$3 and up at pump in '07?

There is a very interesting article in the current (January 2007) Scientific American on ethanol in gas. Apparently, MTBE is VERY expensive, and when the govt. asked the oil companies to use ethanol instead, they leapt at the chance. The article is negative on ethanol as a fuel until it can be made from cellulose, but although they mentioned the major benefit once they kept being negative. It's mostly about how E85 or E100 would be of little or no benefit in reduction of CO2 due to the current energy intensive production requirements.

While we here in Alberta have the (usually) lowest price for gas in Canada (but higher than most places in the US), I do still drive the anti-Prius. It doesn't exactly gussle, but it burns fuel like there is no tomorrow!

Maybe if I continue there won't be!

 

<div class='quotetop'>QUOTE(David Beale @ Dec 30 2006, 03:21 PM) [snapback]368737[/snapback]</div>

Haha... I have an 04 350Z which uses the same engine (but tuned for more hp) as your 01 Pathfinder (the 3.5L VQ V6 debuted in the 01 Pathfinder) and yeah, on the same commute, it consumes about a little 2x what my Prius does. I have to get premium for the Z too, so gasoline costs are well over 2x.

 

Also, another thing that's nutty is that SUVs are exempt from the gas guzzler tax (http://suvs.about.com/od/fueleconomy/a/jf_gasguzzler.htm). It seems a little silly that for example, the Audi RS4 EPA rated 14/21 gets slapped w/a $2000 gas guzzler tax but gas guzzling vehicles like Chevy Tahoe whose EPA ratings range from 15/20 to 16/22 or Surburban w/EPA ratings from 14/18 to 15/21 don't get hit with it since they're light trucks.

From http://wardsauto.com/keydata/USSalesSummary0611.xls, YTD, 7.9 million light trucks (includes minivans, SUVs, pickups and some vans) were sold in the US vs. 7.1 million cars. Last year, it was even more stilted w/8.4 million light trucks vs. ~7 million cars.

It's not surprising that the average weight of vehicles in 2006 has risen to 4142 lbs compared 3220 lbs. in 1987 per http://www.epa.gov/otaq/cert/mpg/fetrends/420s06003.htm. Light truck sales now make up 50% of vehicle sales vs. 28% in 1987.

 

<div class='quotetop'>QUOTE(cwerdna @ Dec 30 2006, 04:54 PM) [snapback]368766[/snapback]</div>

There's lots of money in the auto and oil companies. That translates into lots of influence with politicians.

 

<div class='quotetop'>QUOTE(Rick Auricchio @ Dec 30 2006, 08:28 PM) [snapback]368777[/snapback]</div>

well said Rick. Let's just keep pumping 70 million tons of heated gases into our fragile atmosphere daily until we have a major climatic disruption that can't be fixed. Don't you just love big oil, US auto makers, and El Presendente Bush!

 

<div class='quotetop'>QUOTE(daniel @ Dec 29 2006, 08:17 PM) [snapback]368421[/snapback]</div>

Few things irritate my wife more than when somebody says "you're so lucky to live near the Metro". Nope, luck had nothing to do with it. Our choice reflected our preferences. As would the choice to live way out in the boonies, in a much larger, nicer house, had we decided to go that route. The core concept of modern economic theory is "revealed preference": within the scope of the opportunities available to you, what you choose to spend your money on reveals what you value. I don't whine (much) about the conditions near the DC Metro, I sure don't want to hear people whine about the cost of gasoline. Make your decision and deal with it.

On the issue of house size, this was not helped by the decision to eliminate capital gains tax on housing. I mean, the Federal government now offers both a tax subsidy on current costs (spending for mortgage interest and property taxes is deductible), and tax-free capital gains upon sale. So, federal tax policy made buying absolutely the largest house absolutely the most financially rewarding choice you could make, for the middle-class buyer. That's independent of your preferences for the use and enjoyment of housing space and amenities as such. To an economist, this means we are over-investing in physical housing, as an investment vehicle. This is a misallocation of resources that will stand for decades.

