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High Gasoline Prices

Gasoline Prices Soar, Then Come Back Down, Then ?????

Copyright AA1Car

When I first wrote this article back in July of 2006, the price of gasoline has just rised above $3 a gallon for the first time. People were screaming and thinking it was the end of the world (myself included). Little did I know this was just the beginning of a wild roller coaster ride fueled by fears, speculation, price gouging and outright market manipulation.

Unfortunately, most of us have no say whatsoever in what we have to pay for fuel. Why? Because unless we walk, ride a bike, use public transportation or get a ride with somebody else, we have to drive our cars virtually everywhere we go.



The modern American cityscape is NOT the least bit pedestrian friendly. Heck, it isn't even car-friendly. Parking lots rarely interconnect, forcing you to drive all the way around to get from one trip mall or big box store to the next. It's rare to drive more than a couple of blocks without getting snagged up by stop signs and traffic lights. And during much of the day, it's gridlock in the big cities.

traffic congestion

Urban sprawl makes an automobile an absolute necessity for getting to work, school, shopping, entertainment, you-name-it. And except for some of the larger cities like Chicago, public transportation is nonexistent or a complete joke.

DRIVING GREEN

Most of us would like to drive a fuel-efficient car so we can save money when we fill up at the gas pump. But hybrid cars are in short supply and high demand. Consequently, car dealers are usually getting full list price for such cars.

Driving less, car pooling, and trading in your old gas guzzling SUV or large vehicle for a pint-sized fuel sipper is about the most any of us can do to minimize the impact of soaring gas prices.

ECONOMIC IMPACT OF HIGH GASOLINE PRICES

Back when I first wrote this article, I accurately predicted the severe economic impact high fuel prices would have not only on individuals and families, but also the American economy. It was the straw the broke the camel's back. With so much money being spent on fuel, there was less money to spend on everything else. Major purchases were postponed, people maxed out their credit cards, then borrowed more, and then began to fall behind on their mortgage payments and other monthly bills. It all began to spiral down, and today (February 2009) we were in a severe recession.

Although fuel prices are holding around $1.80 to $2 a gallon, Americans have not resumed their old driving habits. Most people are driving less, which is keeping demand and prices down, at least for awhile. Crude oil prices continue to flounder in spite of cutbacks in production by our Arab friends and others (some friends these people are!).

What follows is a summary of my posts tracing the history of what has happened to gasoline prices over the past three years:





UPDATE: October 8, 2006

Gas Prices Back Down....But For How Long?

Who would have thought that gas prices would drop as much and as quickly as they have in the past few months? As I write this, the price for unleaded regular in Chicago is around $2.38 a gallon -- and as low as $2.01 a gallon in rural Iowa.

Why the sudden drop? Could it be there is an election coming November 7th and the current administration is asking their oil buddies for some help? Hmmmmmm. Wonder what the price of gasoline will do immediately AFTER the election?

Pardon me if I'm a bit skeptical but since the price of gasoline is TOTALLY MANIPULATED by those who have the oil, they can charge us whatever they damn well please and we have to pay it -- that, or move to oil-rich Venezuela where the price of gasoline is reportedly 12 to 15 CENTS per gallon! You can fill up your SUV there for less than $5 in gringo dollars. Maybe we should make them a deal: we'll trade them our gas-guzzling SUVs for their cheap gas.


UPDATE: November 16, 2006

Election is over, Gasoline Prices Back Up!!!

Hmmmmm. Why am I not surprised by this turn of events? Looks like President Bush's oil buddies couldn't help save the incumbent Republicans from losing their seats. Time to start sticking it to us again.


UPDATE: April 18, 2008

The Iraq War drags on, the dollar continues to plummet, inflation runs rampant, taxes are up, and speculators continue to push oil prices to record highs!

These are not good economic times! The price of crude recently hit $117 a barrel, gasoline is back up over $3.65 a gallon in our area, and has hit $4 a gallon in some parts of the country (California & Florida). The Presidential election is coming this fall, but none of the politicians are saying much of anything about (1) how to end the war, (2) how to restore the value of the dollar, (3) how to bring inflation under control, and (4) how to drive the price of gasoline back down so Americans don't go broke at the gas pump.

We have over 100,000 combat troops in Iraq who have been playing hide-and-seek with a bunch of crazies for over five years now, which is a year longer than it took us to win World War Two!. Why don't we let those people sort out their own problems, and shift our military efforts to "managing" the oil supply in the region for our own best interests. Without cheap energy to fuel our vehicles and economy, America is in deep trouble!


