Can We Handle $4 Gas?

A lot of things are getting better in the economy. Gas prices are not one of them.

After rising 17% since December, nationwide gas prices are siphoning enough cash out of consumers' pockets to make some worry that we could be headed back into a recession. It's a legitimate fear. "We need to look at the situation of gas prices today," Rick Santorum said last month. "We went into a recession in 2008 because of gasoline prices. The bubble burst in housing because people couldn't pay their mortgages because we're looking at $4-a-gallon gasoline. And look at what happened, economic decline." That's an incomplete, yet otherwise accurate, analysis.

But some aren't as worried this time around. Standard & Poor's published a report (PDF file, Adobe Acrobat required) last week rebutting those fretting about the consequences of $4 gas. "The U.S. Economy Can Handle $4 Per Gallon of Gasoline," it states assuredly.

How? For one, there's little sign that rising gasoline prices are causing consumers to retrench in a meaningful way -- yet, at least. Despite higher gas prices, "consumer spending on clothing and accessories was up 5.3% versus a year ago, spending increased 4.3% at sporting goods, hobby, book, and music retailers, and the food and drinking establishment business increased by 8.2% year over year," S&P wrote.

There are a few reasons for this. Nominal incomes are rising, up about 3% in the last year. That doesn't make people richer -- inflation ate away most of the gain -- but it does offset part of the rise in gas prices. People are also driving less and doing it in more fuel-efficient vehicles. And after defaulting or refinancing on painfully high mortgages, households have much more flexibility now than they did a few years ago. In 2007, debt payments made up 14% of an average household's disposable income. Today, it's 11%. That makes a huge difference.

But it was this line in S&P's report that caught my attention: "While consumers are definitely paying more at the pump, many consumers are benefiting from the lowest winter heating bills in years due to the combination of natural gas prices and the exceptionally mild winter in the northeastern U.S."

Surging gas prices could wallop consumers if you assume all else is equal. But it's not. Recent headlines that read "Home Heating Costs Fall to Lowest Point Since 2001" draw less attention than those detailing higher gasoline prices, but they're just as important to households' finances. 

Natural gas -- which heats about half of U.S. homes -- has fallen 40% in the last year, with prices now near a decade low. The Energy Information Administration estimates that the average home that heats with natural gas will spend $204 less this year than they have during the average of the last five years. For a household using 60 gallons of gasoline per month, that savings offsets the entire recent spike at the pump.

Why don't we give credit to such savings? Duke economist Dan Ariely has a theory for why rising gasoline prices feel particularly miserable compared with other commodities. He explains:

For the several minutes that I stand at the pump, all I do is stare at the growing total on the meter -- there is nothing else to do. And I have time to remember how much it cost a year ago, two years ago and even six years ago. Yet I have no such memory about the prices of items in any other category. I have no idea how much milk was six years ago, how much bread was three years ago or how much yogurt was a week ago.

Or how much natural gas prices were a year ago, for that matter.

Another way to look at this is all energy consumption -- including gasoline, heating, electric utilities, etc. -- as a percentage of all consumer spending:

Sources: Bureau of Economic Analysis, author's calculations.

This chart ends in December, so it doesn't capture all of the rise in gasoline prices (or the more recent decline in natural gas prices). But what it shows is important: At best, energy consumption as a share of income is currently about average, if not a little below it.

"We are inclined to conclude that $4.00 per gallon of gasoline will not derail the U.S. economy," S&P wrote, "but acknowledge that $5.00 per gallon presents an entirely different set of risks, especially as we approach the summer peak driving vacation months."

That seems like a reasonable stance. Never underestimate the wrath caused by high gas prices -- and rising gas prices are something to be legitimately upset about -- but paying $4 at the pump might not be the nail in the coffin some presume it will be.

If you do think oil prices are bound to keep leaping higher, oil giants like ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) look attractive at current prices. For more energy picks, consider The Motley Fool's free report, "The Only Energy Stock You'll Ever Need." It's free. Just click here.

Fool contributor Morgan Housel owns shares of ExxonMobil and Chevron. Follow him on Twitter @TMFHousel. Motley Fool newsletter services have recommended buying shares of Chevron and ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 07, 2012, at 3:57 PM, portefeuille wrote:

    --------------

    Gas Prices in U.S. Still Dwarfed by European Costs

    February 21, 2012 1:49 PM EST

    ...

    Prices Around the World

    Compared to Europeans, Americans pay a small sum on gasoline. The price per gallon in some European nations is often double or triple the amount it is across the Atlantic.

    Most of the drastic price difference is due to taxes. European governments impose a significantly higher at-the-pump tax, including a VAT -- or value add tax -- in many places. Where as in the United States, about 10 percent of the cost of oil comes from taxes, it's closer to 50 percent in most European states.

    Gas prices have fallen in Europe in the past six months (and risen between January and February), but the strength of the euro and pound sterling compared to the dollar have kept the prices high.

    The below chart shows the 10 highest per gallon prices in Europe, as of Tuesday.

    http://img.ibtimes.com/www/data/images/full/2012/02/21/23654...

    ...

    --------------

    http://www.ibtimes.com/articles/302292/20120221/gas-prices-w...

  • Report this Comment On March 07, 2012, at 3:58 PM, portefeuille wrote:

    slightly less than $10 per gallon is not a problem over here ...

  • Report this Comment On March 07, 2012, at 4:00 PM, portefeuille wrote:

    ... being up around 50% with my fund since initiation in March 2010 helps of course, hehe.

    http://caps.fool.com/Blogs/fund-trades/716433.

  • Report this Comment On March 07, 2012, at 4:38 PM, DJDynamicNC wrote:

    Meanwhile, my bus fare was recently reduced from $1.25 to a dollar even. The savings over gas helps me pay my automotive loan payment which is... let's see, carry the one, add the remainder... yes, zero dollars.

    Of course, I pay ten times that for insurance and maintenance.

    Apologies if that sounds like gloating, in the future I will try to make my gloating sound less like gloating.

  • Report this Comment On March 07, 2012, at 4:43 PM, goldeagle1981 wrote:

    May be the correct title of this article should be "Can we handle $5 gas" instead because in many parts of the country gas price is already above $4: http://gasbuddy.com/GB_Price_List.aspx

    In Orlando, Florida, gas price had reached $ 5.87. The funny part that we were told everyday that the global supply of oil is much greater than that of global demand and that in a few years US of A will become an oil exporter instead of an importer. Now, may I ask, why our gas price continues to rise?

    Is it because the purchasing power of our paper money keeps going down which is a direct result of our contiued increase in both national and personal debts?

    May be in ten years, the correct title will be:

    "Can we afford $20 gas" because by then gas price may double twice or more if our paper money continue to lose value.

    There is really only one solution, as soon as we get pay we need to convert our paper currencey into gold or silver coins....

    Let us compare:

    In 1974, gas price had increased rapdily from that in 1973, average price of one gallon of gas was about 55 cents. The federal minimum wage then was $ 2.00 per hour, that means each hour's minimum wage pay will be able to purchase about 3.64 gallon of gas. Fast forward, the current fed minimum wage is $ 7.35/hr., and the average gas price in the country is about $ 3.76, that means one hour's min wage pay will be enough to purchase only 1.95 gallon of gas today.