We visited Mount Vernon recently. Compared to what's been built in my neighborhood recently, it's a dinky little dump. Mount Vernon claims 7,000 sq ft of living space on three floors, but that includes the attic. (http://www.mountvernon.org/visit/plan/index.cfm/pid/551/) Excluding the attic space, that would be about 5,500 sq ft. I don't think they build them that small around here any more.

And it's not just houses and cars, it's a pandemic. Looked at barbeques at the Home Depot? You can get them half the size of a car. Guess that's in case you want to have the neighbors over for a whole suckling pig or something. I went to buy a stereo amp for Christmas. Plenty of choices, as long as I wanted 600 watts and up. 600 watts? In my house? They are all geared for home theater applications -- so they have to fill the gigantic room in the gigantic house where you keep the gigantic TV. Have you seen "Supersize Me". Well worth renting. The McDonald's supersize fries (no longer offered) was a half-pound of french fries. Presumably for one meal, for one person. Checked out the largest size drink at the (Japanese-owned) 7-11 lately? I can't believe anyone could drink that at a sitting.

But the one that really fascinates me is mattresses. Have you tried to buy a mattress recently? There is nothing for sale less than a foot thick. None of my current bedsheet sets will fit a modern mattress. For the other examples above, I can see a conspicuous consumption aspect to the purchase, or getting the enjoyment of stuffing your face with more. But what possible consumer demand could there have been for ludicrously thick mattresses? Did people really go to mattress showrooms and say, "I want the thickest mattress you've got"?


Maybe we can afford it, maybe not. But I just can't believe this current bout of excesses will have a happy ending. On the margin (ie., now) it's been financed through an expansion of debt and reduction in debt quality that would have been unthinkable 20 years ago. Serial seven-year car loans, wrapping the negative equity on the current car into the new car loan? That's not intrinsically different from a Ponzi scheme. No-money-down, cash-back mortgages? It's tough to believe you could possibly expand that trend any further. Particularly when the US personal savings rate has remained firmly below zero since 2005 (http://bea.gov/briefrm/saving.htm). As Herb Stein (former Federal Reserve Chairman) once said, "Things that can't go on forever, don't."

Yet it never ceases to amaze me how the mainstream American ethic changed from thrift to consumption in the 20th century. When I go back and read (e.g.) Poor Richard's Almanac, or the Little House on the Prarie series, I realize that for most of American history, thrift was preached as a virtue. It was a necessity, sure, but it was taught as a virtue. To characterize a person as thrifty was a compliment. It was part of the Boy Scout Motto, for crying out loud. Self-indugence was for the wealthy, and for the decadent Old World aristocracy, not for the American worker.

Now the median American patterns his or her behavior on the wealthy to the largest extent possible. Anyone preaching thrift -- Amy Dacyczyn (the Frugal Zealot) is my favorite -- is viewed as fringe and extreme. Thrift is no longer a virtue, it carries the stigma of poverty. I blame television for the acceleration of this trend, but I tend to blame TV for a lot of ills. The timing is right, in any case -- the latter half of the 20th century is the age of TV.

 

<div class='quotetop'>QUOTE(chogan @ Dec 31 2006, 09:01 AM) [snapback]368923[/snapback]</div>

Most excellent post! I often think if the regular masses would stop trying to live the lifestyles of the rich and famous they actually COULD. Oh, the house would be older, smaller and furnished with pre-owned stuff. They could have a newer car, but it would cost under $15000, they could take vacations...on the cheap. Their debt would be non-existent, their retirement could be earlier but more frugal, and they could give their kids help with a quality education so they could live better than their parents. All this really means is living in the here and now, but planning for the future.

I live what I 'preach' and my contemporaries can't understand how I can do so on minimal income. My mother once accused me of dealing drugs! (NEVER). Priorities and planning aren't that hard to manage if you 'just do it'. One example. I managed to save and buy a home on a single income in the land of outrageous prices by going to less concerts and when I did I bought nose-bleed tickets, went out to eat less often than my friends, drove a piece of s**t car, have never flown first class, and my vacations at that time were camping. Suddenly, bingo! Down payment saved, house bought, appreciation huge (never refinanced for cash out), net worth...yes!. All with no inheritances, lawsuit winnings or parental gifts. My friends? renters, cc debt, luxury cars for the past 25 years, etc. It's priorities. I don't tell this story for a pat on the back (I could care less as evidenced by my lifestyle), but as example that much is possible with priorities.