UPDATE: April 25, 2008

It's Official! Gasoline Hits $4 a gallon in Chicago!

At least on BP station in Chicago is selling regular unleaded for over $4 a gallon ($4.02 to be exact). The average price in the suburbs is still around $3.69 to $3.89 a gallon, but it's headed up.

Congress is finally talking about restricting arms sales to Saudi Arabia in an effort to put pressure on the Saudis to increase production. Some are also asking why President Bush is not releasing any oil from the DOE Strategic Petroleum Reserve to increase oil supplies and drive down prices. Both of the measures might help a bit, but the REAL problem is commodity speculators driving up oil prices and oil companies manipulating supplies and prices for their own profit.

As public anger grows over soaring fuel prices, some are calling for price controls on gasoline and diesel fuel. It might help, but it would probably only create shortages. Others say we should slap the oil companies with windfall profit taxes, or regulate or nationalize these monopolies for the good of the country. Nationalizing is an interesting idea. They did that in Venezuela and the price of gasoline there dropped to 12 cents a gallon! The only drawback with that approach is that our government usually screws up every program it tries manage. Imagine bureaucrats like those from FEMA running the oil companies. The price might be a lot cheaper than it is now, but there would likely be shortages all over the country.

The real solution to this mess is to reduce our dependence on fossil fuels. That means switching to smaller, fuel-efficient vehicles like they drive in Europe, using more alternative fuels and biofuels, increasing the production of hybrid and plug-in hybrid vehicles, building new nuclear plants to provide clean, low-cost electricity to power plug-in hybrids and electric vehicles, living closer to where we work so we don't have to burn so much fuel commuting back and forth, and doing something (anything!) to stop urban sprawl. The more our cities continues to spread out, the more gas it takes each and every one of us to travel from A to B.


UPDATE: May 8, 2008

While Politicians Pontificate, Chrysler Announces Plan to Stabilize Gasoline Prices at $2.99 per Gallon for New Car Buyers!

In response to direct customer feedback citing the prospect of rising gas prices as a top concern, Chrysler LLC today announced its own economic stimulus package: an exclusive gas price protection policy that eliminates the risk of further spikes in fuel prices. With the U.S. purchase of eligible Chrysler, Jeep and Dodge vehicles, customers can enroll in the Let's Refuel America program and receive a gas card that immediately lowers their gas price to $2.99 a gallon, and keeps it there for three years. The offer is available at 3,511 U.S. Chrysler, Jeep and Dodge dealerships through June 2, 2008, and is available on vehicles ranging from popular new compacts, crossovers and minivans to full-size diesel-powered pickup trucks.

"Today we are proud to introduce an unprecedented program to help put customers' minds at ease and do something to help working people who are worried about the volatility of fuel prices and vehicle cost of ownership," said Jim Press, Vice-Chairman and President, Chrysler LLC. "The Let's Refuel America Price Guarantee puts money in your pocket today, and allows our customers to better manage their fuel expenses. And you can't get it anywhere else besides a Chrysler, Jeep or Dodge dealership."

This is the kind of action we need to see from our "leaders" in Washington D.C. So why aren't we getting it???


UPDATE: Fall, 2008

Gasoline Price Bubble Has Burst, Gas down to $1.50 a gallon in Iowa

On a recent trip to Iowa to visit relatives, I saw gas prices in the $1.50 range all across the state. For some reason, the price of gas in Illinois has remained in the $1.80 range.



UPDATE: February 2009

States Jacking Up Gasoline Taxes To Raise Much Needed Revenue

Since the economy tanked, states are looking for ways to replace lost income and sales tax revenues. So guess what? They are jacking up gasoline taxes. Illinois now has one of the highest gasoline taxes in the nation at $57.9 cents/gallon. Car-crazy California, by comparison, is up to 63.9 cents/gallon. Federal gasoline taxes are still lagging at 18.4 cents/gallon (where they have been for years), but will soon be going up too as politicians in Washington D.C. scramble to dig even deeper into our pockets.



UPDATE: August 2012

Gasoline Prices Average $3.54 per Gallon Nationwide

Big Oil continues to stick it to the American public!

As crude oil prices rise and fall, gasoline prices are averaging around $3.54 per gallon nationwide. Prices range from over $4.00 a gallon in the Chicago metro area, and $3.73 a gallon in California to a low of $3.31 a gallon in the Gulf Coast area.

