Tag Archives: Crude Oil

The $10 Gallon Of Gasoline Is Possible, But They Still Won’t Wash Your Windshield !

How high will the price of a gallon of gasoline go? Regular grade gasoline is at or above $4.00 a gallon across the United States now, and crude oil is hovering in the $135 a barrel range. In fact, gasoline is close to $5.00 a gallon in some areas, and diesel fuel is averaging just about $5.00 a gallon across the nation.

At these prices, you’d think a whole squadron of singing “Texaco men” would descend on your car when you pull into the service station, cleaning your windshield, checking your tire pressure and oil level and polishing your headlights. As the jingle promised, “You can trust your car to the man who wears the star… The big, red Texaco star” (or maybe it was “the big, bright Texaco star”). Today though, all you’re likely to find at your local gas station are self-service pumps. If you’re lucky enough to find an air hose to inflate your tires, you’ll probably have to pay for the air and do it yourself.

U.S. DOE EIA\'s Gasoline Price Graph

This gasoline price graph is linked from this U.S. Dept of Energy EIA page, and

should display their current data. For EIA’s Diesel Fuel price history, click here.

We have previously questioned what a flareup in Middle East tensions might do to the price of crude oil. In today’s news, there was speculation that an Israeli military exercise earlier this month may have been a not too subtle hint that they may be preparing to (or at least want to appear to be preparing to) attack nuclear facilities in Iran.

There has been speculation that if Iran reacted to an attack by blockading shipping in the Strait of Hormuz, the price of crude oil on the world market could quickly hit $300 a barrel. The Strait of Hormuz is a 21-mile-wide strategically important body of water between Iran on the North, and the United Arab Emirates and Oman on the South. It is the only shipping route for much of the oil exported from the Persian Gulf.

Just how serious is the threat of an attack on Iran? Mohamed ElBaradei, head of the United Nations’ International Atomic Energy Agency, said in an Interview on Arab television on June 21st, that “any military strike on Iran could turn the Mideast to a ball of fire” (see CNN article). This raises the possibility that the United States, the United Nations, or an international coalition might take military action to keep the Strait of Hormuz open to shipping to keep oil flowing.

The brilliant mathematicians at RoutingByRumor (they stay in our ivory tower) figure that a $300 barrel of crude oil would equate to a gallon of gasoline in the $10 to $12 range. That is, if you are able to buy it at all. Could you imagine the prospect of a $200.00 fill-up at your local gas station? We think the oil companies might have to start using armored cars to deliver the gasoline to their stations. Carjackings might become commonplace, not for the vehicle, but for the contents of it’s gas tank. Imagine what these stratospheric fuel prices would do to the American economy, which is already hurting because of the price of oil.

What we think future gasoline deliveries might look like !

For many Americans, we think gasoline at $10.00 a gallon would quite literally make it too expensive to commute to work (unless they are lucky enough to be driving one of these vehicles). Many Americans without access to public transportation would simply be better off staying home. Imagine what $10.00 gasoline will do to food prices, already spiraling out of control because of the current price of crude oil. People unfortunate enough to have oil heat will be unable to heat their homes.

So there you have it… Record high gasoline prices, military posturing by Israel towards Iran, warnings of an apocalyptic conflagration in the Mideast, and the supply of crude oil from the region hanging in the balance. Things do not look good for oil or gasoline prices or an uninterrupted supply.

You know, that old pair of inline skates in the attic, and that rusty old Schwinn in the garage are looking better every day now. Or maybe we will get a Delorean like the one from Back To The Future, with a “Mr. Fusion” Home Energy Reactor that can run on banana peels and half-empty cans of beer.

Dr. Emmett Brown (Christopher Lloyd) fuels up his Delorean’s fusion

reactor with banana peels and beer, in Back To The Future

(credit: wikia.com)

– Routing By Rumor

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The Commodity Crisis Du Jour – Gasoline… Rice… Now Corn. What’s Next ?

