Annual Spring Gas Price Spike

[August1991]

Seems every time the snow melts and the weather gets nice the gas goes up. Been like this for years. What are we supposed to do? OPEC owns us all.

Wait a second. It's called supply and demand. It takes two to tango.

[bush_cheney2004]

Wait a second. It's called supply and demand. It takes two to tango.

Right you are...Economics 101:

[August1991]

I dunno, but for me gas remains one of the cheapest component costs of car ownership. I don't think my driving habits would be substantially impacted until prices started going up somewhere in the $5+/L range.

Fair point. Various licenses, parking fees, maintenance and then the big-ticket of depreciation (depending on model, year) add to the cost of car ownership. I did the calculation awhile ago and came to the conclusion (based on typical driving) that gasoline was half and other costs the other half. With gasoline at over 1.40 per litre, the split must be 70/30 now.

It's a moot point. You're still buying gas at that price with a car that has the same gas mileage. So whether you buy it 50 litres a time or 10 litres a time it still costs the same unless you watch Tomorrow's Gas Prices Today.

I weigh the hassle of stopping to buy gas against the chance that I'll find a lower place later/elsewhere. I usually buy about 10 litres or so unless I know that I'm getting a good deal or I'm on a long trip.

[August1991]

I think the gov't should regulate gas prices.... consumers are getting screwed.

Getting screwed?

It is hard to imagine a more competitive market than retail gasoline in urban centres. The price is indicated to a decimal place (all taxes included) on illuminated signs that are two meters high. People have space for a reserve of 50 litres. The product is basically homogenous except for loyalty points and location.

As a quick rule of thumb, take the world price of oil (US $ per barrel - about $100 now) and convert it into Cdn cents per litre (100 cents or $1.00 per litre). Then add any taxes (in Quebec about 45 cents). This will give you a rough estimate of the local retail gasoline price.

Quick rule of thumb? I have done simple statistical regressions on this using long time periods (30 years or more) and the correlation is very high.

----

As to your suggestion of "government regulation", maybe we should consider the Venezuela-Chavez-Trudeau-NEP model. Let's create a Made in Canada price. After all, it's our oil! Why not sell our own resource to ourselves at a low price? (In Venezuela, gasoline is about 5 cents per litre - if I understand properly.)

Of course though, that would be like making Celine Dion stay in Canada and sing in concerts at $5,000 a pop. Or making Sydney Crosby stay at home and wash dishes.

IOW, if we have a valuable resource on the world market, we would be foolish to waste it at home through a government-regulated and enforced low price.

Edited April 5, 2012 by August1991

[August1991]

Right you are...Economics 101:

My complaint with this video is that it doesn't distinguish between short run and long run. Typical supply/demand is imagined - as in the video - in the short run. When it comes to gasoline, in the short run, people can at most shop around.

Things are different in the long run.

In the long run, on the demand side, people can change jobs, move to a new house, buy a different car, get divorced (if the two spouses refuse to leave jobs far from each other).

On the supply side, in the long run, a high price is an invitation for innovation. I think they call it tele-commuting nowadays (although I suspect that's a scam). A better example would be small displacement engines or even self-serve, credit-card at the pump gas stations.)

Edited April 5, 2012 by August1991

[bush_cheney2004]

My complaint with this video is that it doesn't distinguish between short run and long run. Typical supply/demand is imagined - as in the video - in the short run. When it comes to gasoline, in the short run, people can at most shop around.

Things are different in the long run...

Perhaps, but ultimately transportation costs have to be reckoned with in the supply/demand food chain. Also, a lot of people don't understand that with a devalued US dollar, prices for petroleum based products will inevitably increase.

[dre]

Getting screwed?

It is hard to imagine a more competitive market than retail gasoline in urban centres. The price is indicated to a decimal place (all taxes included) on illuminated signs that are two meters high. People have space for a reserve of 50 litres. The product is basically homogenous except for loyalty points and location.

As a quick rule of thumb, take the world price of oil (US $ per barrel - about $100 now) and convert it into Cdn cents per litre (100 cents or $1.00 per litre). Then add any taxes (in Quebec about 45 cents). This will give you a rough estimate of the local retail gasoline price.

Quick rule of thumb? I have done simple statistical regressions on this using long time periods (30 years or more) and the correlation is very high.

----

As to your suggestion of "government regulation", maybe we should consider the Venezuela-Chavez-Trudeau-NEP model. Let's create a Made in Canada price. After all, it's our oil! Why not sell our own resource to ourselves at a low price? (In Venezuela, gasoline is about 5 cents per litre - if I understand properly.)

Of course though, that would be like making Celine Dion stay in Canada and sing in concerts at $5,000 a pop. Or making Sydney Crosby stay at home and wash dishes.

IOW, if we have a valuable resource on the world market, we would be foolish to waste it at home through a government-regulated and enforced low price.

IOW, if we have a valuable resource on the world market, we would be foolish to waste it at home through a government-regulated and enforced low price.