 

Well, it gets worse! In the last few years, in order to meet the tougher emissions requirements, manufacturers have to ensure the cat is kept warm. To do this they have to inject - more- fuel into the engine. This obviously produces more CO2 (though it does lower other emissions such as hydrocarbons and NOx). To pass the tougher crash standards the manufacturers had to add more structure to the vehicles, so they got heavier.

While I like the lower emissions and better crash ratings, there has got to be a better way!

Then came Prius. While the Prius does burn fuel to keep the cat warm, it does so less often. The Prius design uses "space frame" construction to minimize weight and maximise strength. This innovative design concept is also used in the new Honda CRV (and was not a Toyota idea, but rather a recycled idea from the past).

 

<div class='quotetop'>QUOTE(Godiva @ Dec 29 2006, 02:51 PM) [snapback]368388[/snapback]</div>

We also have some taxes that some other states don't have. For instance, we have about .18 per gallon in state excise tax. Then we have state sales tax added to the price of each gallon, so that varies, but is 7.25% here where I live (I think).

States without a sales tax, like NH, don't have that added in, of course.

Gas prices should go higher, everywhere, if we want people to conserve. There are too many Prius on the lots here in Ventura County that are just not selling like they used to!

 

<div class='quotetop'>QUOTE(chogan @ Dec 31 2006, 08:01 AM) [snapback]368923[/snapback]</div>

Exactly. Americans have been successfully brainwashed by advertising into buying stuff they don't need with money they don't have -- all to power an unsustainable economic system that depends on over-consumption.

Unsustainable because in the absense of domestic savings we have to borrow from abroad, until the foreign debt bankrupts us.

 

<div class='quotetop'>QUOTE(Rick Auricchio @ Dec 29 2006, 10:23 AM) [snapback]368267[/snapback]</div>

Couple of things come to mind:
1. Celebrate the higher prices.
2. Show your desire for a vehicle that doesn't use gasoline, instead of just buying what the car makers tell us we want.
3. Drive less.
4. Eat less food from distant places.
5. Enjoy local entertainment and resources more.

(oops. already answered. Thought I'd post before reading the whole thread. My bad).

<div class='quotetop'>QUOTE(mootsman @ Dec 29 2006, 03:31 PM) [snapback]368398[/snapback]</div>

That's quite true. Throwing lives at keeping our oil supply flowing also hurts some folks bad. Breathing the exhaust caused by automobiles kills people, and makes many more sick. That hurts. We could keep gas artificially low, and have a loaf of bread cost $20 to make up for it. There's no easy way here. We need to look for the way out of the mess - not just put a bandaid on the problem by surpressing the cost of gasoline. Gasoline SHOULD reflect the cost to society. Currently it does not. As long as gas stays cheap, we as a nation (and world) find little incentive to change the way we do things. Most change hurts in some way. We either do it now while it hurts a little, or we do it later when it hurts a lot.

By keeping gas prices down, that helps the folks you mention in the SHORT TERM. What of the next generations? What do they do for energy? Do we just worry about the here and now? Or do we work toward a better future? Cheap gas prices today improves nothing in the future, as far as I see it.

 

<div class='quotetop'>QUOTE(daniel @ Dec 31 2006, 03:21 PM) [snapback]369066[/snapback]</div>

The other day I was at the car dealership for a SIRIUS receiver issue and while talking with my sales guy overheard a sales negotiation for an SUV with dealer financing to the tune of 23%!!!!!!. Between the car payments and gas for the guzzler, this family will probably max their credit cards for food.

Wait untill we have to pay the war bill :angry:

 

<div class='quotetop'>QUOTE(chogan @ Dec 31 2006, 08:01 AM) [snapback]368923[/snapback]</div>

A MOST excellent post, Chogan! Thank you! I just needed to pick this nit... "Thrifty" IS currently part of the motto, not just "was."

