$10 per gallon gas

[southsider2k5]

The problem with the 2nd generation Prius is that 100MPG hype is just that. I've read numerous articles that the 100MPG ratings are based on an outdated rating system and the reality is your talking about a 46-60 MPG automobile. Again, that is great mileage, but it isn't a significant improvement over the first generation.

 

The better idea is to start getting these rolled out in all the product lines to the point that the companies can reach economy of scale which lowers the payback period of these vehicles (as a lot of hybrids still aren't wise fiscal purchases for those that don't plan on keeping a car for 5 or 6 years). In addition, I don't want a f***ing Prius, so if I have the option to get that sort of milegae in a car I like, good. GM does this with the Hybrid Tahoe, but again, it is so much more than the standard one.

 

I think Hybrid will be the gap until we develop good battery power and at that point, we won't need filling stations or anything (we'll have batteries which can power a vehicle for hundreds of miles at a time and take very little time to recharge). Again, this is a bit into the future, but a lot of the capabilities are there.

 

That isn't what Bill Clinton told me...

[Balta1701]

The problem with the 2nd generation Prius is that 100MPG hype is just that. I've read numerous articles that the 100MPG ratings are based on an outdated rating system and the reality is your talking about a 46-60 MPG automobile. Again, that is great mileage, but it isn't a significant improvement over the first generation.

 

The better idea is to start getting these rolled out in all the product lines to the point that the companies can reach economy of scale which lowers the payback period of these vehicles (as a lot of hybrids still aren't wise fiscal purchases for those that don't plan on keeping a car for 5 or 6 years). In addition, I don't want a f***ing Prius, so if I have the option to get that sort of milegae in a car I like, good. GM does this with the Hybrid Tahoe, but again, it is so much more than the standard one.

 

I think Hybrid will be the gap until we develop good battery power and at that point, we won't need filling stations or anything (we'll have batteries which can power a vehicle for hundreds of miles at a time and take very little time to recharge). Again, this is a bit into the future, but a lot of the capabilities are there.

You really don't need 100's of miles to put a major dent in the U.S. oil consumption. Most people drive 40 miles per day or less. If you can get a battery that can last 5-10 years and run 40 miles on a 1 nighttime charge combined with hybrid recharge systems, you're pushing hundreds of MPG for the average driver.

[NorthSideSox72]

The problem with the 2nd generation Prius is that 100MPG hype is just that. I've read numerous articles that the 100MPG ratings are based on an outdated rating system and the reality is your talking about a 46-60 MPG automobile. Again, that is great mileage, but it isn't a significant improvement over the first generation.

 

The better idea is to start getting these rolled out in all the product lines to the point that the companies can reach economy of scale which lowers the payback period of these vehicles (as a lot of hybrids still aren't wise fiscal purchases for those that don't plan on keeping a car for 5 or 6 years). In addition, I don't want a f***ing Prius, so if I have the option to get that sort of milegae in a car I like, good. GM does this with the Hybrid Tahoe, but again, it is so much more than the standard one.

 

I think Hybrid will be the gap until we develop good battery power and at that point, we won't need filling stations or anything (we'll have batteries which can power a vehicle for hundreds of miles at a time and take very little time to recharge). Again, this is a bit into the future, but a lot of the capabilities are there.

You appear to be misinformed here on some things.

 

First, the Prius already gets 48 to 50 MPG, in the CURRENT version. You can look at the vehicle stickers, with the current (tougher) rating systems, to confirm that.

 

Second, the 2nd gen cars are still in prototype mode, so of course its all hype no one knows for sure what it will actually be. But if the current car gets 48, which it does, then the new tech sure as heck won't be 46-60 (or else they wouldn't bother with all that investment).

