Re: They're gonna stay high, but hopefully less rapid swings
back2basicz
5/24/2011 1:51:49 PM
Scott,
That is not a fair comparison.
for one-Western Europe has a much higher Standard of Living than either China or India
and two-Western Europe has a much better Public Transportation network(atleast the cities do) than either China or India.
for the record-Gasoline costs $8.5/Gallon in the UK today
and it costs $9/Gallon in most of Western Europe today.
Regards
Ashish.
Gas still $4.25 in N.Cali
Bullseye
5/24/2011 1:33:58 PM
Northern California still facing some of the most expensive gas prices. $4.50 for premium gas and $4.25 for regular unleaded. I'm not surprised to see spending go down as low to mid income gets squeezed out here.
Re: They're gonna stay high, but hopefully less rapid swings
Scott Raynovich
5/24/2011 12:15:15 PM
As my European friends say, "What are you whining about?" I haven't checked lately but petrol in Britain/Europe is at least $6/gallon if not more.
Re: They're gonna stay high, but hopefully less rapid swings
back2basicz
5/24/2011 11:09:08 AM
edsawma,
We are already seeing Gasoline prices in excess of $4/Gallon across Asia.
India has Gasoline prices in excess of $6/Gallon today!!! And consumers are responding by cutting back sharply-Very,very sharply.
China has Gasoline Prices in excess fo $5/Gallon Today!!! And same dynamic is at play here.
The thing is in both these countries spending on Food forms a massive chunk of disposable incomes(close to 25%); And with Food prices continue to skyrocket (alongwith Gasoline and Diesel prices);we are seeing massive-massive cutbacks in Spending as well as in consumption of refined products.
Lets not forget these are the two countries from whom OPEC/IEA are expecting most of the demand for Oil to come from.If these countries are cutting back sharply(alongwith the traditional heavy users in America and Europe).Where is demand growth going to come from???
So now its a question of just figuring out when the Liquidity tide now sweeping Asset/Commodity markets worldwide (thanks to QE2) turns the other way and flows back into USD and US Treasuries.
Regards
Ashish.
Re: They're gonna stay high, but hopefully less rapid swings
edsawma
5/24/2011 8:37:57 AM
However, you have to disassociate price levels with total gas spending. As global demand increases, the price will be forced above $4. I think Americans will continue to respond by adjusting their lives and habits to consume less gas. It's my belief that there is so much demand elasticity today that those initial adjustments happen within weeks or a few months, and prices decline again. As China and other countries become a larger share of the market for gas, American consumption will have less influence on prices.
Re: They're gonna stay high, but hopefully less rapid swings
AskAsa
5/24/2011 6:59:12 AM
It's one thing to adjust to a higher number, such as $4 a gallon. It's another to have the resources to accept it -- and have the cash to incorporate $4 a gallon gas into your budget, At some point, you just have to cut back to avoid escalating debt. (Unless you're the US government!)
Re: They're gonna stay high, but hopefully less rapid swings
John Jordan
5/24/2011 5:56:12 AM
I disagree on the getting use to $4 a gallon theory. In the past few years the oil producers have tested the $4 a gallon mark and each time the American consumer has pulled back on driving and spending and miraculously the price fell when the reports came in on lower demand for oil.
At least for now $4 a gallon seems to be the level that has put a crimp on demand. I know for me personally, I start cringing when it takes $60, $70 to fill my Jeep Liberty. I think it would be tough getting used to.
I am loving the sarcasm in the title. Still checking for $5 a gallon gasoline even though it has dropped 9-11 cents over the past 3 weeks. The summer brings in travelling months, and what better tiime to "tax" the public than to hit them through petro
They're gonna stay high, but hopefully less rapid swings
edsawma
5/23/2011 6:07:04 PM
The biggest problem with gas prices is very rapid swings in price. If prices move $1 per gallon over a period of say a year, people can make adjustments in their life. They can decrease their commute by moving or finding a new job. Even though the lead time on both of these things is longer due to the ecomony, they are still possible for a good percentage of people over a period of a year. I think high gas prices are going to be the norm, and our society will change (perhaps for the better) due to those high gas prices. If we're at all lucky, it might mean better city planning, more investment in broadband, and new green technology. These all take time though and happen over years, not months.
For this reason, I am in favor of policies that prioritize better price stability in gas in the short-term, and policies that decrease our need in gas in the long-run.
In terms of stock-market impact. I again think that quick swings in gas will hurt consumer spending. But even $4 / gallon gas won't kill the economy after about a year of getting used to it.
September was the right time...
back2basicz
5/23/2011 3:49:39 PM
John ,
You very rightly point out Oil prices started rising since September[When QE2 swung into action].
Its interesting to see the price of Crude oil in terms of Gold or other relatively stronger currences[NOK come to mind straightaway].
The fact is Crude Oil has hardly appreciated if you look at it in terms of Sound Money[Which the Federal Reserve currently does not believe in].
Regards
Ashish.
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