    In 1974, the average price of silver per troy ounce was $ 5.00, each dollar (face value) worth of 90% US silver coins (halve, quarters and dimes that were made prior to 1965) contains 0.72 troy oz of silver. That means each $1 face value of 90% silver coins was worth $ 3.60 in 1974, which would be enough to buy about 6.55 gallon of gas then. Today, the most recent silver spot (per troy oz.) price was $ 33.41, that means one dollar face value of silver coins is worth $ 24.08, which will be enough to buy about 6.40 gallon of gas. In short, in terms of 90% silver coins, the price per gallon of gas in 1974 was about 15.3 cents and in 2012 it is about 15.6 cents. That means the gas price actually did not really go up that much but our the purchasing power of our paper money had been greatly depreciated since 1974.

    Now, will there be any points to save with an current interest rate that is less than rate of inflation?

  • Report this Comment On March 07, 2012, at 4:51 PM, TMFMorgan wrote:

    <<In Orlando, Florida, gas price had reached $ 5.87. >>

    The link you posted has Orlando at $3.77

    <<The funny part that we were told everyday that the global supply of oil is much greater than that of global demand and that in a few years US of A will become an oil exporter instead of an importer. Now, may I ask, why our gas price continues to rise?>>

    The U.S. actually just became a net exporter of fuel products for the first time since 1949. But keep in mind, oil is a global commodity. Events overseas -- say, Iran threatening to close Hormuz -- impacts the price of oil *everywhere*.

    <<Is it because the purchasing power of our paper money keeps going down which is a direct result of our contiued increase in both national and personal debts?>>

    If it were, how do you explain the 40% fall in the price of natural gas over the last year?

  • Report this Comment On March 07, 2012, at 5:11 PM, DJDynamicNC wrote:

    "Is it because the purchasing power of our paper money keeps going down which is a direct result of our contiued increase in both national and personal debts?"

    There was at least one article posted in this very space about the decrease in personal debt held nationwide over the last few years. I'm afraid I have difficulty buying your claim.

  • Report this Comment On March 07, 2012, at 5:19 PM, TMFMorgan wrote:

    <<Now, will there be any points to save with an current interest rate that is less than rate of inflation?>>

    Yes. Buy blue chip stocks. You'll crush inflation.

  • Report this Comment On March 07, 2012, at 5:24 PM, DJDynamicNC wrote:

    "In 1974, gas price had increased rapdily from that in 1973, average price of one gallon of gas was about 55 cents. The federal minimum wage then was $ 2.00 per hour, that means each hour's minimum wage pay will be able to purchase about 3.64 gallon of gas. Fast forward, the current fed minimum wage is $ 7.35/hr., and the average gas price in the country is about $ 3.76, that means one hour's min wage pay will be enough to purchase only 1.95 gallon of gas today."

    We are in agreement that the federal minimum wage has not kept up with the cost of living. I'm glad you agree. I look forward to increasing it to a reasonable rate.

    At any rate, since gasoline's (almost) only purpose is mobility, what would be more useful to measure is the utility of transportation that a person can derive from one hour's work.

    That means measuring miles per gallon, for drivers (a statistic which is most assuredly much higher than in 1973, the worst year for average US fuel efficiency according to Gizmag) and transit rates per mile of coverage for city dwellers.

    But I think that a car-centric infrastructure is a huge drag on our economic development, forcing people to constantly lock up large quantities of resources in giant mobile rust boxes that depreciate rapidly and break frequently and kill tens of thousands of people annually. Every step we can take towards a carless or car-reduced future is a good one.

  • Report this Comment On March 07, 2012, at 5:26 PM, DJDynamicNC wrote:

    " 1974, the average price of silver per troy ounce was $ 5.00, each dollar (face value) worth of 90% US silver coins (halve, quarters and dimes that were made prior to 1965) contains 0.72 troy oz of silver"

    If you used processing power instead of silver as your arbitrary unit of comparison, you'd find that the dollar has never been stronger.

    It is easy to say anything you like, if the rules are "pick something and compare it to anything else."

  • Report this Comment On March 07, 2012, at 5:32 PM, GBlock1 wrote:

    With rising gas prices, what's everyone's take on the RV industry and RV stocks?

  • Report this Comment On March 07, 2012, at 5:36 PM, TMFMorgan wrote:

    ^ Yep. Further: Silver is up about 7x since 1974. With dividends, the S&P is up 58.6x. Case rested.

  • Report this Comment On March 07, 2012, at 5:38 PM, scootrnc wrote:

    Don't care....care gets 45+ MPG...knock yourselves out...

  • Report this Comment On March 07, 2012, at 5:54 PM, slpmn wrote:

    One thing about gas being $10/gallon is the Europeans don't poop their pants when it goes up a buck (or euro, whatever). Their society adapted to expensive fuel long ago. For us it's a 30% increase and everyone flies into a tizzy.

    We like our junk food and our gas cheap in this country. Thank the lord the price of a McDonalds hamburger isn't sensitive to persian gulf saber rattling or we would have some serious problems.

  • Report this Comment On March 07, 2012, at 5:55 PM, DJDynamicNC wrote:

    @GBlock - to be honest, I'm unclear on the future for RVs. On the one hand, rising fuel prices heavily impact them in day to day expense terms. On the other, if you can afford an RV, you can probably afford a pretty decent chunk of gasoline.

    I really just don't know enough about the industry to make a sound judgment call.

  • Report this Comment On March 07, 2012, at 5:56 PM, davirom wrote:

    Is anyone else bothered that Rick Santorum has looked at the 2008 recession and concluded that the cause was gasoline prices?

  • Report this Comment On March 07, 2012, at 6:01 PM, esh21167 wrote:

    Once saw the documentary 'A Crude Awakening' where someone spoke of Americans not caring about the price of gas until it costs more than gourmet coffee.

    I was at a Target recently that had a Starbucks and I quickly calculated their price for coffee: Just over $15/gallon, and lattes were over $30/gallon. But people seem very happy to pay that, and yet complain about $4/gallon gas.

    Further, I don't know about the entire US, but in the greater Philadelphia area, I am almost always the slowest driver on the road at the speed limit to +5 over. 3/4 of drivers are passing me like I'm parked. People say the price is hurting them, but they surely don't act like it does.

  • Report this Comment On March 07, 2012, at 6:04 PM, xetn wrote:

    "The U.S. Economy Can Handle $4 Per Gallon of Gasoline," it states assuredly."

    As long as you are not unemployed, underemployed, or retired. Otherwise, no problem.

    Recently, I read a report that stated that the rising price of gas was really a result of the falling value (purchasing power) of the dollar. Seems resonable since the 1913 dollar (the year the Fed was created to keep the currency stable) has fallen by 98%. Way to go Fed!

  • Report this Comment On March 07, 2012, at 6:14 PM, DJDynamicNC wrote:

    @Davirom - I simply don't have time to be outraged by all the outrageous things Rick Santorum says, or else yes, I probabyl be a little worried.

  • Report this Comment On March 07, 2012, at 6:15 PM, DJDynamicNC wrote:

    "As long as you are not unemployed, underemployed, or retired. Otherwise, no problem."

    Agreed. Makes it very curious that people want to cut off unemployment insurance and social security.

  • Report this Comment On March 07, 2012, at 6:15 PM, colleran wrote:

    'Rick Santorum said last month. "We went into a recession in 2008 because of gasoline prices. The bubble burst in housing because people couldn't pay their mortgages because we're looking at $4-a-gallon gasoline. And look at what happened, economic decline." That's an incomplete, yet otherwise accurate, analysis.'

    That is the first time I have heard gas prices as a cause for the recession. What analysis do you base this on? As far as I am concerned, it is not only incomplete, it is plain wrong.

