I read an interesting story in TheWall Street Journal today about the changes in people's behavior given the soaring price of gasoline. In one statistic, the 72-mile rail system that connects Miami with Fort Lauderdale and West Palm Beach, Fla., saw an increase of more than 5.5% in riders for April as compared with a year ago. Boeing's
What you are seeing is classic economics at work. People who do not consider their consumption of gasoline at $1.25 per gallon are making choices to conserve now that the price has doubled. Certainly the folks at ExxonMobil
Here's the thing: For all of the talk of the Saudis increasing supply, or the junta of this, that, or the other controlling oil prices, until supply at the refining level exceeds demand, prices will rise. And as we know, there isn't any more refining supply coming on line anytime soon in the U.S. -- there hasn't been any new supply for two decades. That's why Valero's chairman noted recently that this is a great environment for the refiners. They ought to be getting killed by the increased prices of their supply -- but they aren't. Why? Because in an environment of undersupply, they can name the prices at which they sell. And they do. They'll keep doing so until demand softens, which, in spite of rising gas prices and stories such as these of people changing their habits, has yet to happen. Americans' growing love of horsepower over the last decade of cheap gas means that our installed base of vehicles are largely guzzlers. You can change your habits -- changing your vehicle's habits is a much more difficult task.
One idea may be to start watching the sales numbers for the car companies that produce the highest number of fuel-efficient vehicles, such as Honda
Bill Mann owns none of the companies mentioned in this story. Valero was a selection in the June 2003 inaugural issue of Motley Fool Hidden Gems. To see what we've got cooking now, consider afree trial.