The impact of Oil is unmistakeable — from crimping consumer spending to affecting major purchase decisions to weighing on equities — it is neck and neck with interest rates for the most influential market factor lately.

The WSJ notes that high oil prices is crimping SUV sales. The big, inefficient and deadly vehicles (which always seem to be in my way) are Detroit’s most profitible cash cow. Don’t think the secular bull market in energy over the past few years hasn’t contributed to GM’s woes.

Wsj_suv_fuel03212005184708And yet, Gasoline remains cheap. That’s right, it is a relatively inexpensive commodity. It takes 100 million years to create; Then it needs to be explored and found, drilled into and pumped out of the ground, shipped, refined in gasoline, then transported to your local gas station where some guy pumps it into your car for about two and half bucks a gallon — and thats for high octane premium.

(Sold to me — I think its a steal).

Hey, its not like you don’t have other options. The Journal and Consumer reports put out a chart of "most fuel-efficient vehicles by category." There are lots of hybrid models coming out. You could go pure electric. Or, you can adapt your driving habits to be more fuel efficient (I drive a stick, but not for that reason).

As a kid who grew up loving muscle cars, I assumed that by the time I was 40 gas would be $5 a gallon (which it is in Europe). So I don’t complain about gas under $3. I tank up  thankfully. Then I turn off the dynamic skid control, lay a patch of rubber and carve up some twisty back roads.  That much fun for that little money is a bargain at twice the price.

How cheap is this drilled, transported, refined gasoline? Cheaper than water: 


Other "Refined" Products Compared with Gasoline
:

Product Unit Cost Price per Gallon
  Lipton Ice Tea    $1.19/16 oz  $9.52 per gallon
  Ocean Spray $1.25/16 oz  $10.00 per gallon
  Gatorade  $1.59 /20 oz    $10.17 per gallon
  Diet Snapple
(preferably Peach) 
$1.29/16 oz    $10.32 per gallon
  Evian water $1.49 /9 oz    $21.19 per gallon
  Whiteout $1.39 /7 oz      $25.42 per gallon
  Brake Fluid $3.15/12 oz    $33.60 per gallon
  Scope  $0.99/1.5 oz    $84.48 per gallon
  Vick’s Nyquil    $8.35/6 oz    $178.13 per gallon
  Pepto Bismol   $3.85/4 oz    $123.20 per gallon


$21.19 for WATER – and the buyers don’t even know the source. No wonder Evian spelled backwards is Naive.

Be glad your car doesn’t run on Scope, Whiteout, Pepto Bismal or Nyquil.

>

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UPDATE: April 1, 2005  11:45am

Yes, I was being a bit snarky in my description of Gasoline as cheap.

If you are of middle income or higher, than Gas is indeed an inexpensive part of your budget. However, if you are on a tight budget, than its an increasingly burdensome expense lately.

We see this in the same store numbers from Wal Mart and Target — WMT in particular — as the stock has made fresh 52 week lows; their clients are much more price sensitive than Target’s  . . .

>>

Sources:

Rising Gasoline Prices Threaten Viability of Biggest SUVs
Jeffrey Ball And Joseph B. White
The Wall Street Journal
March 22, 2005; Page B1
http://online.wsj.com/article/0,,SB111145802324985959,00.html

Category: Commodities, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “Cheap Gas”

  1. milton heath says:

    It seems silly to compare prices of highly marketed name brand products against gasoline. For example, doesn’t the corn in a $4 box of Kelloggs corn flakes cost about 4cents. Evian is a brand. It is fashion not H2O. Nobody in the US sells gasoline as a brand name anymore. AMOCO did make better gasoline (I new a Director of the research labs who told me about the difference in quality between gasolines.) But low and behold, BP buys AMOCO and because the quality marketing of AMOCO branded gasoline didn’t get higher retail prices, BP killed the AMOCO brand (recall the crytal clear gasoline TV ads AMOCO had.). Forget synergies, if AMOCO brand was worth 2cents more per gallon, BP would not have killed this brand.