  • Report this Comment On March 07, 2012, at 6:18 PM, EJDubya wrote:

    Econ 101. Supply and demand - deal with it. Worldwide, our gas is pretty cheap, at least outside of some 3rd world countries. Just north of us (Canada) has much more expensive gas, as does Europe as noted. Park the Hummer, drive the Prius, Insight, etc., or take the bus/train/subway/bike/feet. It's all about choices.

    Dubya

  • Report this Comment On March 07, 2012, at 6:27 PM, TMFMorgan wrote:

    colleran,

    I think it's pretty well agreed upon that gas prices made 2008 more miserable than it otherwise would have been, and likely pushed consumers over the edge. More here:

    http://www.voxeu.org/index.php?q=node/3664

    FWIW, "extremely incomplete" may have been better wording. Gas prices helped light the match that ignited fuel spread years before (the housing bubble).

  • Report this Comment On March 07, 2012, at 6:37 PM, steltek wrote:

    It's interesting to note that even in countries where taxes alone on gas are higher than $4 per gallon, like Italy (~$4.80) and Greece (~$5.50) they still cannot make good on social entitlements. These countries also have higher income tax rates on people making over 100K euros than we're proposing on people making over $250K. As of 2011, Italy is 43% over 75K, 2012 Greece is 45% over 100K. Even higher taxes on both income and fuel do not guarantee a country's solvency.

  • Report this Comment On March 07, 2012, at 6:38 PM, dennyinusa wrote:

    esh21167

    You hit the nail on the head.

    I am amazed people will spend $500.00 on a phone and not bat an eye. Then 6 months later buy new phone because it is faster.

    Like knowing the answer to “What you doing?”, Reply “Oh nothing”, is going to change their life if they know it 10 seconds faster.

  • Report this Comment On March 07, 2012, at 6:39 PM, TMFBiggles wrote:

    @ xetn -

    You know, I see this whole "the Fed destroyed the value of the dollar, it's lost 98% of its value since 1913!"

    In 1913, average annual income was about $17,500 at current rates (inflation adjusted). A Model T would have cost you $12,000. The average home didn't have a radio, to say nothing of television or the Internet. The average lifespan was about 52 years long and for many people it consisted of nasty, brutish work in factories that had a tendency to burn down or maim people with alarming frequency. There were four distinct recessions in just the one decade preceding and including 1913, and every single one saw trade and production drop close to or into the 20% range.

    But hey, your dollar was tied to gold. That was pretty cool.

    Really, now.

    - Alex

  • Report this Comment On March 07, 2012, at 6:55 PM, Graminal1 wrote:

    The oil companies get bashed for high gasoline prices which is total spin by the liberal media.

    Here are some facts, no spin.

    The oil companies, like the Republicans, cannot articulate their position in a manner that the “folks” can easily understand. For example in 1967, the average price of oil and gas were $3.12/bbl and 36 cents/gallon, respectively. With oil at $105/bbl today, if that ratio still existed, the price of gasoline would be $12.12/gallon! In 1967, Exxon’s profit margin was 8.90%. In 2011, the number was hardly higher at 9.07%. So, the oil companies are MUCH more efficient today and doing a great job. (They are even more efficient when you consider there was lead in gasoline in 1967. It is much more costly to produce unleaded gasoline due to increased processing and lower yields.) The higher dollar profits are simply due to much a higher raw material price. Blame the environmentalists and Democrats for refusing to allow reasonable drilling. We could be energy independent and have $2.5/ gallon gasoline.

  • Report this Comment On March 07, 2012, at 6:57 PM, TMFMorgan wrote:

    Well said, Alex.

  • Report this Comment On March 07, 2012, at 7:12 PM, williamkennedy wrote:

    you are a moron. Santorum's timeline is completely wrong. the US was in recession in 2007, before the $4 gas prices. If you know the lie, then all you are is a liar. if you don't know the lie, you are stupid. Either way you are useless for advice or education.

  • Report this Comment On March 07, 2012, at 7:15 PM, TMFMorgan wrote:

    ^ Please note the "that's an incomplete" reference after quoting Santorum.

  • Report this Comment On March 07, 2012, at 7:59 PM, hbofbyu wrote:

    DJDynamic -

    I couldn't agree more about your opinions on the automobile. We pay dearly for their use, upkeep, depreciation, accidents, pollution - there is just a huge cost on society. I may be biased because I have also lost a few friends and many aquaintences to the autombile. One a drunk driver, one did not see my high-school buddy on his motorcycle, the most talented girl my senior year was killed in a roll-over. We don't blink at 40,000 lives lost each year on our highways but we drop $57 billion on Homeland Security ($8.1 billion for the TSA) to keep an explosion or airplane crash from killing 200 people. I just wish I had an alternative like a train. I live in the west and there is no other option except to commute daily with semi-trailer trucks at 80 mph (driving a Smart car is a death trap).

    Morgan,

    Which Blue Chips are better than others for beating inflation?

  • Report this Comment On March 07, 2012, at 8:28 PM, Davemuse wrote:

    As someone already mentioned, $5 dollar gas is where we are headed, and so average people are looking at spending $600-1000 more each year for gasoline. The half that are enjoying the drop in natural gas prices obviously won't be hurt that bad. But all kinds of prices are going up, especially food, and though the percentage is less, the total of all inflation is going to be larger than what people face with gasoline. Groceries, medical costs, cell charges, you name it. In total, rising prices along with median incomes staying unchanged, the result is REDUCED buying power for most everyone except those with real wealth who can absorb the higher prices. Since our economy is driven by purchasing goods and services, and if there is a REDUCTION, the overall economy SHRINKS.

  • Report this Comment On March 07, 2012, at 8:55 PM, Chontichajim wrote:

    I wish gas would go down to $4/gallon but agree that by itself the dividends from BVO, BPT and gains from CVX and COP take the bite out of things.

    I hope we do not go overboard in shifing NG to a vehicle fuel. Our utility bill is low because we live in a warm climate (low gas use on top of low gas price) with a natural wind tunnel (wind farm on other side of river) to give us free air conditioning in summer.

    What workds badly if the gas remains high are tranport costs for everything we buy and use, less money spent on consumer non-essentials, and governement costs/debt.

  • Report this Comment On March 07, 2012, at 8:57 PM, Chontichajim wrote:

    I meant MVO not BVO.

  • Report this Comment On March 07, 2012, at 9:00 PM, ybnvsfool wrote:

    More BS from MF. Why is $4.00 gas OK when we could have $2.00 gas? If you want to get the economy going agian, skip all of the BS and open up drilling and full capacity refineries again. Like it or not, we are going to be dependent on oil for 30 years or more. Anyone that tells you different is a fool indeed.

  • Report this Comment On March 07, 2012, at 9:32 PM, Chontichajim wrote:

    ybnvsfool ; CVI is on my watchlist (don't own it). They claimed a temporary shut down of their two refineries was due to too much refined gas in the pipeline. East Coast pipelines are shutting down since Brent can't compete with Midwest oil prices. West Coast refineries may close over the next 15 years unless we can replace Alaskan oil products with Canadian (which may not go to the West Coast). How do you propose forcing private companies to keep open or increase refining when they find it is not in their economic interest. Nationalize oil/refineries? Drilling has increased at high rates over the past few years but companies will not drill unless it is in their economic interest even if a location is open. Do we try to compel drilling in expensive locations at a rate not optimal to companies?