 

And as for GM's hybrid Tahoe, its really not even remotely comparable to a Prius, or any other hybrid that gets 30 to 50, or even other hybrid SUV's like Saturn's or Ford's that get 25 to 35. The hybrid Tahoe gets 20 to 22, and that's according to GM's estimates, which are sure to be liberal. That hybrid is still worse in economy than most regular cars. Why on earth GM made the poor business decision to go to the Tahoe for their first hybrid, when people are running away from those vehicles at this point, is something I don't even understand. As usual, the American car companies don't seem to get it.

 

The one thing in your post I do completely agree with though, is that hybrid tech is a bridge to other things. Electric cars will become a major factor in the relatively near future.

 

[Chisoxfn]

You really don't need 100's of miles to put a major dent in the U.S. oil consumption. Most people drive 40 miles per day or less. If you can get a battery that can last 5-10 years and run 40 miles on a 1 nighttime charge combined with hybrid recharge systems, you're pushing hundreds of MPG for the average driver.

But you really do, because a lot of Americans may only drive 40 miles on a random basis, but we also like to be able to make weekend trips or extended drives and having a car that only goes 40 miles can severly hamper/limit Americans (to the point that we won't buy the car). I would never consider buying a car with a range of 200 miles a day, never. You get that range to a more reasonable amount and than I'd consider and I'm guessing there are a chunk of Americans who feel the same way I do.

 

I agree that if everyone bought that car, you would be talking about a major dent and I do agree with your last statement (supplanting a battery that goes about ~40Miles without using any gas and at that point it just turns back to a hybrid vehicle (still averaging a good amount of MPG). It removes any long term restrictions while still putting a major savings on gas (although at one point we will have to figure out a way not to use gas in general and I think that will come via battery power or hydrogen (battery seems more reasonable in the sense that it would appear easier to recharge/refill than hydrogen).

[Balta1701]

But you really do, because a lot of Americans may only drive 40 miles on a random basis, but we also like to be able to make weekend trips or extended drives and having a car that only goes 40 miles can severly hamper/limit Americans (to the point that we won't buy the car). I would never consider buying a car with a range of 200 miles a day, never. You get that range to a more reasonable amount and than I'd consider and I'm guessing there are a chunk of Americans who feel the same way I do.

 

I agree that if everyone bought that car, you would be talking about a major dent and I do agree with your last statement (supplanting a battery that goes about ~40Miles without using any gas and at that point it just turns back to a hybrid vehicle (still averaging a good amount of MPG). It removes any long term restrictions while still putting a major savings on gas (although at one point we will have to figure out a way not to use gas in general and I think that will come via battery power or hydrogen (battery seems more reasonable in the sense that it would appear easier to recharge/refill than hydrogen).

The idea is not just a 40 mile per day car, the idea is a 40 mile per day car with a standard, but fairly small, gasoline engine, so that when the battery for the day has run nearly dry, you can switch to the gasoline system to run for the day. So, hence, the plug-in-hybrid system I keep hoping we'll actually be able to set up. There are already more than a few places that have sprung up that do those sorts of conversions on Priuses.

 

If you can get that system running, then you can kill off a huge chunk of this country's oil production. The key is getting the battery to the 30-40 mile per day, 5-10 year lifespan point. That's a useful threshold, because you're not demanding something unreasonable like 200 miles per day from a small battery, but you're also not so small that everyone has to flip to the gas system on their normal commute.

[Texsox]

Why on earth GM made the poor business decision to go to the Tahoe for their first hybrid, when people are running away from those vehicles at this point, is something I don't even understand. As usual, the American car companies don't seem to get it.

 

18 months ago, SUVs ruled the world. That was what was selling and what Americans seemed to want. Whenever we can go big, we go big.

[Chisoxfn]

You appear to be misinformed here on some things.

 

First, the Prius already gets 48 to 50 MPG, in the CURRENT version. You can look at the vehicle stickers, with the current (tougher) rating systems, to confirm that.

 

Second, the 2nd gen cars are still in prototype mode, so of course its all hype no one knows for sure what it will actually be. But if the current car gets 48, which it does, then the new tech sure as heck won't be 46-60 (or else they wouldn't bother with all that investment).