    Municipal water prices compared to gasoline (or oil) is an interesting comparison, especially since we view water as a renewable resource. Maybe water’s higher price has to do with the monopoly of water service. Especially since I find municipal water to have an after taste that is not pleasant in my community, here in Florida; in other words high price, low quality.

  2. seamus says:

    Milton, good points. When I first saw that chart, it kind of bugged me. Gasoline is the definition of a commodity for 99% of drivers.

    Barry, I’ve been rooting for higher gas prices for years, since no politician has the courage to tax it appropriate to the external impact of its use.

    The proliferation of “light trucks” is pure ignorance of externalities by drivers. It’s not just that less fuel efficient vehicles transfer dangerous levels of carbon and other pollutants into the atmosphere, but SUVs and big pickups also provide safety for their occupants at the expense of safety of car drivers, since heavier vehicles tend to destroy lighter ones. Imagine a bullet-proof vest that didn’t absorb a bullet, but ricocheted it off in a random direction!

    I think generally complaining about “SUVs” misses the points. Higher gas prices address the points. And lookie lookie! They’re impacting customer behavior. Welcome the hybrids!

  3. james says:

    barry – great post. thanks much! as to seamus – oh great benevolant one! how should we mere mortals choose a mode by which we transport ourselves from place to place by thine divine desires? It seems our meager price system has displeased thee by measures we could not possibly calculate. Seamus the great! Deliver us from our woes! Decide for us the means by which we move flesh and bone so as to longer endanger your great collective.

  4. Barry,

    The most expensive refined liquid I can think of is….

    Hewlett Packard Printer Ink $8000 a gallon.

    http://naybob.blogspot.com/2005/03/is-gasoline-expensive.html

  5. Jon H says:

    As a counterpoint, Barry, gasoline is the only substance we typically use in such large quantities. It’s easy for a person to burn two gallons per day, just going to and from work. What other substance do we use 2 gallons of, every day?

    Compare the price of a week’s worth of gasoline to the price of a week’s worth of whiteout…

    Also, most of the examples you give can be easily exchanged for cheaper alternatives. Juices or Evian can be swapped for Poland Spring, or tap water. Purchases can be delayed until a good sale comes up.

    That’s not true about gas. Alternatives are not readily available, and it often is not feasible to adjust usage. And you can’t buy the king-size jug of gas and get a discount, as you can with other things. Gas prices go up linearly with quantity.

  6. Rajesh says:

    Just to add to Jon H.’s counterpoint thread: gasoline is also the one commodity on your list that is produced in large quantities at one go (with the exception of course of Evian – though the source might have something to do with it). And it looks like Seamus might get his wish: $105/barrel coming soon (Reader beware its a NY Post report: http://www.nypost.com/business/22944.htm).

  7. Joe says:

    Gas isn’t all that expensive right now — adjusted for inflation, a gallon cost 50% more in 1981 than now. But that’s small consolation to people who are struggling to pay for the cost of their daily commute, which they’ve seen double in just a few years.

    As for your table, it’s interesting but not really a fair comparison. If you’re using several gallons of Pepto Bismol a week, you have bigger problems than the cost of gas. Converting things to ‘cost per gallon’ for a comparison to gasoline doesn’t make a valid point, unless you use all those substances at a similar rate to gasoline.

  8. bear2 says:

    Diesel fuel is more expensive than gasoline. Can you imagine what it costs a trucker to run his truck for a month, burning 10 gallons an hour. You and I are going to pay for that increase, sooner or later. Maybe consumer prices haven’t increased yet, but they will sooner or later.

  9. Jon H says:

    Another thing that differentiates gas from the rest:

    Increases in the price of Evian or Pepto-Bismol will never raise the price of gas, but increases in the price of gas will raise the price of Evian and Pepto.

