NationStates Jolt Archive

I am going to start this new little thing I call, "Predictive News". In it, I shall set up a news headline that could possibly be in the future, and you will predict whether or not it comes true. Here is the first one:


Early August, 2006

Gas Prices climb over 4 dollars a gallon!

My bad poll show up now.

Well, a little clarification: Do you mean prices will remain above $4 per gallon for an extended time, or will they briefly spike above that level due to a natural disaster like last year?

Personally, I think they won't. There is some significant oil and refining capacity coming on line over the next few years that will dampen prices, along with improvements in efficiency and conservation; gasoline demand in the US is hovering over the unchanged mark and any price spikes will knock it down considerably. The trend going in to 2007 is likely to be negative for oil prices with the possibility of hurricane driven price spikes. I'm thinking around $2.80-$3.00 most likely, with a minimum of $2.40 and a maximum of $3.20 for regular unleaded.

So I say: No. Gas will not cost $4 per gallon by August

(Right now, futures for August gasoline are only $2.13 per gallon, equally a retail price of $2.73 or so)

I predict... proles will spice their gas with $4.00 curries. All summer long, or for as long as the buffet holds out.

Well, a little clarification: Do you mean prices will remain above $4 per gallon for an extended time, or will they briefly spike above that level due to a natural disaster like last year?

Personally, I think they won't. There is some significant oil and refining capacity coming on line over the next few years that will dampen prices, along with improvements in efficiency and conservation; gasoline demand in the US is hovering over the unchanged mark and any price spikes will knock it down considerably. The trend going in to 2007 is likely to be negative for oil prices with the possibility of hurricane driven price spikes. I'm thinking around $2.80-$3.00 most likely, with a minimum of $2.40 and a maximum of $3.20 for regular unleaded.

So I say: No. Gas will not cost $4 per gallon by August

(Right now, futures for August gasoline are only $2.13 per gallon, equally a retail price of $2.73 or so)

I mean that they will at least reach that point.

I mean that they will at least reach that point.

No, not in August of 2006.

Gas companies aren't stupid. They will lower prices before the election so their bought and paid for congressmen will get reelected. Watch out after November though.

Gas companies aren't stupid. They will lower prices before the election so their bought and paid for congressmen will get reelected. Watch out after November though.

If gas companies had control over prices, they would...but fortunately they don't. The only thing controlling prices is the market, and the market is quite apolitical seeing as how it is not a sentient being and definitely not one with political predilections.

Gas companies aren't stupid. They will lower prices before the election so their bought and paid for congressmen will get reelected. Watch out after November though.

True, and the saddest part is there will be enough people stupid enough to fall for it. But I wouldn't give the gas companies too much credit in the brains department if any at all... they've gotta be aware that they need to work on setting a new fuel standard yet they're just twiddling their thumbs.

oooo a whole $4. Look at me being shocked:rolleyes:

How come everyone bitches about the price of gas but nobody bitches about the price of real estate and home construction? I guess Centex is not as fun to pick on as BP. It couldn't be another agenda - could it?

How come everyone bitches about the price of gas but nobody bitches about the price of real estate and home construction? I guess Centex is not as fun to pick on as BP. It couldn't be another agenda - could it?

Well, people can't use their gas tank as a cash machine to buy things. They love the high price for their home and the plentiful equity it produces, but they convienently forget the double-digit inflation it produces and the artificial bubbles it creates in markets with the corresponding negative effects in the long term.

Remember, the free market is only good and wonderful when it benefits you and when it doesn't it is either due to political manipulations or price gouging...

This wouldn't happen under socialism. Gas would cost $0.50 a gallon and it would rain gold coins and we'd shit cotton candy.

This wouldn't happen under socialism. Gas would cost $0.50 a gallon and it would rain gold coins and we'd shit cotton candy.

Except you'd get two gallons of gas once a week, it would fuck up your engine beyond repair, and the gold and cotton candy would be taken away by the upper levels of the Party leadership at gunpoint.

They'd take the cotton candy from your ass via some method that would 99.99% of the time involve you dying via gunshot or hard labor.