  • Report this Comment On March 07, 2012, at 10:50 PM, kyleleeh wrote:

    <<the result is REDUCED buying power for most everyone except those with real wealth who can absorb the higher prices. Since our economy is driven by purchasing goods and services, and if there is a REDUCTION, the overall economy SHRINKS.>>

    Purchases of gasoline are factored into GDP. we're spending much more of our income on phones now then we did in the 90s, but that doesn't mean iphones are shrinking our economy...in fact they've created many well paying jobs.

    I think the better question is what happens to the money being spent on gasoline? If oil companies pay it out to shareholders and that provides income to retiring baby boomers, who then spend it in our economy then I think it's a wash in the grand scheme. On the other hand if it's horded by the company or used in inefficient buy backs and acquisitions, then you might be right about it shrinking our economy.

  • Report this Comment On March 07, 2012, at 10:52 PM, TMFMorgan wrote:

    << skip all of the BS and open up drilling and full capacity refineries again>>

    U.S. refinery production of gas and diesel is at an all-time high, and U.S. consumption of gas is at an 11-year low.

  • Report this Comment On March 07, 2012, at 10:58 PM, TMFMorgan wrote:
  • Report this Comment On March 07, 2012, at 11:05 PM, steltek wrote:

    @Alex and Morgan,

    No, that was *not* well said. What is not factored into those calculations is the extent to which technology has reduced the cost of manufacturing items. Owning an automobile was about on par with owning an airplane in today's terms, for % of population owning one and the % of technology and productivity going into making them.

    You've intentionally compared apples to oranges to make your point. I'm not impressed by the disingenuous method of comparison and even less impressed by your colleague patting you on the back for insulting a forum member, with a post that basically calls a member a dumb-ass without actually coming out and saying it. Your veiled insult is crystal clear.

    Furthermore, despite your bad comparison, $12,000 is 68.6% of $17,500. The average sticker price for a car in 2004 was $29,476. The average income for the U.S. then was about $32,000. Thus the average car as of 2004 costs 92% of average income.

    So, purchasing power has been reduced DRASTICALLY.

    Other than that, your post was spot-on! I'm really sick of the condescending posts by Motley Fool writers. Is there a place we can submit complaints? Thank you.

  • Report this Comment On March 07, 2012, at 11:43 PM, TomBooker wrote:

    The apprentice at the Repair Shop dropped my crystal-ball, so I'm out of the seeing the future game.

    My Consumer Beacon is still working though. Credit card purchases at my model WaWa are pushing into 2007 numbers. With heavy concentrations on Tuesdays and Wednesdays every 2 weeks. I'll wait for the next Fed FoF Report. It'll deserve a look.

    Here's a gotta-have link for things we can see and can't see, and our natural biases.

    Posted without comment at 6:00 PM on Black Friday 2011.....

    The Fed's version of a mea culpa for blowing the call on the mortgages, the House Bubble, and the Financial Collapse.

    I bet this wasn't popular among a lot of the Fed's "PhD's"...

    Enjoy. http://tinyurl.com/89o2dh7

  • Report this Comment On March 08, 2012, at 12:02 AM, steltek wrote:

    A little more digging shows the comparison to aircraft ownership is a bit overstated. A better comparison would be to a semi (tractor trailer). In 1917, there were ~5M passenger cars registered in the U.S., or about 5 per 100 people. Today, there are about 15M semis, buses, and heavy duty trucks costing about $100K per vehicle.

    Thus, in 1917, $12,000 bought a rare item, available to only 5% of the population. In 2011, there were about 5 $100K trucks per 100 people. So, $12K in 1917 productivity is about $100K in 2011 productivity.

    That puts 1917 purchasing power relative to available technology at 3.5 times that of 2011. $12K (cost) / 17.5K (avg income) = 68.6% of 1917 income. $100K (cost) / $40K (avg income) = 250%. 68.6% : 250% = about 1 : 3.5. So in 1917, purchasing power was 350% better, relative to current technology and availability.

    Oh, and the U.S. debt limit was set for the first time, at $30B in 1917, or about $193B in today's terms. It would be pretty nice if our current debt was at $193B instead of $15T, wouldn't it? THAT is the point of tying dollars to gold -- to restrict deficit spending. In 2004, the US govt collected $2.2T in taxes and used $660B to pay interest. Almost a third of taxes collected *just paid interest!*

    Really now! (Right back at you. How do you like these juvenile jabs?)

  • Report this Comment On March 08, 2012, at 12:06 AM, Pinpress wrote:

    Was relieved today to pay *only* $4.59/gal -- no higher than last fill up.

    Big difference between olden days and today is how much farther people drive to go to work every day. And not every long commute has public transportation or carpooling as an option.

    Wasn't it Planet Money that explained why gas prices have little to do with supply and demand and everything to do with oil futures (speculation)?

  • Report this Comment On March 08, 2012, at 1:29 AM, kyleleeh wrote:

    <<The average sticker price for a car in 2004 was $29,476.>>

    If the "average car" in America is the price of a BMW then I think you just further demonstrated the amount of wealth generated since 1913.

    Out of curiosity why did you arbitrarily us 2004 figures and not today's numbers? It smells a little bit like cherry picking data if you ask me.

  • Report this Comment On March 08, 2012, at 1:29 AM, kyleleeh wrote:

    *use

  • Report this Comment On March 08, 2012, at 2:51 AM, tom0s wrote:

    The oil industry has few enough big players that they can significantly influence the price of gas, especially when all the media make so many excuses for them. They know they will get a better deal from a Republican president. So watch gas prices rise up to election day, then fall immediately after that.

  • Report this Comment On March 08, 2012, at 3:16 AM, steltek wrote:

    Here is more comprehensive data regarding of auto prices today:

    http://blogs.wsj.com/drivers-seat/2011/06/03/new-car-prices-...

    Average price of GM's and Fords were both above $30K. Is that middle america enough?

    I never tried to make the argument that greater wealth hasn't been developed. The cost to produce things has gone down considerably, and quality has gone up through materials innovations. Both of those improvements are because of technological evolution, not because of the change in monetary policy. The continuous downward pressure on prices due to competition and innovation is part of what makes fiat currency (somewhat) viable. Improvements to efficiency, automation, and outsourcing all lower prices. But prices remain steady of going down because of the devaluation of currency. Those are opposing forces, not parallel.

    If purchasing power and wages had remained flat while innovation lowered prices, we would have a scenario where people would be making $17,500 and a $100K car would cost $12K. In today's terms that would mean you could buy a Mercedes S550 (msrp $95K) for about $30K, making that affordable to median income families.

    People have lost purchasing power relative to availability of goods, but we've definitely gained tremendously in terms of innovation.

  • Report this Comment On March 08, 2012, at 4:33 AM, steltek wrote:

    For some stats, I couldn't find more recent data than 2004, so I made that comparison. I'm not completely sold on gold backed currency, but fiat currency has enabled irresponsible spending policies, with no reasonable recourse for taxpayers. Gold backing is not the only solution to that irresponsibility, but it's the only one with any momentum presently.

    However, the issue was not currency or inflation. It was the way another member was treated by the employees of TMF -- as if his view were stupid. Thus, I was demonstrating that the view did have merit. I don't like that even with an expensive subscription, the writers aren't professional enough to eschew ad hominem attacks, express or implied.

    (This is a repost because the first never showed up. I waited an hour before posting again, so I hope it doesn't double post.)

  • Report this Comment On March 08, 2012, at 8:03 AM, TMFBiggles wrote:

    @ steltek -

    How is it an ad hominem attack? All of the points I made are true. I didn't say "... and you're a stupid-head for thinking that!"

    Do you object to the "really, now?" Or the dismissive comment about gold backing?