  10. kylawyer says:

    Interesting comments, but I imagine they miss the point.

    Amusing post.

  11. Neal Cupstid says:

    In the summer of 1974, I was shocked that gas prices had reached $1.00 a Gallon. Now nothing surprises me and I guess I will never understand the times the prices seem to go up and down.

  12. Milo says:

    Forget about gas being $1 a gallon, or even $5 a gallon. Right now, oil is one of those commodities that is denominated in US Dollars worldwide. No matter what country you are from, or where you buy oil, it is denominated in Dollars. Now we all know that the US Dollar, itself, is worthless; it’s funny money, because there is nothing backing it ( one reason, btw, that oil is so high, along with everything else). But imagine for a moment what would happen if the Arabian oil Sheiks suddenly decided that their oil would no longer be denominated in US Dollars, but in Gold; perhaps some newly minted Islamic gold coin. This would mean that the price of oil would not simply be converted to the equivelent value of gold, but could ONLY be purchased WITH gold. NOW what do you think the price of oil would be? Many hundreds of “dollars” per barrel, if not thousands. It is a scenario that could happen.

  13. FRED says:

    Instead of concentrating on the cost per gallon, focus on the monthly or yearly cost of the product.

    1. Windex ($10 per gallon) = $83 cents/month – $10/Year
    2. Water (BRITTA FILTERS) = $20/year
    3. Milk ($3/gallon) = $3/week $12/month $144/year
    4. Ice Cream – ($6/gallon) = $6/week – $24/month – $288/year
    5. Gasoline – ONE CAR ($2.50/gallon) = $30/week – $120/month – $1440/year

    It seems to me that gas is more expensive than water…

  14. Keith Rambo says:

    You are all crazy and most likely being paid by the gas companies to promote these folklore tales and propganda to make consumers think that buying gas at expensive prices is normal. In other countries the gas price is high because of their taxes, it is wrong for oil companies to charge as much as they do for gas. And to blame people who buy vehicles that are offered on the market is wrong and you should be ashamed of yourself. I hope they are paying all of you bastards that make over a hundred ksssss a year and already dont need any of dirty money from the foreign business people that could not possible care less about you and your familys. Go ahead and join in with the rhetorical persuasion of you so called environmentalist that propby dont do a god damn thing about what you think of other then tell younger people it is okay to get robbed by big oil companys. I own a small two door car a just got done paying $40.00 in regular gas if that makes all you people happy then go fuck yourself. I just got robbed and are politicians dont care either becasue they are all being paid by the oil companies just like who ever runs this website.

  15. George says:

    Wow Keith, take a bromo! Hey, I’m sorry you’re hurting from the gas price; I am too. But I am sure as hell not going to stop “blaming people who buy vehicles that are offered on the market”. They are part of the reason that gas costs 3 bucks a gallon today. They are also a menace to everyone else on the road. I don’t blame them as much as I blame our idiotic government, however. If they gave a damn about this country they could have included “light trucks” in the same CAFE regime as passenger cars, and not given twenty thousand dollars worth of tax benefits to any small business that buys a giant SUV. While we’re on the subject of oil, don’t forget that the destruction of Iraq and the radicalization of Iran were both GW Bush productions. OK, Keith, I’m going to go f*ck myself now, right after I cash this check from ExxonMobil.

  16. Full disclosure: I own BP and Conoco Phillips — and have for many years now. (Amoco, whoch BP merged with, and Phillips, which Conoco took over)

    I owned them as a hedge, and they did nothing for years when oil was $20.

    Now, they are superstars.

    Its not like its a closed ownership — anyone — including Keith Rambo — can own them.

    As to getting paid by them — other than the dividends that every shareholder gets, thats the only check I receive from the oil companies.

    I am available for consulting however, if they ever wnat to write a much bigger check!