Except you'd get two gallons of gas once a week, it would fuck up your engine beyond repair, and the gold and cotton candy would be taken away by the upper levels of the Party leadership at gunpoint.

They'd take the cotton candy from your ass via some method that would 99.99% of the time involve you dying via gunshot or hard labor.
You're funny when you're full of shit.

Except you'd get two gallons of gas once a week, it would fuck up your engine beyond repair, and the gold and cotton candy would be taken away by the upper levels of the Party leadership at gunpoint.

They'd take the cotton candy from your ass via some method that would 99.99% of the time involve you dying via gunshot or hard labor.
Well, at least when the Vanguard comes for you and tell them to kiss your ass it'll be loaded with sugary goodness.

You're funny when you're full of shit.

Give me social-democratic capitalists like France or Germany over a socialist hellhole like the USSR anyday.

Give me social-democratic capitalists like France or Germany over a socialist hellhole like the USSR anyday.
A-freaking-men.

Well, at least when the Vanguard comes for you and tell them to kiss your ass it'll be loaded with sugary goodness.

Serfdom with a Smile?

If gas companies had control over prices, they would...but fortunately they don't. The only thing controlling prices is the market, and the market is quite apolitical seeing as how it is not a sentient being and definitely not one with political predilections.
If we were dealing with supply and demand the prices would rise but the profits would go down. The profits would go down because you wouldn't have product to sell so even with higher prices you would make less. What other business makes record profits when the supply of their product is low? In order to make a profit you need a supply.

This obviously isn't a case of supply and demand. The supply is pletiful enough to bring record profit. If there is enough supply to bring record profits there is obviously not a supply shortage.

To take this out of the realm of oil. If there were a disease that wiped out 80% of the corn crop. The price of corn would skyrocket. But would the farmer make a record profit? No because he only has 20% of his crop to sell. He would make a lot on that 20% but that profit wouldn't be equal to a 100% crop at a lower price.

That is how supply and demand works.

Give me social-democratic capitalists like France or Germany over a socialist hellhole like the USSR anyday.



Mmmmm 20% youth unemployment. 10% persistent nationwide unemployment. Stagnat economy. yummy.

If we were dealing with supply and demand the prices would rise but the profits would go down. The profits would go down because you wouldn't have product to sell so even with higher prices you would make less. What other business makes record profits when the supply of their product is low? In order to make a profit you need a supply.

This obviously isn't a case of supply and demand. The supply is pletiful enough to bring record profit. If there is enough supply to bring record profits there is obviously not a supply shortage.

To take this out of the realm of oil. If there were a disease that wiped out 80% of the corn crop. The price of corn would skyrocket. But would the farmer make a record profit? No because he only has 20% of his crop to sell. He would make a lot on that 20% but that profit wouldn't be equal to a 100% crop at a lower price.

That is how supply and demand works.

yeah! Just like all those homebuilders like Centax who could barely squeeze out a profit while the costs of their materials skyrocketed. Those poor bastards! (http://finance.yahoo.com/q/is?s=ctx)

Whhops! I gues not. Oh well. So much for your theory. Got water all over the place!

Mmmmm 20% youth unemployment. 10% persistent nationwide unemployment. Stagnat economy. yummy.

I don't really like it either, but when forced to choose between Germany or the USSR I'll go with Germany. It's kind of a lesser of two evils...

Well, a little clarification: Do you mean prices will remain above $4 per gallon for an extended time, or will they briefly spike above that level due to a natural disaster like last year?

Personally, I think they won't. There is some significant oil and refining capacity coming on line over the next few years that will dampen prices, along with improvements in efficiency and conservation; gasoline demand in the US is hovering over the unchanged mark and any price spikes will knock it down considerably. The trend going in to 2007 is likely to be negative for oil prices with the possibility of hurricane driven price spikes. I'm thinking around $2.80-$3.00 most likely, with a minimum of $2.40 and a maximum of $3.20 for regular unleaded.