    I very strongly disagree with the notion that the monetary policies in place before 1913 are somehow superior to those we have now. I also disagree with your assertion that I compared apples to oranges. I found a very easily-identifiable large purchase for a quick comparison, but you ignored every other point I made to focus entirely on the car's price. Why? It's far more important that average real incomes are three times higher, and that recessions are less damaging.

    In 2010 the average taxpayer made about $56,300. So let's use your link (which I appreciate for the reference) and say that the average taxpayer can buy a car with a bit less than half of his annual income. That's substantially better than it was in 1913, don't you think? Should it matter to me that my dollars are worth 98% less, when I can buy a car orders of magnitude better than the one that was built in 1913 for less of my annual income than would have been required back in the day?

    If my 1913 compatriot had a similar opportunity, the Model T would have cost him almost $4,000 less (in today's terms). And that was, let's remember, the cheap mass-produced car of its day. In your link, an average Hyundai costs about a third of average annual incomes. I like Hyundais. They're good, reliable, and increasingly attractive cars with each passing year. I can buy a Hyundai with my average modern income and still have enough left over for rent, food, clothing, entertainment, a vacation, and some investments.

    (Incidentally, the average nominal income in 2004 was $51,300, per IRS reported data.)

    I'm sorry if I seem dismissive. I can find 100 statistics and references to show that the average American has a far better life now than they would have had in 1913, whether the underlying reason is economic, technological, or social.

    If we want to focus solely on economic factors, the recessions that occurred during the gold standard were brutal, brutal events. They happened rather often. They lasted quite a while. There was no guarantee that you could get your money back if your bank was somehow involved in a scheme that went bad. You had almost no protection from swindles and con artists.

    Have you read this article?

    http://www.fool.com/investing/general/2012/03/07/the-truth-a...

    It's got more points on the larger issues with a return to gold backing. I didn't write it, but I agree with the argument.

    I don't mean to threadjack this into a completely unrelated direction. I apologize to everyone for that, and I'll be stepping out now.

    I'd like to thank you, though, for giving me an idea for an article. If you'd like to follow this argument further, check back on the site in a few days for my follow-up.

    - Alex

  • Report this Comment On March 08, 2012, at 8:08 AM, DivingDan wrote:

    Don't know where you live but I've been paying close to $4/gallon gas for the last few years. It's called living in a tax hell like NY. Just cross the border into NJ and gas is 30-40 cents a gallon cheaper.

    I think we can handle it.

  • Report this Comment On March 08, 2012, at 9:00 AM, howboutme wrote:

    Interesting article but it is very pre-mature. The real effects of 4+ dollar gasoline will not show themselves for 9-12 months. Only then will you be able to report statistical figures that effect the economy.

    It is to soon to run the numbers as consumers have not changed gears from the effect it is having on their finances. Its only been 4 months, and the increase has been slow. People are still trying to maintain what they were used to. Wait another 6 months and you will be writing an article that completely contradicts this one,.........leading to the real effect of higher gas prices.

    Help out the Fool community, write articles that will estimate the future of something and stop writing about the past. Only way to make money in stocks is to predict what the next year is going to do not what happened in the last year,...those profits have already been had.

  • Report this Comment On March 08, 2012, at 9:19 AM, steltek wrote:

    My issue was with this:

    "But hey, your dollar was tied to gold. That was pretty cool.

    Really, now.

    - Alex"

    The take-away from that is "in every way life was worse back then, but hey your money was tied to gold." I.e. the conclusion you want the reader to make is "Sure, you can tie your money to gold, but your life will be a lot worse in every way." I.e. zealots who want their money tied to gold are stupid and so focused on gold backing they don't realize their lives would be worse.

    If you're really going to sit there and pretend you weren't taking a pot shot at the guy, I give up. You are beyond reconciliation.

    What I was looking for is 1) an admission that your tone and implications were less than professional, 2) an apology, and 3) an admission that the opposing idea is not completely without merit.

    The vast majority of things you pointed to as improvements of the least 90 years are due to technological and cultural evolution, not currency or financial policy. Like I said in my last post, my issue was not the argument of currency backing. It was the tone you took with the other member and complete dismissal of his ideas. If you can't admit when you've been snide and condescending, then no thanks, I have no interest in reading your next article. And I'd still like to know where I can post a complaint. I'm really tired of the attitude in these posts and the denial they're met with when someone calls you on it.

    Thank you.

  • Report this Comment On March 08, 2012, at 9:31 AM, mikecart1 wrote:

    Not sure what everyone is complaining about. I just paid $2.85/gal on my gas at Get Go in Pennsylvania + 5% cash back with my credit card. People need to learn how to play the game that is given, not trying to manipulate the game into a desired one. Everyone else at that gas station was paying $3.75/gal for regular.

    The higher the gas gets, the more discounts I will get. Every major city has programs to get discounts on gas. You just need to learn how to use them properly.

  • Report this Comment On March 08, 2012, at 10:00 AM, DJDynamicNC wrote:

    "The vast majority of things you pointed to as improvements of the least 90 years are due to technological and cultural evolution, not currency or financial policy."

    You say that as though monetary policy has had no impact on enabling technological or cultural evolution. That's a curious position to take.

    That whole "the Fed destroyed our dollar" argument pops up all the time. I can understand why people get sick of it and tired of debunking it. I can also understand why you didn't like the tone - but if the crux of your argument is "I don't like your tone," that doesn't auger well for the ideas you espoused.

    " the conclusion you want the reader to make is "Sure, you can tie your money to gold, but your life will be a lot worse in every way." "

    The original argument was that the Fed had destroyed the value of the US dollar. The counterargument was that purchasing power has expanded, not contracted, and that in fact prior to the Fed the economic environment was much worse. That's the conclusion being expressed.

    The thing is, that's objectively true. In 1913, life was worse by basically every quantifiable measure. You can't really escape that fact. That's why people so often retreat into fictions about how much more "respectful" life was back then; the only things that they can argue were better are intangibles and subjective feelings.

  • Report this Comment On March 08, 2012, at 10:03 AM, dwot wrote:

    Lol, where I am gas has been as high as $1.65/liter, which is around $6/US gallon.

    I've been traveling this week and the average price I've been paying is $4.85/US gallon.

    Pretty interesting when you consider we are net exporters to the US...

  • Report this Comment On March 08, 2012, at 11:19 AM, DJDynamicNC wrote:

    "It's called living in a tax hell like NY."

    Those higher taxes don't just disappear, you know. Taxes are the price we pay for civilization.

    There's a reason that Wall Street is still on Wall Street and not in Mississippi. I live upstate and the economy here is one of the fastest growing in the nation (Rochester, NY).

    It's a hell of a state, and I'm proud of it and proud to pay my share.

  • Report this Comment On March 08, 2012, at 12:27 PM, jetski27 wrote:

    SUE OPEC for price Fixing.

    What is OPEC? 12 guys from different countries that sit around and determine Oil prices? Isn't that price fixing at its finest? Price Fixing is illegal in many countries.

    I see the rising gas prices reflected in the grocery stores.

  • Report this Comment On March 08, 2012, at 12:45 PM, 48ozhalfgallons wrote:

    @ hbofbyu: "I live in the west and there is no other option except to commute daily with semi-trailer trucks at 80 mph (driving a Smart car is a death trap)."

    Apparently, the West is just too risky for you. Please return to Jersey, D.C. or Massachusetts and take your orwellian nightmare with you. The West use to be idyllic before all the libs came. No speed limits in Nevada and Montana. A smart car (fuselaged wheel chair) on a freeway is a moving death trap for anyone driving within a quarter mile of it. I would be ashamed admitting driving one.