  17. Keith Rambo says:

    George and Barry you go ahead and cash in on your checks and dividends from ExxonMobil and other oil companies. I am going to protest about the high gas prices when ever I can, and as frequently as I can. I will not allow you, the media or any of the oil companies to use rhetoric and try and to make me feel good about getting ripped off. I don’t care what the both of you are investing in or your great ideas are about the world. BOTTOM line is I am getting ripped off by oil companies every time I go to the gas station, not because I am addicted to oil, not because I cannot afford it, but because these companies are over pricing their gas. That is it, you can vent out towards me all you want, and it’s not going to change a thing at all about the way gas is over priced. You might be happy about the over priced gas, and compare it to the price of water and the price of other products, but they are all over priced as well and that is another story that I am open to.

  18. Mark says:

    A little perspective: One gallon of gas contains the amount of energy that one human being could produce working hard 8 hours a day, five days a week, for a month. And you are paying $3 for it. Gas is cheap at $3 a gallon, and it would still be cheap if the price were to double to $6 a gallon. We are extremely fortunate to live in times when we have essentially a gift of virtually free energy given to us by earth. You are not getting ripped off, and the major oil companies are not over-pricing their gas. When crude oil is $75 a barrel, $3 gas is appropriate.

  19. Keith Rambo says:

    Mark, it is a very calm statement that you make. Gas is expensive. Gas is very expensive at $3 a gallon. And if it doubles I think there are going to be allot of very unhappy people all over the country. The earth does provide us with this natural resource. And then the business Goliath’s step in and ruin it all. I am getting ripped off. The major oil companies are over charging, and I will go as far as saying they are targeting middle class America. Unlike you Mark I will back my statements up with facts. Fact, in Venezuela gas per gallon is $0.12 (in American dollars); in Saudi Arabia gas per gallon, in American dollars is $0.91 a gallon. Now not to mention that them prices also include a 75% tax on them. So you do the math. Common sense says Middle Class America is getting ripped off. Call it what you want, it is a scandal. All of these prices are free to look at @ http://money.cnn.com/pf/features/lists/global_gasprices/

  20. keith rambo says:

    Well I guess everyone is right. Gas is fine the way it is. Maybe I am overacting. I just dont understand how people dont see what I do. $3 a gallon is expensive to me. I under stand the supply and demand rule and I still think gas is over priced. Maybe I am one of those people who think oil and gas are my natural born right because I live in America. Oh well enough with this conversation, I am finished making a stand on the big picture blogs. Good luck to all of you and if anyone took my statements personal I apoligize.

  21. Big Picture says:

    Is Our Government To Blame For High Gas Prices?

    Front and center in every form of media is the rising cost of oil and gas. It affects the lifestyles of every American and the costs of all goods and services we use. Many of us are shaking our fists and looking for somebody to blame. Before we start pointing the finger elsewhere maybe we should point it at ourselves.

    To our Governments credit, they realized the problem and have done something about it. They passed federal tax incentives that pay each and every American to make their home and business more energy efficient. Our government passes laws that benefit us financially when they want or need us to take action. Have you made your home more energy efficient and done your part to reduce our dependence on foreign countries?

    I’ll wager you that the percentage of Americans who have made their property more energy efficient and taken advantage of this tax break is very small. If most Americans took this simple inexpensive step (Almost paid in full by our government) we could dramatically reduce our oil consumption.

    There are inexpensive revolutionary new products now available to the public that can slash your prices of both gasoline and your electric bill. Almost all new homes being built now have these energy saving products. Doing their part, our Government continues to raise the energy efficiency requirements for appliances and other items via building codes.

    One of the best ways to slash your electric bill by 20% or more is to install radiant barrier in your attic. It reflects 95% of the heat before it enters your house. It can reduce the temperature in your home by almost 20 degrees. The average cost for a 1200 square foot home would be under $1,000.00. The government tax break allows a $500.00 tax credit. You could see a $400.00 monthly electric bill drop to around $300.00. It could pay for itself within a year and the government pays most of the bill. If every American took advantage of this, it would reduce our consumption and dependence of other nations by millions of barrels of oil. In turn, you would also save energy on fist wagging and the price of gas.