 

And as for GM's hybrid Tahoe, its really not even remotely comparable to a Prius, or any other hybrid that gets 30 to 50, or even other hybrid SUV's like Saturn's or Ford's that get 25 to 35. The hybrid Tahoe gets 20 to 22, and that's according to GM's estimates, which are sure to be liberal. That hybrid is still worse in economy than most regular cars. Why on earth GM made the poor business decision to go to the Tahoe for their first hybrid, when people are running away from those vehicles at this point, is something I don't even understand. As usual, the American car companies don't seem to get it.

 

The one thing in your post I do completely agree with though, is that hybrid tech is a bridge to other things. Electric cars will become a major factor in the relatively near future.

The SUV market may be decreasing, but the Tahoe Hybrid has an ~30% increase in fuel capacity. The actual mileage may be less than the typical "car", but the fact is even with the decreasing SUV sales, many Americans drive SUV's (just check out a California freeway on a daily basis, where the ratio is pretty even between Car & SUV, in fact, in many areas I drive, I'd say there are more SUV's than cars). Now lets say I'm in the market for an SUV, this means I'm not in the market for a freaking Prius (I should preface this by saying there isn't anyway in hell I'd ever buy a Prius, things are a rip as far as I'm concerned; your paying 30K for a car that has the features/quality of a compact car), I basically have the option of buying a Tahoe Hybrid or one of the other many gas guzzling cars (the bright side is more SUV's are doing the variable engine (ie, 4/8 cylinder where the engine runs on 4 during highway driving (unless you are stepping on it)). If Honda/Ford whomever all had the typical SUV's with hybrid engines and 30% better fuel capacity, than I would be buying a car and in turn effecting the gas supply.

 

The reality is the majority of SUV owners aren't going to just turn over there SUV for a freaking Prius or Civic Hybrid. We drive SUV's for a variety of reasons, most of which have to do with the fact that we probably haul stuff/have kids/drive in winter conditions/prefer to have the extra room, and the Prius/Civics of the world aren't going to fix that.

 

In terms of the NextGen Prius, they are scheduled to come out in the near future and the technology is already set aside and they are in heavy testing stage. In fact, the Next Gen Prius will be out during 2009 (Model Year 2010). The MPG ratings which estimate the "100" MPG Next Gen Prius estimate the current generation Prius at "85" MPG (you can expect to get 45-48 MPG out of the current Prius, not 85MPG). These estimates are based on Japanese standards and from everything I've read online are completely out-dated and ridiculous.

 

The new Prius is actually going to offer two batteries and the key is the new hybrid engine will run on hybrid ("battery") power for an extended time (ie, the car will run up to 25-30 MPH before the "Gas Engine" kicks on). The version that is expected to get the best mileage will be based on a lithium ion platform (anticipated 10 MPG improvement from the previous Scion, which pushes it into the 55-58 MPG range) while the version using the current batter (although a tweaked version of such battery platform) will see a 5MPG improvement (estimated).

 

The release is scheduled for Detroit Auto Show in January 09 and will hit show-rooms early in 2010. Toyota is working on coming out in future years with an option which involves a bigger, plugin type battery, which would push the MPG into the 100MPG range (this is something which would work for short-range use and Toyota has already nixed reports that it will be available in the next few years as the cost is currently far too high).

[NorthSideSox72]

18 months ago, SUVs ruled the world. That was what was selling and what Americans seemed to want. Whenever we can go big, we go big.

This is sort of my point - its been a huge weakness for American car companies for decades now. They react to the current trends, instead of thinking ahead. When they started planning for a Tahoe hybrid, SUV's were king of the world. But that sort of thing never lasts long, and even 3 or 4 years ago, there was every indication of two things - rising oil/gas prices, and the curve away from larger SUV's and going to small and mid-size SUV's. Those trends were already well underway. The smart money, since it takes years to put a car to market, is to go with where things will be - not where they are.