    I 40 and I 70 were designed in the '50s to move people and freight bidirectionally between East and West when 15 million mostly conservative souls lived on west coast California. Add 25 million liberals to the west coast who demand transport from a still four lane highway system because they want a 12 billion dollar choo choo to run from Disneyland to Las Vegas. The East West Interstate is more strained than our electrical grid. Nobama passed on upgrading those two shovel ready interstate projects in favor of giving tax dollars to bankers and choo choos.

    @ DJDynamic "But I think that a car-centric infrastructure is a huge drag on our economic development, forcing people to constantly lock up large quantities of resources in giant mobile rust boxes that depreciate rapidly and break frequently and kill tens of thousands of people annually. Every step we can take towards a carless or car-reduced future is a good one."

    The automobile followed by defense and agriculture is our economy. Nobama and Government Motors? Get the connection? If public transportation is your thing, then go start up a company with your own money which will provide that service instead of picking my pocket for your orwellian ideals. Oh, no money? Ask Nobama for a taxpayer loan. If you really enjoy sitting on that stainless steel bus seat with all those smelly street people commuting one or two hours to your work place, be my guest; I won't stop you. However, when you require me to do it.... From your posts, I infer you are pro choice. Just whose choice?

  • Report this Comment On March 08, 2012, at 12:50 PM, DJDynamicNC wrote:

    "If public transportation is your thing, then go start up a company with your own money which will provide that service instead of picking my pocket for your orwellian ideals"

    No need, I'm off to Canada in August where the entire country supports a robust and well-developed transportation infrastructure.

    "If you really enjoy sitting on that stainless steel bus seat with all those smelly street people commuting one or two hours to your work place, be my guest; I won't stop you. However, when you require me to do it.... From your posts, I infer you are pro choice. Just whose choice?"

    A compelling economic argument. You certainly wouldn't want to have to spend any time with "those people." George Wallace made very similar arguments, and was just as effective. Hold your head high, sir.

    As for whose choice - I fail to see how building an infrastructure designed around car ownership is seen as "providing a choice." On the other hand, it's providing YOUR choice, so I understand why you think that.

  • Report this Comment On March 08, 2012, at 1:03 PM, slpmn wrote:

    ^ "The West use (sic) to be idyllic before all the libs came."

    Now that deserves an LOL. Great stuff, 48oz. You need to post more.

  • Report this Comment On March 08, 2012, at 1:07 PM, rominosj wrote:

    If we Peruvian a "third world" country with an income per capita of 10,000 can handle 6 dollar gas, the US should be OK with a 4 dollar gas.

  • Report this Comment On March 08, 2012, at 1:20 PM, slpmn wrote:

    Peruvians and others not addicted to high fructose corn syrup, junk food, and cheap debt, will never understand how Americans feel about the price of gas.

  • Report this Comment On March 08, 2012, at 2:02 PM, robgott wrote:

    DJDynamicNC -

    Please don't go! We need all the rail-supporting, intelligent and progressive people we can get in this land of the 'fat, dumb & happy,' (read 'McDonalds snarfing, Tea-bag loving & Hummer-driving Amarricans'), to stay & help educate these poor duped and unfortunate souls.

    (But I completely understand why you're going ... my 18-yr.-old child has already defected to the U.K. ^]^)

    To all those who posted complaints about the high cost of gasoline -

    I own a fair number of shares of Exxon and so (supposedly) stand to gain from gas price hikes, (I haven't seen much of their fattened profits yet). Despite the cost to my personal investment future, I say the Feds should TAX THE HELL OUT OF THE OIL COMPANIES! Use the revenue to raise the minimum wage, reduce taxes to lower & mid income taxpayers, and build high speed light rail where ever possible, (creating tons of jobs, reducing C02 emissions & linking rural/suburban sprawled communities to urban centers, enabling them access to more job, education & cultural enrichment opportunities & improving their quality of life). Those steps alone will help stimulate the economy. There'd probably even be enough money left over to pay off some national debt, and upgrade our public education system to 21st century standards, (it hasn't been revamped since the 19th)!

    Yes, the oil companies will fight this aggressively with their army of lobbyists & massive media budgets, pulsating dire messages of higher prices @ the pump and imminent global disaster if their gluttonous profits are reduced. We (the govt. & people) need to stand up to them and stand strong. It's high time Big Oil paid its debt to this country (taxpayer funded highways, roads, beltways, bridges, tunnels, traffic lights, speed cameras, tolls, tax breaks, demise of the RR, pollution of air, sea and land, global warming, auto deaths, etc., etc., etc.).

  • Report this Comment On March 08, 2012, at 2:43 PM, 48ozhalfgallons wrote:

    @ robgott: "in this land of the 'fat, dumb & happy" It is the happy part that you libs can't stand. Fat and dumb would do us in by themselves requiring no action from libs...... but it is the happy that so irks your ilk.

  • Report this Comment On March 08, 2012, at 2:45 PM, Yeti434 wrote:

    I do not understand why we are just talking about the price of fuel. Yes, demand is much lower. Yes, most of the rise is do to a combination of instability in the middle east and inflationary pressures starting to set in from the ongoing monetary stimulus.

    What we need to really talk about is the combination of prices increases on the food and fuel front. Food prices across the board have skyrocketed, with corn and beef leading on this front (making this an expensive Saint Patty's day).

    Finally, I am not eager to jump on the major gas corporations over this increase. Sure, prices will continue to rise, but demand has been falling in the United States, whereas the demand for food is, well, much more stable.

    But I think there is a much deeper problem here. The rate of technological growth in energy, agriculture and biotech have slowed to a halt. In NV a state senator can delay the construction of a nuclear powerplant for 40 years. Warren Buffet's latest investment was a rail company that hauls primarily coal. Even in the political debates you see no one talking about nuclear power or increasing technological growth across these sectors--all of which are now heavily regulated by the U.S. government.

    So long as we hold back these industries by politicizing their business, we stand in a terrible competitive position with the rest of the world.

  • Report this Comment On March 08, 2012, at 2:52 PM, TomBooker wrote:

    Since the beginning of 2009, the price of oil and the price of the stock market have moved in close tandem. Like most asset classes have in varying degrees.

    From there you can choose your poison... stocks are following oil or oil is following stocks.

    Or

    You can say they are both following a 3rd variable.

    Then the candidates become the global economy, the dollar, monetary policy liquidity pumps... take your pick.

    Of course we can stand $4 gasoline, because our portfolios are up to 3 yr highs. We can also move into the discussion the topics of economic recovery, corporate earnings, and oil demand.

    IMHO, if stocks and oil de-couple, pain perceptions will change considerably depending upon which directions each one goes.

    I wonder if all of the retail investor money which has evacuated from the Market in the past year, won't come back in because it is being used for deleveraging and inflating real Household expenses. ???

    http://tinyurl.com/7sz7kq8

  • Report this Comment On March 08, 2012, at 3:37 PM, Merton123 wrote:

    Europe is tied together with High Speed Rail. I remember traveling through europe on a Europass 20 years ago. Will high gas prices over here benefit the rail road companies (i.e., Warren Buffet)?

    The current administration back to work program is asking for billions of dollars to upgrade our national rail road infrastructure. I look forward to traveling on a train system that is comparable's to europe train system versus taking an airplane.

  • Report this Comment On March 08, 2012, at 3:46 PM, DJDynamicNC wrote:

    @Robgott -

    Believe me, I would love to stay and carry on the fight, but the wife is Canadian and she had less than zero interest in moving here.