 

<div class='quotetop'>QUOTE(nicos @ Dec 31 2006, 03:48 PM) [snapback]369084[/snapback]</div>

The war bill is all going into the foreign debt. As we speak that war debt has increased the interest we have to pay on our debt. Just like that family paying 23% interest on the SUV they won't be able to afford to drive and probably have no real use for anyway. Just like this war that served no purpose. But W just wanted to have a stupid, pointless war like a child playing with tin soldiers, or like that family, that just wanted the SUV because they thought it looked cool. Or because "everybody else" had one. Or because the morons believed the lies that it is "safer." Like the American people believed the lies about WMDs. Morons, led by the nose by a moron, and eating up the commercial propaganda of cynical advertising agents who care about nothing but their pay check, so they, too, can buy an SUV.

 

<div class='quotetop'>QUOTE(chogan @ Dec 31 2006, 08:01 AM) [snapback]368923[/snapback]</div>

You're lucky that housing in your area is way cheaper than it is. A 5500 sq. ft house would cost probably $2.5 million here. See http://www.dqnews.com/ZIPSJMN.shtm and http://www.realtor.org/Research.nsf/Pages/MetroPrice for an idea of the insanity around here. The median price of a single family home around here is ~$747K.

 

don't mean to be a scrooge but, in reference to gas prices rising, big oil suks... need I say more.. <_< I think not.

 

Interesting article in the local paper's HOME section today.

It's about baby boomers downsizing. It talked about the increase in the sq ft of an average home of the last few years, that much of the space is wasted and that living takes place in cozy corners. Then it mentioned an architect that won an award for designing a "katrina cottage" at about 300 sq ft. And that boomers should be looking 20-30 years down the line at what home they are going to live out their lives in. Not two story. Elderly people don't like lugging laundry up and down stairs. Etc. I know my parents home is a big big for them but my Mom has someone come in twice a month to help clean and they don't make much mess. My own home at 1200 sq ft is a bit much for me now, but when I retire should be just right. I'm looking at staying put. That was another thing. Boomers relocating to smaller homes now and then no moving again.

Why the increased size of homes? Well, profit for the construction companies. They can get more for a two story with twice the sq ft on a smaller lot than the old ranch used to be. Now my home is 60% of the parcel or a bit larger than a lot and was built in 1919. No, it's not insulated but I did insulate the attic. I'll be working on it more. But I don't plan to move ever. I've put too much in, have too much yet to do and I love my home. It's my home, not a house I'm living in for a few years in order to flip and make a profit.

 

<div class='quotetop'>QUOTE(mootsman @ Dec 29 2006, 03:31 PM) [snapback]368398[/snapback]</div>

I certainly understand this sentiment, and I do feel for people who have financial issues whenever there are inflationary pressures. But I think its overstated.

There's a point where the commute becomes more expensive than a closer job at less pay. Let's run some numbers with my commute, 80 miles round trip for 220 work days a year (let's see if I can do this right):

Total miles: 17,600
In my Prius, at my average of 47.5 MPG, I will use 371 gallons
In my Ford Sporttrac, which averages 17 MPG on the same commute, I would use 1,035 gallons.

At $3.50 a gallon, my Prius will cost me $1300. My Sporttrac will cost me $3600. That's a difference of $2,300. That's a powerful incentive to buy a gas sipper.

But if I'm really that squeezed by the $16 in gas my truck is going to cost me every day, I can take a job at $2 less per hour closer to home. And enjoy a better standard of living because I'm not wasting 2 hours a day on the road.

As gas gets more and more expensive (and it must if we are truly running out), then the economic pressure will cause the change that some liberals want to impose by government force. At $5 a gallon, the gas cost is over $5,100 a year, or $23 a day. I could take a job near home at $3 less per hour. I'm either moving, or taking a new job.

 

<div class='quotetop'>QUOTE(daniel @ Dec 29 2006, 10:17 PM) [snapback]368421[/snapback]</div>

To the parts I qouted, I agree.