 

Plus, trends aside, you get almost no value by hybridizing a giant SUV. You won't gain new customers who are looking for fuel efficiency, because that 20-22 number is still far too low. Your main market segment who wants a giant playground/grocery-getter, or the ones who actually have a use for an SUV, are going to buy it regardless. And you may actually scare off some regular customers who don't to spend the extra dough up front. So really, what possible value were they getting out of going that direction? As far as I can tell, the answer is, none.

 

[RockRaines]

The main problem with the Prius is that you are driving a Prius.

[Chisoxfn]

The idea is not just a 40 mile per day car, the idea is a 40 mile per day car with a standard, but fairly small, gasoline engine, so that when the battery for the day has run nearly dry, you can switch to the gasoline system to run for the day. So, hence, the plug-in-hybrid system I keep hoping we'll actually be able to set up. There are already more than a few places that have sprung up that do those sorts of conversions on Priuses.

 

If you can get that system running, then you can kill off a huge chunk of this country's oil production. The key is getting the battery to the 30-40 mile per day, 5-10 year lifespan point. That's a useful threshold, because you're not demanding something unreasonable like 200 miles per day from a small battery, but you're also not so small that everyone has to flip to the gas system on their normal commute.

I agree with you that in the next 2-5 years that should be the plan and it should be the bridge between what will be the next fuel source for vehicles (I'm thinking full blown battery powered cars, but we'll see if they can make those sort of leaps in technology). Also, there are places that trick out those Hybrids today (turning them into plug-in versions), however the cost is in the double digit range and Toyota has recently indicated that despite reports indicating the next-gen Prius will possess such capabilities, that currently it is not cost effective and they do not anticipate being able to add such into the next gen Prius in the early years of production (they are hoping to roll it out in the latter years, so we are talking 2011/2012 on).

 

The one big factor is that we are talking about one car, which is going to have 450K in production in 2009 (that is Toyota's anticipated production number). This is not going to have a large scale impact on the economy. What would have that sort of impact is a full blown roll-out of this technology on the various models throughout the industry (thus not vastly limiting the market that you can truly hit). I do realize that the reason the Prius has been so successful is because early on it relied on consumers who bought the car wanting people to know that your driving a hybrid (Honda didn't have much success as they just offered the technology in the standard car).

[Chisoxfn]

18 months ago, SUVs ruled the world. That was what was selling and what Americans seemed to want. Whenever we can go big, we go big.

I still think GM has been the American Car company that has been doing a stellar job on this front. I also believe long term the consumers like there SUV's and various other products and with GM trying to push Hybrid technology in various lines as the hybrid efficiency (basically put as you can power the car more and more on battery power) increases they will be better prepared to drop such technology into the next Tahoe's and so on, thus continuing increasing the efficiency of those vehicles (maybe its not like a Prius which gets 100 MPG, but I still say a good chunk of the market likes SUV's and prefers them so me buying a version that is 30% more fuel efficient than my previous car should still have a significant impact on the oil demand (thus, simple supply/demand, we'd see increases in the price of oil & thus gas).

[Texsox]

The SUV market may be decreasing, but the Tahoe Hybrid has an ~30% increase in fuel capacity. The actual mileage may be less than the typical "car", but the fact is even with the decreasing SUV sales, many Americans drive SUV's (just check out a California freeway on a daily basis, where the ratio is pretty even between Car & SUV, in fact, in many areas I drive, I'd say there are more SUV's than cars). Now lets say I'm in the market for an SUV, this means I'm not in the market for a freaking Prius (I should preface this by saying there isn't anyway in hell I'd ever buy a Prius, things are a rip as far as I'm concerned; your paying 30K for a car that has the features/quality of a compact car), I basically have the option of buying a Tahoe Hybrid or one of the other many gas guzzling cars (the bright side is more SUV's are doing the variable engine (ie, 4/8 cylinder where the engine runs on 4 during highway driving (unless you are stepping on it)). If Honda/Ford whomever all had the typical SUV's with hybrid engines and 30% better fuel capacity, than I would be buying a car and in turn effecting the gas supply.

