This is the highest in 3 1/2 years. YoY gas prices are up a little over 25%.
I suspect that this is a significant psychological threshold. While it’s not a “shock,” which historically has caused Americans to cut back their spending by double the increased amount that they spend on gas, causing a recession, it might very well cause a 1:1 retrenchment, which will be felt by discretionary spending like restaurants. And, of course, it recirculates more of the currency outside of the USA into the treasuries of petroscheikhdoms.
An interesting byproduct is that the regional Fed districts which suffered the most from the downturn several years ago are turning in the best manufacturing and new orders growth in any of the districts now.
Um, $4.00 per gallon in Southern California. But we have nice weather.
Well, not in May, of course. High in the low sixties and 100% cloud cover 90% of the day through May and June, but it gets nice in Aug and Sept.
Meanwhile, Ford Motors is going to cut back on smaller vehicles to build bigger and wider SUVs and Pickup Trucks because they are more profitable.
Sounds like the seventies again when Toyota and Nissan moved in with their fuel efficient vehicles to fill the gap when gasoline started to climb. I had a Datsun 510 in 1974 which took me back and forth to college from my apartment 40 miles away. 32 miles to the gallon in highway driving was pretty good back then.
Big three lost market share to the Japanese automakers.
James Hamilton suggested a simple equation for gasoline prices:
(oil price per barrel)/40 + $1
Think 40 gallons of gasoline per barrel of oil plus $0.35 for the refinery gross margin plus $0.25 for the distributor gross margin plus $0.40 for excise taxes (hence the $1).
Oil prices have reached $80 per barrel so our equation suggests $3.
Outstanding–let’s get it to to $5. No wait, $7. How about $10? It’ll clear up the omnipresent traffic jams and will be great for the environment.
And this time, hopefully it’ll stay there and not crash again.
Let’s have a carbon tax:
http://econofact.org/new-republican-support-for-a-carbon-tax
One of many policy proposals from Jeff Franket:
http://econbrowser.com/archives/2018/05/guest-contribution-an-economic-platform-for-the-democrats
California has a carbon tax. Nobody knows what it consists of, except that big corporations can pay money to be exempted from it.
We also have a gasoline tax, passed by the legislature to fix roads, since they were not fixed by the last gas tax that was passed for the purpose of fixing roads. Revocation of this tax is now on the ballot as a “public initiative.”
$5 a couple days ago:
http://thehill.com/policy/transportation/automobiles/388786-gas-prices-reach-5-per-gallon-in-manhattan
oil prices have crashed since, tho…
https://rjsigmund.files.wordpress.com/2018/05/may2620182houroilpricessince8ammay1.jpg
“One gas station in Manhattan’s Hell’s Kitchen neighborhood listed its gasoline for $4.999 per gallon, according to the news station.”
Have you ever been to Hell’s Kitchen? Everything is expensive there.
Brent Europe prices still above $76 a barrel even as WTI dropped to $67.74. I can hear it now – Keystone Pipeline!
that spread between WTI and Brent will only mean more exports:
https://rjsigmund.files.wordpress.com/2018/05/may172018crudeoilexportsasofmay11.jpg
figure roughly $2 a barrel trans oceanic transport costs, all the rest is windfall profits, limited only by our ports’ capacity to load outgoing ships..
meanwhille, we’re importing heavier sour crude, often at higher prices, because that’s the kind of crude our refineries were built for…
Rjs – we had much bigger spreads back during the 2011-2014 period. James Hamilton wrote about this back then noting it is costly to get oil from Canada and North Dakota to the ports.