Jerry Edle, left, and Dave Lanz keep an eye on a large
propane tank which they are towing through a flooded cornfield,
in Oakville, Iowa, Monday, June 16, 2008.  The tank floated away
during flooding. (from yahoo.com - AP Photo/Sue Ogrocki)

As if the American economy and the American consumer weren’t being pinched enough by $4.00 to $5.00 a gallon gasoline prices, here comes another big hit.

The flooding in the Midwest will have a major impact on corn prices (see this article), corn supply, and a ripple effect that will be felt in almost all food categories, from breakfast cereals to meat and poultry, to soft drinks and every other food item that contains corn or corn-derived ingredients. Examples of important corn-derived products are corn oil and high fructose corn syrup. They’re used to produce everything from margarine and soda pop, to french fries to bakery items. And rising prices and shortages of corn-derived ethanol will simply fuel higher gasoline prices. Ethanol production was already putting a strain on corn supplies and driving up the price of corn even before the flooding in America’s corn belt impacted this year’s crop.

A police officer \

A police officer demonstrates his finely honed public
relations skills, and welcomes home a resident of
flood ravaged Cedar Rapids, Iowa (read story)
(AP photo/USAToday by Seth Wenig - Caption by RoutingByRumor)

Just like the rising price of crude oil, rising prices for corn will have an almost immediate impact on the cost of many of the things you buy. In fact, corn probably plays a more important role in the food chain than wheat, rice, oats, or any other grain.

If you thought the size of the box of your favorite breakfast cereal was shrinking, you ain’t seen nothing yet. If corn prices go through the roof, you’ll need a microscope to find your cereal boxes. Maybe we’ll switch to shredded wheat.

We expect that in addition to seeing rationing or purchase limits on rice at the supermarket, you’ll soon see shortages and rationing of corn and products containing corn as a major ingredient.

Better start stockpiling the Doritos and the Corn Pops.

– Routing By Rumor

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The Price Of Oil Is Increasing 150% A Year ! Is The $200 Barrel Of Oil Too Far Away ?

It was just over three months ago that we noted that the price of crude oil had passed $100 a barrel for the first time ever. Now, in less than four months, it has increased another 40%, and is closing in on $140 / barrel. Almost every day sees a new record high for the price of crude, and Friday was no exception. That equates to an annual increase in the price of oil somewhere around 150%. Based on the past few months, we think oil might hit $200 a barrel before the end of the year. If you think the U.S. economy is in trouble now, imagine what that will do to it.

Gasoline is at or above $4.00 a gallon in much of the U.S., with predictions of $5.00 to $6.00 a gallon by the end of the summer. It seems that those economic stimulus checks that Uncle Sam and his nephew George W. were kind enough to send y’all are little more than a gift to the oil companies and market speculators. Being able to afford to fill their gas tanks is the number one concern for most Americans now.  You would think that sky high gasoline prices would make a big enough dent in demand that there will be no gasoline shortages.  The truth is that the underlying cause of high prices is a tight supply and global demand for oil.  Because of this, we believe the next gasoline crisis is not too far down the road.

Look what fuel prices have done to the market for larger vehicles. Truck and SUV sales have dried up to the point that the market resembles the real estate market. Car dealers and real estate salespeople have joined the exclusive club once reserved for the Maytag repairman.

If you think increasing food prices and inflation in general are bad now (don’t believe the fairy tale statistics that Washington tries to feed you), just watch what happens over the next few months. Inflation, the cost of energy, and the economy (yes, Virginia, we ARE in a deep economic recession) are such problems that they have succeeded in replacing Iraq on the front page of your newspaper for the past few months.

These concerns have prompted the economic gurus at RoutingByRumor to come up with our top ten list of concerns that Americans are faced with…

  • Skyrocketing gasoline prices (try filling your tank)
  • Skyrocketing food prices (try keeping food on the table)
  • Energy prices (try heating/cooling your home)
  • Inflation (try to keep up)
  • Skyrocketing healthcare costs (try getting sick)
  • The real estate slump (try selling your home)
  • The foreclosure crisis (try holding onto your home)
  • The deteriorating job market (try finding a decent paying job, or any job at all)
  • Stagnant or decreasing wages, benefits and income (especially investment income)
  • The lack of leadership in Washington (try to find a real President)

Gee whiz… terrorism, illegal immigration and global warming didn’t even make the top ten. That’s how bad things are.

