2008 August 13 Wednesday
Fear Of High Gasoline Prices Peaks?
$4 gasoline is not enough to scare everyone into compact cars and hybrids.
"In May, June and July, people were just stunned" by $4 gas, says Jeremy Anwyl, CEO of Edmunds.com. Now, "It's kind of a return to rationality, where the singular fixation on fuel economy is gone. As people think things through clearly and a little more calmly, they'll make different decisions."
In June, 31.4% of recent new car buyers surveyed said the purchase was motivated by a desire for better gas mileage, Acxiom says. That's up from 21.1% in February, but still less than a third of buyers. There is "not this huge flood to one segment in the auto industry," says Tim Longnecker of Acxiom's automotive practice. "There's still going to be this huge desire for utility."
People need to learn the hard way. There will be corrections in oil prices during the big march to higher prices. But future rallies will take oil to much higher price points and future spikes will force a larger fraction of the driving population toward the most efficient vehicles.
Some top economists expect the current recession to last for at least another 18 months because the ordinary citizen is heavily in debt in every country. Thus it is possible that the price of oil might decline to surprisingly lower levels for a couple of years before heading for $200 per barrel. But such downward spikes in the price of oil, is precisely what the oil producers want in order to drive the cash-poor alternative energy inventors to bankruptcy. Just like the internet companies of the late 1990s, many of the alternative energy companies which depend on venture capital, have only a few years of money to show some success, or else they will go bankrupt. It is also possible that the financial oil traders were also temporarily responsible for sending the price of energy to high levels faster than the actual market conditions would have dictated, and so it seems that we now have an intermediate correction in the price of not only oil, but many commodities. I feel sorry for the scientists working for alternative energy companies, but again, bankruptcy is better for these scientists instead of getting assassinated or kidnapped in case they attain some breakthrough.
The EPA mandates different fuel blends for different cities and regions during the summer. This fuel cannot be sold outside of its regional market. Every year, without fail, when summer rolls around, gas prices go up because of this. People are always stunned. Every fall, when the mandate expires, prices go back down.
Why this generates no news is no mystery. How do you get news? Some government department sends out a press release, some "activist" group sends out a press release or something randomly happens in front of a camera. In this case, the EPA is happy because they get power, the fuel refiners are happy because they to make monopoly profits for a few months when the market for fuel is no longer national and "consumer groups" don't care because they only send out press releases demanding more government regulation, not less.
"I feel sorry for the scientists working for alternative energy companies, but again, bankruptcy is better for these scientists instead of getting assassinated or kidnapped in case they attain some breakthrough."
So why are energy companies so much more ruthless than all those other types of companies that routinely lose business to innovations? Are realtors going to kill the founders of Foxtons?
I was not just talking about American oil companies, I was taking into account also foreign governments who happen to own some of the new oil companies outside the United States... This time oil is not just about money, but also political power.