    I think at the very least, we should stop subsidizing the oil companies, and I don't think you'll find too many people who disagree. And I think setting the minimum wage to a level by which a single person working a decent number of hours per week can survive on it is a fundamental concern for a free and compassionate society. I'm glad you agree!

    On the plus side, I think the trends are bending our way, and step by step we're moving forward.

  • Report this Comment On March 08, 2012, at 3:49 PM, 48ozhalfgallons wrote:

    @ Yeti434: Nicely written. I agree with your views regarding the vastly under utilized potential for nuclear energy. The real issue is human society lacks the maturity required to safely coexist with nuclear technology. Consider the probability of a Stuxnet virus simultaneously locking out the cooling pumps on 50 reactors. Have we built those plants with fast reaction manual overrides? I doubt it. As desperately as we will need energy, the consequences of even one disaster are incalculable. We can count on a perfect storm. The most basic tenet of engineering, sci fi and plumbing is never turn on something you can't turn off.

    I prefer paying more for gas than waiting in line for it. The time in line takes away the time I can spend here harassing liberals, er, progressives.

    Food? In vitro meat will be the cuisine of no choice provided by libs to keep us dumb fat ones from being happy.

  • Report this Comment On March 08, 2012, at 3:57 PM, hbofbyu wrote:

    With just one Nuclear Power plant costing billions and 10 or more years to complete, I just don't see it as a viable energy source for the future. You would be surprised how quickly solar is changing, becoming cheap and soon ubiquitous.

    http://www.americanprogress.org/issues/2009/01/nuclear_power...

    In my opinion Nuclear Energy is dead in the US, Germany and Japan. The rest of the world will follow - and be 20 years too slow.

  • Report this Comment On March 08, 2012, at 5:03 PM, CaptainWidget wrote:

    <<IAnd I think setting the minimum wage to a level by which a single person working a decent number of hours per week can survive on it is a fundamental concern for a free and compassionate society. I'm glad you agree!>>

    What level would that be? And what is a decent number of hours per week?

    What does that have to do with $4 a gallon gas?

    PS: I drive a 4 banger, I don't worry about gas prices much. It's either $50 a month or $60, it doesn't really make much difference. People do funny things when you force them to cope with their own money...they make smart financial decisions that make sense to them.

  • Report this Comment On March 08, 2012, at 8:15 PM, SolarInvestor wrote:

    Someone said if we drilled more in the US, we would be energy independent and gas would be $2.50/gallon. Why does everyone think domestic oil is cheaper than Middle East oil? Domestic oil is the consistency of cake batter. You have to add all kinds of chemicals to it just to get it to flow down a pipeline.

  • Report this Comment On March 08, 2012, at 9:00 PM, CaptainWidget wrote:

    <<Someone said if we drilled more in the US, we would be energy independent and gas would be $2.50/gallon. Why does everyone think domestic oil is cheaper than Middle East oil? Domestic oil is the consistency of cake batter. You have to add all kinds of chemicals to it just to get it to flow down a pipeline.>>

    I don't know if this is true or not, but the market would surely figure it out. If people were allowed to drill, we would find out in short order whether the extra processing was worth the home-grown, non shipped supply line.

    Maybe it is worth it, maybe it isn't. But it's not my job, your job, or Barrack Obama's job to decide. None of us have all the necessary information to make an informed decision on which oil is "better", only the market as a whole contains enough information to make that determination. By letting the market function, we'll find out the answer. By not allowing it to function (with the drilling permitorium we're not seeing) we'll never know if domestic oil is more efficient than Saudi oil.

  • Report this Comment On March 08, 2012, at 9:58 PM, fullmoonchaser wrote:

    All in all, for most people, the price of fuel is the smallest part of the expense of owning a passenger vehicle...

    Consider the cost of the vehicle, upkeep, insurance, etc.

    Admittedly, I like to get my gasoline as cheap as possible, but I'm not going to get in a tizzy about the price at the pump in comparison to the price of the other expenses of owning a vehicle.

  • Report this Comment On March 08, 2012, at 10:36 PM, richardrollo wrote:

    You are a little late with this question. 15 minutes ago, I paid $4.49 per gallon in the Los Angeles area.

  • Report this Comment On March 08, 2012, at 11:04 PM, Darwood11 wrote:

    Not only have natural gas prices fallen, but a milder winter also reduced the need for that fuel for home heating.

    I live near Chicago, and the difference showed up in a $23 natural gas bill for the month of February. That includes heating, hot water and cooking! Why so low? I'm on a "budget" plan which gives a steady bill each month, with an expectation for a specific consumption. This fall and winter, I consumed less than expected. I'm so far ahead that I could stop all payments for several months to catch up!

    My electric bill will also be lower, with a change in providers which "guarantees" a 20% reduction in the cost of electricity for the next 12 months. This does not include transmission and some taxes, which will remain unchanged.

    I can't say if this is enough to offset the rise in the price of gasoline, however. I can say that my costs for 2012 utilities will be less than that budgeted, even if November and December 2012 be colder than normal.

  • Report this Comment On March 09, 2012, at 1:28 AM, valari25 wrote:

    In 5 minutes I can go put my hands on the TransAlaskan Pipeline where it branches off to feed Flint Hills Refinery. Regular unleaded is $4.05 right now. I used 264 gallons of $4.03 heating oil in January on a well insulated, 1500 square foot house kept at 67 degrees. My local electric utility is run by morons, so they burn oil and charge .24/kwh.

    Residents here are going broke fast and I view my town as a microcosm of the US. We simply aren't moving fast enough to replace oil where possible. $4 gas will quickly be followed by $5 gas and $6 gas.

  • Report this Comment On March 09, 2012, at 1:56 AM, Libertarian71 wrote:

    The debt-to-GDP ratio is over 100%, real unemployment is over 20%, and the price of gasoline at the station nearest our home (in Los Angeles County) is over $4.30. But yet another Motley Fool columnist is singing Kumbaya.

    http://www.zerohedge.com/news/us-debt-gdp-passes-101-global-...

    http://www.shadowstats.com/alternate_data/unemployment-chart...

  • Report this Comment On March 09, 2012, at 5:48 AM, aurreth wrote:

    It's funny that you mention the Duke's essay about thinking only about the rise in oil. Here in Israel there was a major protest and riots about the prices of cottage cheese (I know, that's what's wrong in Israel - cottage cheese, forget about wars and poverty) and during the summer of 2011 many people actually declared embargo on the companies producing the product, saying it's too expensive..

  • Report this Comment On March 09, 2012, at 8:07 AM, ravenesque wrote:

    How about $8 gas? Can you handle that?

    http://michaelfury.wordpress.com/2009/06/08/up/

  • Report this Comment On March 09, 2012, at 8:18 AM, ravenesque wrote:

    And after Iran is attacked? Can you handle $8 gas?

    http://michaelfury.wordpress.com/2010/08/23/as-the-crow-flie...

  • Report this Comment On March 09, 2012, at 8:40 AM, DJDynamicNC wrote:

    @Captain: -->"What level would that be? And what is a decent number of hours per week?" <--

    I'm open to debate on this. There are, obviously, a lot of factors which would impact the decision of what is personally sustainable. Cost of living differs place by place, though more expensive locations like cities may find it worthwhile to set their own, higher minimums (as, indeed, some cities have already done). The presence or absence of nationalized health care obviously has a major impact on personal expenditures. I split my time between Canada and the US, and in my experience the much higher minimum wage coupled with the nationalized health care in Canada result in much greater freedom from coercion for bulk of the population (as it liberates them from dependence on a specific and circumstantial set of employers and enables them to enter freely into contracts rather than having their options so frequently circumscribed). This results in slightly higher levels of life choices I don't approve of and will ultimately subsidize, but that is a price I am willing to pay for the large gains to quality of life, economic mobility, entepreneurship, and individual freedom of action.