    In America almost 400 Senior Citizens die a year because of heat trauma. If every elder had radiant barrier installed in his or her home and it reduced the temperature by almost 20 degrees inside – I wonder how many lives it would save? I recommend you use the radiant barrier provided by Hy-Tech Thermal Solutions. The only incentive I receive by endorsing this product is the satisfaction of knowing that I provided you with a safe product that works.

    There is a new product called Enviro-Max Plus that is a fuel additive that actually works. When added to your gas tank it will increase your gas mileage by 30%. They claim that for every dollar you spend on their product you will save three dollars in gas. A friend used the additive on his way to Florida and he used two-½ tanks of fuel. On his way home he did not use it and it took 4 tanks of diesel to return home. It almost cut his diesel fuel consumption by half. A simple web search will inform you where to buy it and how to be a reseller to make extra money while helping our nation. I have noticed other copycat companies providing similar products and I would use caution.

    We now have a paint additive available that will reflect 95% of the heat away from your home. It is the same technology used on the space shuttle and jet engines on our airplanes. This ceramic technology has been around since the 1950’s but only recently available to the public thanks to the testing by NASA and Hy-Tech Thermal Solutions. It is the cheapest non-traditional insulation you can buy for your home with the average extra cost of only $120.00.

    By visiting the Department of Energy online you can learn many inexpensive ways to save energy in your home and cut your electric bill by 25%. They also provide testing results of Radiant Barrier from 1991. They should update these test results because radiant barrier products have improved.

    Other ways we can all do our part to protect our nation and environment is by recycling everything, install a solar backup energy supply, only buy from or invest in companies who are environmentally friendly and invest in innovative alternative energy, only install white reflective shingles on our roofs, buy energy star products and appliances, or by giving unwanted items away versus throwing them in the dump.

    We can also blame our media for our lack of knowledge of this new technology. Americans are suspicious of new untraditional products and it takes time for us to accept them. Several salesmen could tell us about them but we won’t adopt them until the mass media informs us. The media should be more problem-solution oriented. They will print information about the new tax laws, but don’t offer information about the new products it covers. When they talk about the high price of gas they should offer us ways to battle this problem with these new products. The media seems more interested in propaganda and the latest new widget versus their responsibility to inform and lead our nation in the right direction.

    We live in the greatest nation on earth. It is a free country that we had the luxury of being born in. For that reason we have the right to remain inactive, wave our fists at and blame our government or corporations all we want. I maintain that the status of our nation and the world requires action from each and every American to do our part to conserve our natural resources. If we don’t – it could very well lead to our demise. America can be defeated by its own citizens, as the Romans.

  22. dadsp33k says:

    this is stupid. how many gallons of pepto bismol or snapple do you consume per day? it’s all relative. DUH!

  23. Riley Fan says:

    I know these type calculations are silly, but if you look at the shelf price tag in the super market it is also priced to a larger quantity.

    Keeping with the “gas” theme, my favorite per gallon cost is Mylicon. These infant gas drops sell for about $12-$14 an oz. So that is $1500-1800 a gallon.

  24. bean says:

    Dear America:

    Bike. Walk. Take the bus. Organize a real carpool, with three or four people from work. Realize you’re not the only person in the world. Stop fucking whingeing.

    If you don’t like gas prices, stop buying the shit.

  25. Jim Johnson says:

    My Webster’s and a subsequent web search did not define “whingeing”, but I conceed it does sound painful.

    Many chuckles. Some excessive passion. See ya in the tar pits.