– Routing By Rumor

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The Coming Gasoline Crisis… Get Ready For Gas Lines And Rationing !

credit: Florida Sun-Sentinel / americanphotojournalist.com

photographer: Melissa Lyttle

The first gas crisis in the United States in recent (post WW II) times was during the winter of 1972-73. The second gas shortage was during the summer of 1979. It was during that crisis that gas prices broke (at least in the Northeast U.S.) $1.00 a gallon for the first time. Those were the good old days. Fast forward to 2008, when, for many parts of the United States, gasoline is now topping $4.00 a gallon, and rising daily.

Despite the fact that we are almost 30 years down the road since the last energy crisis, we are still almost totally dependent on petroleum-based fuel. Electric, natural gas, solar, hydrogen and to a lesser extent ethanol, have failed to make a significant dent in our demand for petroleum-derived gasoline and diesel fuel.

There are still virtually no all-electric, natural gas or hydrogen vehicles on the road, with a fairly insignificant number of these alternative-fuel vehicles in some fleets, such as utility company, transit authority and delivery company vehicles. Have you ever seen an electric, hydrogen or natural gas refueling station ? Even today, for all practical purposes, gasoline and diesel are the only fuel options available. What percentage of the privately owned passenger vehicles in the U.S. are all-electric or gas-electric hybrids ?

Despite more energy-efficient homes and appliances, we continue to set energy consumption records. Electric utilities generally set new winter and summer peak output records each year. It seems that no matter how efficient our homes or cars become, no matter how hard we try to conserve energy, we will never see lower demand for energy. All we can hope to achieve is to slow the increase in energy consumption.

While the increase in total energy consumption varies by geographic region and market sector, consumption generally increases between 1 and 3% annually (see US Department of Energy report).

Now couple our ever-increasing appetite for energy with the fact that developing nations, most notably China, are significantly increasing their energy use. It portends continuing increases in the price of energy from all sources, not just oil. It also means tighter supplies and future energy shortages (see this April, 2008 AP article in the NY Times about tight oil inventories). With the summer approaching, shrinking gasoline supplies (despite higher prices), and increasing seasonal demand, it’s a recipe for trouble. They are even attributing a decrease in U.S. oil supplies to fog in the port of Huston. What’s next… blaming it on which way the wind is blowing ?

Recent world events related to shortages of food staples such as rice, wheat and corn are already being felt in the United States. While there does not appear to be a true shortage yet, the prices of all these commodity items has risen sharply in recent months. And yes, much of this increase can be tied to the price of oil.

We are seeing more and more instability, in terms of price and availability of food items. In just the past few weeks, rationing (or more accurately, purchase limits) have begun to pop up at retailers around the United States, on rice and flour. While panic buying is likely to blame to a great extent, a tight supply is no doubt at the root of these actions, as well as the sharply higher prices.

credit: freeenterpriser.com

Gasoline is subject to exactly the same market behaviors as food. To some extent, it is even more vulnerable. You can’t plant more oil seeds next Spring in anticipation of higher demand. The crude oil supply is more or less constant, at least for now. It’s a non-renewable resource, so once it’s gone, it’s gone forever.

It would not take much to touch off panic buying of gasoline. A steep short-term increase in the price of crude, a new political crisis in the Middle-East, a weather-related emergency, or some unforeseen event that influences energy markets, are all capable of creating a crisis overnight.

We think that the recent run-up in gasoline prices has significantly increased the likelihood that we will see another gas crisis in the near future. This is regardless of whether there is a true shortage, or if it’s just panic buying that takes hold. Don’t be surprised to see gasoline rationing being put in place as soon as this occurs, whether it is imposed by the retailers, or by the government. Don’t be surprised to see long lines at the pumps, a la 1972.

– Routing By Rumor

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