    --> "What does that have to do with $4 a gallon gas?" <--

    It's definitely off topic. :lol: It's not the first time we've taken the thread off topic and I'm sure it won't be the last.

    --> "PS: I drive a 4 banger, I don't worry about gas prices much. It's either $50 a month or $60, it doesn't really make much difference. People do funny things when you force them to cope with their own money...they make smart financial decisions that make sense to them. " <--

    It's interesting you say that, considering just a few comments later you say:

    --> " None of us have all the necessary information to make an informed decision on which oil is "better", only the market as a whole contains enough information to make that determination" <--

    If none of us have the information necessary to make informed economic decisions without the entire market at our disposal, then any "smart economic decisions" we make are limited by our need to be aware of the entirety of the market, which, of course, none of us can ever be. This is going to result in flawed decisions, even when we make what is clearly the best and most rational decision possible based on the information available to us individually.

    The best read we can get on the state of the market is through pricing information, which is itself supplied by an imperfectly connected market using imperfectly communicated information gathered by imperfectly alert human beings at sub-instantaneous speeds. Even the apparent right decision might well turn out to be the wrong decision in the long run, particularly when the economic environment allows for costs to be externalized before they can impact the price signals for given commodities. Government is the imperfect way of imperfectly addressing the flaws in this imperfect system. It brings flaws of its own, to be sure. But providing a cushion of protection against things outside of individual control and against decisions which prove to inaccurately priced, government establishes a more stable framework and higher quality of life for large quantities of people at the expense of a certain degree of efficiency and with an averaging effect that disproportionately affects the higher standard deviations in economic outcome (in other words, the very rich and very poor see a greater distortion of their outcomes).

    You and I both accept that framework in principle, we merely disagree on whether or not it's a good thing.

  • Report this Comment On March 09, 2012, at 1:37 PM, decebalvs wrote:

    I think wasting the last and poor reserves of fuel that US still has to prop the status quo, is the dumbest idea that republicans ever had. And they had lots of dumb ideas.

  • Report this Comment On March 09, 2012, at 2:41 PM, oldman144 wrote:

    Big oil can throw a party. The have acclimated the American public to thinking 4 bucks a gallon is normal and 3.85 as a bargain. Soon it will be 5 and 4.80..I remember posing for a photo on Jan2, 2000 smiling in front of the BP sign in Dover OHIO that said regular gas 69.9..

    Worse than gas prices is the horror show of 4 dollar a gallon fuel oil here in northern Vermont. I burn pellets and oil so the pain is diminished. The economy will surely die at 5 bucks which is just around the corner.

  • Report this Comment On March 09, 2012, at 3:16 PM, Merton123 wrote:

    Today's March 9, Friday Wall Street Journal has an indepth article about Nuclear Power. The Japanese Toshiba appears to be the only selling selling the next generation of nuclear reactors. Their reactor just got approval by the Nuclear Regulatory Commission. GE has stated that they are deemphasizing Nuclear Power and are focusing on Gas Turbines instead. The Japanese Government helps Toshiba finance the sale of their nuclear reactors. The big buyers are China. Europe has decided to reverse and go anti nuclear. I don't know what will replace their nuclear power - whoever can replace nuclear power share prices should go out of the roof. Or the Europeans will change their minds a few years down the road.

    The near future is high speed rail and small cars. Who will benefit and who will suffer? Buy those companies that will benefit and sell those companies who will suffer

  • Report this Comment On March 09, 2012, at 5:49 PM, CaptainWidget wrote:

    <<I'm open to debate on this. There are, obviously, a lot of factors which would impact the decision of what is personally sustainable. Cost of living differs place by place, though more expensive locations like cities may find it worthwhile to set their own, higher minimums>>

    Then what is the point of having a national minimum?

    Every area is different. I've personally lived in a place in the US in the last 4 years where $800 a month was adequate to survive on.

    So if areas are all different, and they have the capacity to enact a wage floor that they deem appropriate, why does the Federal government need to be involved?

    You admit that localities have the power and the knowledge to put an appropriate rate on labor, so that should be the end of that.

    You make a great argument for government as a buffer to risk....but they have a really great industry that does that now, and much better than the government. It's called insurance. It's cheaper, more accurate in it's forecasts, and MOST IMPORTANTLY, can't put a gun to your head to force you to buy their services.

  • Report this Comment On March 14, 2012, at 2:59 PM, DJDynamicNC wrote:

    "Then what is the point of having a national minimum?"

    To ensure there is a floor below which even the most aggressive company-owned local government cannot go. In a best-case scenario, a complete lack of minimum wage drives competition which encourages business and sets a decent wage level for all employees. Unfortunately, we live in a reality that often fails to measure up to the best case scenario, and just because a totally free market CAN yield such a result doesn't mean that it will, nor does it imply that we will necessarily see a free market last for very long before distortions and rent seeking throw it out of whack. Government is far from the only thing preventing a truly free market from maintaining itself.

    I would argue that insurance is not, in fact, cheaper - Medicare as contrasted with private health insurance bears me out here, but so does common logic. Insurance functions by making a hedge against expenses by drawing on those who won't need a pay out. Expanding the pool of premiums increases that spread - if it's statistically profitable at smaller numbers, it will become more profitable at larger numbers barring unseen distortions - and thus decreases the necessary expense. Remove the need to make a profit and the need to pay for marketing - two major expense sinks in the insurance industry - and you have even further streamlining.

    But at least as important as the economic element is the ethical element. Insurance can't put a gun up to your head and force you to buy services; neither can you force insurance to protect people. Private insurance will ONLY protect people if it's profitable - not just sustainable, but actually profitable - to do so. That leads, as we have so painfully seen, to wide disparity in opportunity and protection and the destruction of careers, families, human lives. We can do better than that.

  • Report this Comment On March 21, 2012, at 5:30 PM, hemifan426 wrote:

    The economy has shown that it could not handle 3 buck gas, 4 buck gas is never going to work in this economy. When you factor back in the things that the government factors out of the inflation rate (food, gas) the real inflation rate is about 30%. Look at your food and gas cost from a year ago. Real wages are falling and the real unemployment rate is about 20 to 25%. 147 a barrel oil and 4 buck gas threw the economy not into a recession, but a full-blown depression. We have been in depression ever since. The oil companies have tried 4 buck gas two more time since and both times the economy burrowed in deeper and never recovered. There is less money out there now and more unemployed. To assume that people can make it on 4 buck gas is foolish at best. Until oil, commodities and gas drops, the depression will continue. No, all your hoping and denial won't make 4 buck gas fly. The economy is already showing it won't work. It amazes me that people will make such ridiculous comments.

  • Report this Comment On April 02, 2012, at 11:17 AM, thidmark wrote:

    "Taxes are the price we pay for civilization. ... I'm proud to pay my share."

    That's easy to say when the government's running a $16 trillion tab ... fact is, nobody is paying their share, which is now around $50,000 a head.

  • Report this Comment On April 04, 2012, at 4:25 AM, thidmark wrote:

    "Remove the need to make a profit and the need to pay for marketing - two major expense sinks in the insurance industry - and you have even further streamlining."

    And you also get lousy service.

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