So I say: No. Gas will not cost $4 per gallon by August

(Right now, futures for August gasoline are only $2.13 per gallon, equally a retail price of $2.73 or so)
One hurricane in the Gulf. Just one.

One hurricane in the Gulf. Just one.

If that...one attack on a Saudi pipeline or a tanker in the Hormuz might be enough. Of course, I'm also guessing that the OP implied a price above $4 for at least a few days; usually, one time disruptions produce only temporary volatility. Oil went up $2+ when Nigerian oil workers were kidnapped, so obviously the supply situation is tight enough and the market is tense enough that something big could be a disaster.

Now next year...I don't know.

If we were dealing with supply and demand the prices would rise but the profits would go down. The profits would go down because you wouldn't have product to sell so even with higher prices you would make less. What other business makes record profits when the supply of their product is low? In order to make a profit you need a supply.

Well, no. Increases in demand result in higher supply and higher profits, and that is exactly what we are seeing. And, if supply drops in a tight market with strong demand, it can cause prices to explode upward, resulting in more revenue per barrel despite slightly lower production...the market has to inflict demand destruction in order to balance the two if supply drops.

Also, there is a lag between oil supply and demand. Remember, 7 years ago oil was $10/barrel (as low as $5 for certain grades) which meant oil companies had neither the desire nor the money to invest in production with the result being that after demand inevitably recovered prices had to climb to balance the two. Even more problematic is the fact that big oil projects have timelines stretching in to the 20, 30, even 40 year range; in 1998, the IEA and others were expecting cheap oil (under $25/bbl, the industry cutofF) out to 2020, with the result being that long-term projects like that were mothballed further reducing available supply.


This obviously isn't a case of supply and demand. The supply is pletiful enough to bring record profit. If there is enough supply to bring record profits there is obviously not a supply shortage.

Oil companies invest, on average, $0.90-$0.95 of every dollar of revenue just to keep production up. In fact, if the price of production continues to rise integrated oil companies may very well start losing money due to their extremely low margins; they're only looking at 4-5% now despite oil prices rising 600% since 1998.

Record nominal profits don't mean anything; Exxon and the others are big companies, so even a small percentage of revenue will equal a huge profit. If Cisco Systems were the same size as Exxon, their profits would be over $120 billion due to the size of their margins...that's almost 4 times the profits of Exxon. In fact, oil companies have profit margins easily only 1/10th the size of other sectors...they're literally barely breaking even.

To take this out of the realm of oil. If there were a disease that wiped out 80% of the corn crop. The price of corn would skyrocket. But would the farmer make a record profit? No because he only has 20% of his crop to sell. He would make a lot on that 20% but that profit wouldn't be equal to a 100% crop at a lower price.

There actually is about 2 million bpd shut in for a variety of geopolitical factors that the industry has no control over; Shell is losing easily $30 million dollars per day for each day its one 500,000 bpd field in Nigeria is shut in, not including refining or other revenue...that's $11.9 billion per year from one field.

Even so, the situation is not just supply driven. Surging demand drives prices up because the supply can't keep up with it, and also because the natural trend of a rising-demand market is for prices to go upward due to the rising marginal cost of additional oil production; oil demand today is at its highest levels ever, and shows no signs of a major slowdown like we had in the 1990's...the trend for oil will be up until another recession or a price spike that drives long term demand destruction.

.they're literally barely breaking even.

Uh if their profit margin didn't go up they would be at or below normal profits (depending on if product for sale was at or less than normal) they wouldn't be at record profits. If product volume went up with increased demand there could be aditional profit but that isn't what we are told.

Uh if their profit margin didn't go up they would be at or below normal profits (depending on if product for sale was at or less than normal) they wouldn't be at record profits. If product volume went up with increased demand there could be aditional profit but that isn't what we are told.
You didnt' read Vetalia's post did you?
Unlike your example of 80% of a product being wiped out, what he have is supply not keeping up with demand, causing price to go up, but since supply is creeping up, their profits are increasing.
Yet their profit margin is one of the lowest of all businesses.

Unless someone stops selling us gas, I'd say no.