Pretty much besides the point because Canada doesnt product its own oil anyways. We buy most of it from Venezuela.

But your claim is still not necessarily correct. Having low domestic oil prices would increase the export of other goods. Its quite possibly that exports would INCREASE overall if our natural resources were used to give our own companies an advantage.

[August1991]

Pretty much besides the point because Canada doesnt product its own oil anyways. We buy most of it from Venezuela.

Canada is a net exporter of oil. We export more oil than we import.

BTW, Ontario and Quebec now suffer from the so-called Dutch disease.

[dre]

Canada is a net exporter of oil. We export more oil than we import.

BTW, Ontario and Quebec now suffer from the so-called Dutch disease.

Doesnt matter if we export more than we import... we import the majority of what we consume. How is the government supposed to fix prices when the bulk of our oil is imported?

[Shady]

Right you are...Economics 101:

Unfortunately, lefties are usually ignorant to the ways of economics.

[Wilber]

Fuel efficient vehicles help mitigate the price.... I have a car with a 4-banger that gets great mileage as long as I am easy on the gas-pedal.... although it does take premium fuel, so I am paying ~$1.50/L. My truck uses significantly more fuel, but I only use that to tow the boat or if I am using logging roads, or in the snow. And, as far as trucks go, it isn't all that big.

I think the gov't should regulate gas prices.... consumers are getting screwed.

You do what you have to do. I have a diesel pickup that I use to tow my trailer and a collector car with a behemoth, V8 both of which are expensive to run but are not used that much. They are toys. My daily driver is a VW TDI with a manual transmission which costs little to run even at todays prices. When you consider that many of todays 4 cylinder engines are producing power that only 6's were putting out not very long ago, I don't see the point in buying anything bigger than a 4 banger unless you are towing something or hauling heavy loads.

I don't think government can regulate gas prices without nationalizing the whole industry. Emerging nations have pushed up demand for motor fuels and oil companies will just sell it to those who are willing to pay more for it. When the Liberals brought in the NEP we had cheaper gas than the US for a while but the oil companies couldn't get their equipment out of Canada fast enough.

[Bonam]

Fair point. Various licenses, parking fees, maintenance and then the big-ticket of depreciation (depending on model, year) add to the cost of car ownership. I did the calculation awhile ago and came to the conclusion (based on typical driving) that gasoline was half and other costs the other half. With gasoline at over 1.40 per litre, the split must be 70/30 now.

I weigh the hassle of stopping to buy gas against the chance that I'll find a lower place later/elsewhere. I usually buy about 10 litres or so unless I know that I'm getting a good deal or I'm on a long trip.

50/50? Maybe if you live 100 km from work and commute daily. Gas represents ~10% of the cost of car ownership for me.

Lease/finance: $350/month

Insurance (in Canada): $250/month

Maintenance: $100/month

Parking: $140/month

Gas (at Canadian prices): $100/month (~900 km/month)

Edited April 5, 2012 by Bonam

[Boges]

50/50? Maybe if you live 100 km from work and commute daily. Gas represents ~10% of the cost of car ownership for me.

Lease/finance: $350/month

Insurance (in Canada): $250/month

Maintenance: $100/month

Parking: $140/month

Gas (at Canadian prices): $100/month (~900 km/month)

$250 for insurance? Either you have some accidents on your record or you're getting hosed.

Also if you have a car that you're still making payments on, there's no way you'd have spend $100/month on maintenance.

[Bonam]

$250 for insurance? Either you have some accidents on your record or you're getting hosed.

Also if you have a car that you're still making payments on, there's no way you'd have spend $100/month on maintenance.

$250ish is what you pay for insurance in BC if you're a male driver in your 20s. Ahh the joys of government insurance monopolies that use age and gender profiling to determine premiums. I agree, it's certainly a hosing. Never had a single accident by the way.

And yes the $100/mo may have been an overestimate for maintenance, in any case even if you knock down the maintenance costs, the gas component of the total cost is still in the 10-15% range.

Edited April 5, 2012 by Bonam

[Boges]

$250ish is what you pay for insurance in BC if you're a male driver in your 20s. Ahh the joys of government insurance monopolies that use age and gender profiling to determine premiums. I agree, it's certainly a hosing. Never had a single accident by the way.

If that's the case then maybe Ontario's free for all private system isn't so bad.

Once you hit 25 the rate drops significantly. I had an accident when I was 20 and my rate was like $400/month. Now it's $145 including home insurance.

[Bonam]

If that's the case then maybe Ontario's free for all private system isn't so bad.

Agreed. I'm all for "free for all" private car insurance. I moved to the US and pay ~1/3 as much now, just under $100/mo.