 

The reality is the majority of SUV owners aren't going to just turn over there SUV for a freaking Prius or Civic Hybrid. We drive SUV's for a variety of reasons, most of which have to do with the fact that we probably haul stuff/have kids/drive in winter conditions/prefer to have the extra room, and the Prius/Civics of the world aren't going to fix that.

 

In terms of the NextGen Prius, they are scheduled to come out in the near future and the technology is already set aside and they are in heavy testing stage. In fact, the Next Gen Prius will be out during 2009 (Model Year 2010). The MPG ratings which estimate the "100" MPG Next Gen Prius estimate the current generation Prius at "85" MPG (you can expect to get 45-48 MPG out of the current Prius, not 85MPG). These estimates are based on Japanese standards and from everything I've read online are completely out-dated and ridiculous.

 

The new Prius is actually going to offer two batteries and the key is the new hybrid engine will run on hybrid ("battery") power for an extended time (ie, the car will run up to 25-30 MPH before the "Gas Engine" kicks on). The version that is expected to get the best mileage will be based on a lithium ion platform (anticipated 10 MPG improvement from the previous Scion, which pushes it into the 55-58 MPG range) while the version using the current batter (although a tweaked version of such battery platform) will see a 5MPG improvement (estimated).

 

The release is scheduled for Detroit Auto Show in January 09 and will hit show-rooms early in 2010. Toyota is working on coming out in future years with an option which involves a bigger, plugin type battery, which would push the MPG into the 100MPG range (this is something which would work for short-range use and Toyota has already nixed reports that it will be available in the next few years as the cost is currently far too high).

 

When we do a Texas roll call, just shout out a howdy! You would so fit in down here.

 

Giving the consumer what they need, instead of what they want, may be a nice social thing to do, it rarely works long term. Like The Big Mac and 48 oz Cokes, the SUV will not die even though it is bad for you.

[Chisoxfn]

When we do a Texas roll call, just shout out a howdy! You would so fit in down here.

 

Giving the consumer what they need, instead of what they want, may be a nice social thing to do, it rarely works long term. Like The Big Mac and 48 oz Cokes, the SUV will not die even though it is bad for you.

I drive an SUV now and I'm looking hard at switching to a car and every time I really think about it, I get pissed at the fact that there just isn't a more fuel efficient SUV. Heck, most of the cars I'm looking at aren't all the fuel efficient. And like I said, I have no desire to drive a Civic/Prius Hybrid (nor do I want to spend the assloads in additional costs to get the Prius or Civic). I absolutely love being able to go up to the mountains when I snowboard (pile in all the people and boards and go). I also prefer sitting up higher and being able to look out on the road (visibility) and quite frankly I love the fact that when I haul crap I can actually fit it in my car and not make special trips.

 

I have a Honda Pilot so its not like a huge V8 guzzler and its my favorite car I've ever owned (I love the s*** out of it and drive the s*** out of it too; pretty long commute to a couple of my main clients). Still, if I want a car, I'd want it to be a sporty car and that means no to the Prius/Civics of the world.

[Chisoxfn]

I should add, me and a couple friends debate this subject often via emails so I've done quite a bit of research on the various auto manufactures and the current alternative fuel projects they have going on.

[NorthSideSox72]

I drive an SUV now and I'm looking hard at switching to a car and every time I really think about it, I get pissed at the fact that there just isn't a more fuel efficient SUV. Heck, most of the cars I'm looking at aren't all the fuel efficient. And like I said, I have no desire to drive a Civic/Prius Hybrid (nor do I want to spend the assloads in additional costs to get the Prius or Civic). I absolutely love being able to go up to the mountains when I snowboard (pile in all the people and boards and go). I also prefer sitting up higher and being able to look out on the road (visibility) and quite frankly I love the fact that when I haul crap I can actually fit it in my car and not make special trips.

