only be shown to exist if you use fraudulent government statistics to "prove" that it exists.
As far as the cost of gas . . . Most people I know are already struggling to make ends meet, because while wages have essentially remained frozen, the price structure has not. What many people don't realize is that this is largely a reflection of a devalued currency.
We here in the central US have historically relied upon cheap gas and cheap food, which some years ago helped offset living expenses that were not subsidized. such as health care and higher education. However, food prices have quadrupled in the last 10 years and gas prices have at least tripled . . . oh yeah, college costs at the state schools, for in-state tuition, have gone up like 10 times what they were in the early 90's (try 20 times what they were in the 70s . . . if you have three kids, it is like paying for 60 college educations in the early 70s).
$5/gallon gas surely will not help anyone balance the household budget! And it is not going to help sell those big, gas-guzzling vehicles that the US automakers insisted on manufacturing because "that's what Americans want!" I still remember my late uncle telling me, after the first OPEC oil-embargo in 1973, that, "Nobody wants those little Jap cars!". He happened to be an executive for GM . . .
Recovery? What recovery? By the way, how's US industrial growth doing these days? Industry, what industry?
Yes, you are absolutely correct. Here in Western Europe we are fed a daily diet of deceit and lies, collectively known as Economic Indicators. When the Cons give the figures they show falling unemployment, rising productivity, and a gradually improving economy. When the other lot give the same figures they seem to show a different story altogether. All I know is, the never ending meddling with the education system, the labour market, and the currency, in order to pursue the votes of whichever -ism is in favour this year, has so warped the labour market, that it no longer functions.
WHAT about oil price which is the problem of asia. 125 from 37/doller and gas is 2.4/ doller frm 11/doller. and u are moaning for high gas price of gas, O GOD GIVE THEM JUSTICE.
with booming auto sales, the question is -- are you going to drive the new auto or merely admire it in your drive?
The U S Government said the recession was over in 2009. Sure it is!!! It continues today.
Oil at $5 a gallon will kill what recovery we have had so far. In their latest news release on oil, the government said there was currently excess supply of this liquid gold. That certainly is not what the market says. With prices rising every day, what do you think. I think our government continues to fabricate lies to suit Obama's reelection hopes.
The public will get used to gradual higher gas prices. However, it will probably kill the recovery because the public will give up other discretionary items as the price increases. If it spikes up, all at once, they might not have enough time to put a lot of thought into what they can give up and just stop buying almost every thing else so they have room to pay for unexpected emergencies!
there is no way out.
It will have a definite negative impact on the economy. How can people "adapt" who are not employed, living on a fixed income, paying for homes that are underwater, and/or have already cut their budget to the bone. Our president needs to approve the Keystone immediately. This is not the speculators fault either. Who can blame businesses for hedging against future higher prices?
Would a Republican or Democrat in office have a negative effect on the economy? Same answer; of course. Higher prices are our future because no sitting or future Congressmen will make the necessary cuts (only reductions of defecit spending).
If it's your average Joe, they can't live on ever increasing debt. Sooner or later, they have to cut something to pay the higher interest cost on their increasing debt load.
Higher gas prices in the U.S. are still lower than Europe and many other countries where taxes make up the majority of the cost. Easy place for our government to pay for Obamacare eh? or wars? at the pump...
Higher prices, as long as gradual, are eventually going to happen. People just adapt. Large fast swings up can definately affect the economy though.