[huh]

To believe that fuel prices reflect supply and demand you would have to prove that the net change in those factors equates to a 10 percent change in price in a week, it simply cant be done, the world doesn't change that fast. Just like the relationship between the price of a barrel of crude and the price of a litre of gas changed by 40 percent the summer before the recession, supply and demand could not account for that. Its profit taking, and frankly I care less about the price than i do about the bullshit excuses, but if the price doesn't settle down our economies are going to be stuck in this yoyo cycle, our prosperity is too tied into the price of fuel.

[Wilber]

To believe that fuel prices reflect supply and demand you would have to prove that the net change in those factors equates to a 10 percent change in price in a week, it simply cant be done, the world doesn't change that fast. Just like the relationship between the price of a barrel of crude and the price of a litre of gas changed by 40 percent the summer before the recession, supply and demand could not account for that. Its profit taking, and frankly I care less about the price than i do about the bullshit excuses, but if the price doesn't settle down our economies are going to be stuck in this yoyo cycle, our prosperity is too tied into the price of fuel.

Fuel is a commodity. Today's price is driven by futures trading and the basis of futures trading is gambling. If the price goes too high, economies will go in the dumpster and the price will drop making it a bad gamble for those who got in late. Same as any other bubble.

[bleeding heart]

50/50? Maybe if you live 100 km from work and commute daily. Gas represents ~10% of the cost of car ownership for me.

Lease/finance: $350/month

Insurance (in Canada): $250/month

Maintenance: $100/month

Parking: $140/month

Gas (at Canadian prices): $100/month (~900 km/month)

!!!!

Damn, brother! That's harsh. How high did you measure on the breathalyzer?

[msj]

$250ish is what you pay for insurance in BC if you're a male driver in your 20s. Ahh the joys of government insurance monopolies that use age and gender profiling to determine premiums.

ICBC does not charge based on gender. Sadly. They really should.

They get away with "age discrimination" based on experience. Which is why a guy like me (level 20) pays the equivalent of $88 per month on car insurance (well, that and I like to drive my cars into the ground - 2004 Toyota).

See this handy chart to see how they do it: PDF

Oh, and too bad about this "profiling."

You will notice as you get older that life insurance premiums go up.

Gee I wonder why?

Edited April 8, 2012 by msj

[August1991]

50/50? Maybe if you live 100 km from work and commute daily.

...

Gas (at Canadian prices): $100/month (~900 km/month)

As others have noted, your numbers are off.

Parking: $140/month Huh? I suppose if you have an underground heated garage. (But likely true.)

Many Canadians live 50 km from work. And 20,000 km per year is a general estimate - but 24,000 km more likely.

----

Nevertheless, Bonam. You make a good point. I made the calculations years ago and your calculation may be more accurate now.

At most, I think your lease/depreciation numbers are inaccurate.

Edited April 9, 2012 by August1991

[August1991]

To believe that fuel prices reflect supply and demand you would have to prove that the net change in those factors equates to a 10 percent change in price in a week, it simply cant be done, the world doesn't change that fast.

The wonderful thing about a market price is that it includes all available information in a single number - like a prediction of tomorrow's temperature.

Just like the relationship between the price of a barrel of crude and the price of a litre of gas changed by 40 percent the summer before the recession, supply and demand could not account for that. Its profit taking, and frankly I care less about the price than i do about the bullshit excuses, but if the price doesn't settle down our economies are going to be stuck in this yoyo cycle, our prosperity is too tied into the price of fuel.

Using monthly data over the past 30 years (about 360 observations) of world oil price and local gasoline price, and taking into account local tax changes, the R2 (correlation) is around 0.80 - IIRC.

----

Anyway, this is now Obama's problem. Americans don't care about world markets or OPEC. If gasoline is expensive, they blame the President.

Now then, maybe Saudi Arabia will help this particular US president in the summer/fall 2012. Maybe the world price of crude will soon fall, after its "surprising" spring 2012 rise.

Edited April 9, 2012 by August1991

[msj]

If anyone wants to get an idea on how to figure out your costs of driving/owning a car then check out this PDF from CAA.

As usual, fuel is the most expensive among variable costs (yes, even for the Prius) while depreciation is the most expensive among the fixed costs.

As they are using averages and are making assumptions the numbers can vary wildly from what many of us often face.

I found the number for gas for a 2011 Chevy Cruze to be pretty close to what I'm paying (although I drive a 2004 Toyota) - 10 cents per km which for me is about $3,000 per year.

The insurance they use is way out but then I don't live in a city and I drive an old car so that probably saves me $900 per year.

[Bonam]

If anyone wants to get an idea on how to figure out your costs of driving/owning a car then check out this PDF from CAA.

Good link.

Yeah I have an efficient car and am between 12,000 and 16,000 km on that chart and as it points out, the fixed costs dwarf the variable costs (gas). Like I said, fuel is a small fraction of the cost of owning and driving a car (almost exactly 10% just like I claimed, if you look at the data for the prius driven in the 12-16k km range).

Again, fuel prices would need to at least triple before they started to impact my driving habits.

Edited April 10, 2012 by Bonam