 

I have a Honda Pilot so its not like a huge V8 guzzler and its my favorite car I've ever owned (I love the s*** out of it and drive the s*** out of it too; pretty long commute to a couple of my main clients). Still, if I want a car, I'd want it to be a sporty car and that means no to the Prius/Civics of the world.

 

Ford Escape Hybrid: 30/34

Saturn VUE Green Line, out this fall: 34/32

Toyota Highlander: 27/25

Lexus RX 400h: 27/24

 

[Chisoxfn]

Ford Escape Hybrid: 30/34

Saturn VUE Green Line, out this fall: 34/32

Toyota Highlander: 27/25

Lexus RX 400h: 27/24

Ford has done an awesome job with the Escape Hybrid. In terms of the market for smaller SUV's they were ahead of the game (as I'm pretty sure that was the first hybrid SUV out on the market and was actually one of the first hybrid vehicles as well).

 

It will be interesting to see Saturns as this will compete with the Escape (in the small SUV market). The key to me is in the description of SUV's, while the Saturn/Escape are SUV's, you still aren't talking about the big boys of the SUV world (in terms of sales and therefor drivers) which is the Ford Explorers, Tahoe/Yukon, Honda Pilot's, Toyota Highlander (its nice to see Toyota coming out with there hybrid), Nissan Pathfinders, and 4Runners of the world. You can easily pinpoint those vehicles as making up probably 90% of the SUV market (maybe I'm exaggerating but its probably close to that).

 

Right now the options are the Highlander (which is a solid car, comparable to the Pilot which I drive and based on what I get in mileage, you are talking about a 32% increase). I think this is a step in the right direction. Again, the next step and the key step is to have these hybrid versions priced at a similar cost to the non hybrid version (I think as these hybrid options become more mainscale and as technology increases as well as economies of scale being reached, we could see a hybrid costing maybe 1K more and at that point for a 32% increase in fuel efficiency you are talking about a no-brainer and the beginning of hybrids becoming the standard vehicle purchased.

 

The Lexus version is essentially the more luxurious Highlander and its nice to see Lexus spreading the wealth (Lexus has added a lot of hybrids to there line of vehicles and again the current problem is structured on the cost/benefit factor which consumers need to consider, imo (ie, cost of hybrid up front and payback period).

[NorthSideSox72]

Ford has done an awesome job with the Escape Hybrid. In terms of the market for smaller SUV's they were ahead of the game (as I'm pretty sure that was the first hybrid SUV out on the market and was actually one of the first hybrid vehicles as well).

 

It will be interesting to see Saturns as this will compete with the Escape (in the small SUV market). The key to me is in the description of SUV's, while the Saturn/Escape are SUV's, you still aren't talking about the big boys of the SUV world (in terms of sales and therefor drivers) which is the Ford Explorers, Tahoe/Yukon, Honda Pilot's, Toyota Highlander (its nice to see Toyota coming out with there hybrid), Nissan Pathfinders, and 4Runners of the world. You can easily pinpoint those vehicles as making up probably 90% of the SUV market (maybe I'm exaggerating but its probably close to that).

 

Right now the options are the Highlander (which is a solid car, comparable to the Pilot which I drive and based on what I get in mileage, you are talking about a 32% increase). I think this is a step in the right direction. Again, the next step and the key step is to have these hybrid versions priced at a similar cost to the non hybrid version (I think as these hybrid options become more mainscale and as technology increases as well as economies of scale being reached, we could see a hybrid costing maybe 1K more and at that point for a 32% increase in fuel efficiency you are talking about a no-brainer and the beginning of hybrids becoming the standard vehicle purchased.

 

The Lexus version is essentially the more luxurious Highlander and its nice to see Lexus spreading the wealth (Lexus has added a lot of hybrids to there line of vehicles and again the current problem is structured on the cost/benefit factor which consumers need to consider, imo (ie, cost of hybrid up front and payback period).

I posted a thread in here back around December or January, right before we bought our Ford Escape Hybrid. I laid out the math, and did payback period calcs based on gas at $3.00, $3.50 and $4.00 a gallon, including the tax rebate. for $4, the payback period, depending on arrival of tax time, was a year or so. And we're above that now.