Higher fuel prices in some areas are attributed to higher taxes (see chart below) and reformulated fuel requirements to reduce exhaust emissions.

Also of note is the fact that U.S. gasoline consumption is DOWN significantly according to the U.S. Energy Information Administration:

"In 2011, the United States consumed about 134 billion gallons (or 3.19 billion barrels) of gasoline, a daily average of about 367.08 million gallons (8.74 million barrels). This was about 6 percent less than the record high of about 142.38 billion gallons (or 3.39 billion barrels) consumed in 2007."

Much of the drop in consumption can be attributed to the sluggish economy, and a slight increase in the use of hybrid vehicles and smaller, more fuel efficient cars.

So the question is, why are gasoline prices still so high? Apparently, Big Oil can ignore the basics laws of supply and demand, and keep their prices artificially high. The only explanation we've been able to come up with (besides outright price fixing by the oil companies) is that the refineries are selling their surplus gasoline stocks to offshore customers to keep fuel prices high, rather than lowering their prices for U.S. consumers. Screwed again......

Here is a link to an interesting graphics that shows how much we are spending for fuel, how expensive it is to drive a vehicle, and how much money Big Oil is raking in: GASSED: Fuel Consumption & Costs.



breakdown of fuel costs
This is why we are paying so much for gasoline and diesel fuel.


UPDATE: January 23, 2015

Gasoline Prices Plummet to Lowest Prices in Years

No one would have guessed that gasoline would be selling for under $2 per gallon in many states as of this writing. The rapid plunge in gasoline prices is supposedly being fuel by a "price war" by OPEC oil producers against shale oil producers in the U.S. The truth is world oil production is far exceeding world oil demand. With supplies up and demand down prices have nowhere to go but down - at least for now. Prices will likely reverse very quickly when the powers that be decide enough is enough and it's time to start cutting back production and driving up the price.

We suspect the real reason behind the sudden price plunge is to exert financial pressure on Russia for their aggression in Ukraine, on Iran for their desire to build nuclear weapons, and on other OPEC countries that are not U.S allies. So far the price plunge seems to be working on the geopolitical scale. The Russian Ruble has collapsed, and Iran and other OPEC producers who are dependant on oil revenues are all hurting from the steep downturn in crude oil prices. A year ago crude oil was $115 a barrel. Today, it is $49 a barrel. Most of the oil producing countries need crude oil prices above $70 to $90 barrel to balance their budgets.

Another explanation is that Saudi Arabia has opened up the faucet to intentionally drive crude prices down in an attempt to force tar sand oil producers and high cost new drilling ventures out of business. The Saudis have tons of cash reserves and can ride out the price war but other oil producers cannot.

gas price chart
This chart from GasBuddy.com shows the roller coaster ride in gas prices from 2007 to 2015.



Update: August 2015

Surprise! Gas Prices Shoot Back Up Overnight

Although crude oil prices are currently near a 6-year low ($42/barrel) and gas prices have been averaging under $2.40 a gallon in most areas of the U.S., an "unplanned" shutdown of BP's Whiting Indiana refinery sent gas prices soaring 70 cents to as much as $1.00 a gallon overnight, pushing prices over $3 a gallon in many areas of the Midwest ($3.69 a gallon in Chicago!).

It's hard to believe that the temporarily closing of one refinery would have such a widespread impact on gas prices. It's also hard to believe that the refinery does not have sufficient fuel stored on site to maintain normal supply during an unplanned shutdown. The so-called "shortage" created by the Whiting refinery shutdown will likely keep gas prices high until after Labor Day.


Update: December 2015

Gas Prices Average Under $2 Gallon Across U.S.

With crude oil prices under $40 a barrel, retail gasoline prices have once again dipped to under $2 per gallon. Good news for consumers, and good news for the transportation industry. How long the low prices will last is anyone's guess.



Update: Summer 2016

Oil Glut Keeps Gas Prices Under $2.25 Gallon in 2016

Americans are burning up 385 million gallons of gasoline a day, and are driving more miles than ever. Yet due to oil over-production and a price war by Saudai Arabia against U.S oil drillers and frackers, there is currently a huge glut of oil on the market. Storage facilities are at capacity. This has kept prices down, to under $2 a gallon in some areas off and on this spring and summer. The fact that this is also an election year may have something to do with the low prices too. I wonder how quickly gas prices will shoot back up as soon as the Presidential election is over in November?



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