    Jim

  26. JJ says:

    It would be possible to bike, walk, or carpool if you live within walking, or biking distance from work. Carpooling dosen’t work for those of us who live to far away and also have things to do after work (school, pick up kids etc.) if you have to rely on someone else, and in return they rely on you is not always a viable option. Also considering wages almost never go up (could you imagine someone young making minimum wage trying to have a job any distance away? Working to pay for gas is all they would be doing) that quickly, for those of us who do not have a huge salary (I am still in my 20′s and going to school) we are having a hard time paying these prices, and not really having any other REAL options. When the price was manageable, I never complained. This is rediculous considering that it for some of us is a daily need. And for me the comparison is gas is the second highest bill I pay per month next to my car payment (I do not pay rent) so I can go to work and school and no where else. It may not be to high for the people who don’t have to live paycheck to paycheck.

  27. janel says:

    For those of us who are middle to lower income, the price of gas is a dooming prospect. Not,only does it restrict our trips in the car, it restricts other purchases,we see the price of groceries rising as a direct result of transportation costs.Spending becomes restricted which squeezes commerce,and they raise prices in order to stay viable. This is the beginning of the end for a capitalist society(of which we all benefit). If our economy crumbles who will feel it? The middle class, the poor,then the environment,and small business and large, and finally the government. Take a look through history at societies that have fallen apart. People die, education stops and the land is scourged. I’m not for governmental caps on prices, but something has to happen.The big businessmen need to get a conscience.Don’t compare us to another country. We are not another country,if we were people would stay where they are. And yes, I try to conserve just because I’m cheap.I don’t drive an suv,I think they’re pretentious;however, I don’t drive an economy car because I can’t afford it. I walk when I can, I ride a bike when I can, but tell me when the price of gas is so expensive how am I to bring home groceries and milk along with kids. How can I encourage my daughter to work when it costs too much to get there.

  28. Windryder says:

    Would anyone want to comment on the record profits that the oil companies have been reaping? We’re struggling and they are making huge profits. What’s with that?
    They slowly get us used to higher prices. Prices are jumped up and then, “Hey, gas is cheap…only $2.50 per gallon.” Good psychology on their part.
    BTW: note that this discussion was started April 1st, 2005, took a hiatus from Aug. 2006 to April of 2007. I guess gas prices are suddenly a hot topic again.

  29. This whole line of argument is disingenuous, and those floating it know it.

    It’s the “stop your belly-achin’, at least it’s cheaper than _____________________ (fill in the blank), and we’re not complaining about that” argument.

    It’s a ridiculous argument. And the people who feed it to the their dittoheads are lying.

    According to these stats, a gallon of Evian is $21.19.

    Amazon is selling Evian at 50.7 ounces for $1.69

    There are 128 ounces in a gallon.

    That means a gallon of Evian would run ya $4.27. You’re only off by $16.92. But I can see where it might make for a more compelling stat if you fudged the numbers.

    And as gas prices continute to climb, so too will the price of Evian.

    The other problem, aside from the lying, with this argument is that the American economy isn’t fueled on Lipton Iced Tea or Ocean Spray or Gatorade or Snapple.

    We don’t need it to commute, to power our homes or to transport goods and render services.

    But, I suspect, those floating this bogus argument know all that and are merely interested in spreading bogus propaganda for the oil industry.

  30. Ditto head? Look around the rest of the site — thats certainly not THIS place.

    The fact remasins that Gasoline is cheap on an inflation adjusted basis — its cheaper than diet coke (at 99 cents per liter) — its also much cheaper in the US than in Europe.

    That doesn’t mean its fun watching prices rise, or that it doesn’t have a major economic impact.

    Consider the policies that have been put into place over the decades to ensure cheap gas, as well as the environmental, and geopolitical impact of chepa gas.

    All those policies began to fail once China grew large enough economically to impact oil prices.

  31. Dave says:

    The Gas prices in the UK are far more expensive than in America.

    -Dave
    Gatorade Coupon

  32. we have gas now ;soon we will find another fuel;maybe low cost;more clean for environment;we still consume our resources.

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