 

But, that math is different in each scenario - my scenario was the FEH versus my current SUV (which was a V6 Saturn VUE with the Red Line Honda engine, at the time), and looking at the non-hybrid Escape versus the hybrid for the cost difference. Someone else making a different change of vehicle would have different results. But for us, it was a no-brainer, and I'm really glad we did it. We'll be making money on the deal by a year in.

 

[lostfan]

Curious to hear SS2K5's thoughts on this.

http://www.mcclatchydc.com/homepage/story/39611.html

 

Speculation driving oil price skyward, Senate panel told

By Les Blumenthal | McClatchy Newspapers

WASHINGTON — One is a billionaire financier and the other operates seven gas stations and convenience stores in a farming community of 7,000 in eastern Washington state.

 

But George Soros and Gerry Ramm delivered the same message Tuesday to the Senate Commerce Committee: Rampant speculation has helped spur out-of-control crude oil prices.

 

In the measured tones of high finance, Soros, whose hedge fund by some accounts made $3 billion last year, talked about a "speculative excess" and warned that the run-up in oil prices could drag the United States into a recession.

 

"There is a strong prima facie case against institutional investors pursuing a commodity index-buying strategy," he said. "It is intellectually dishonest, potentially destabilizing and distinctly harmful in its economic consequences."

 

Ramm, the president of the Inland Oil Co. of Ephrata, Wash., was a bit more plainspoken.

 

"Excessive speculation on energy trading facilities is the fuel that is driving this runaway train in crude oil prices," he said.

 

Others testifying at the hearing said that speculation by investment banks, hedge funds, institutional investors and others may be responsible for more than half of the skyrocketing price of crude oil. The Federal Trade Commission and the Commodity Futures Trading Commission, they said, have failed to investigate.

 

Sen. Maria Cantwell, D-Wash., who chaired the hearing, was especially critical of the Commodity Futures Trading Commission for deciding that regulators in London and Dubai should patrol international crude-oil markets rather than doing so itself.

 

The International Petroleum Exchange is in London but is owned by an Atlanta exchange; the oil trading exchange in Dubai is connected with the New York Mercantile Exchange. In addition, West Texas Intermediate Crude is the benchmark used on most international oil markets.

 

Cantwell said that the Commodity Futures Trading Commission had oversight authority over international exchanges but so far had refused to act. Speculators are taking advantage of the situation, she said.

 

"This is no different than when U.S. businesses take out a post office box in the Cayman Islands to avoid U.S. business laws," Cantwell said. The commission, so far, has proved to be a "toothless tiger" which has "abdicated its oversight responsibility," she said.

 

Sen. Byron Dorgan, D-N.D., said he thought that there had been an "orgy" of speculation when it came to the oil markets.

 

"The law of bubbles is that all bubbles burst," Dorgan said.

 

Even as speculators and others are getting rich, the retail side of the industry is getting squeezed, Ramm said.

 

"Last year, gasoline dealers and heating oil retailers saw profit margins from fuel sales fall to their lowest point in decades as oil prices surged," he said, adding that most station owners make their profits by selling drinks and snacks.

 

Ramm, representing the Petroleum Marketers of America, said retailers were near the limits on their lines of credit because of the high petroleum prices.

 

"This creates a credit crisis with marketers' banks, which creates liquidity problems and may force petroleum marketers and station owners to close up shop," he said.

 

Michael Greenberger, a University of Maryland law professor, said that not only were speculators playing the markets, they also were starting to take delivery of the petroleum products. As they drive prices higher, they then can sell their products for even more. Greenberger said that one investment company was currently the largest owner of heating oil in New England, where oil heats 80 percent of homes.

 

If speculation were reined in and trading rules tightened, Greenberger said, the cost of crude oil could drop 25 percent.

[Balta1701]

It'll never actually happen, with good reason, but I read today an interesting suggestion for how to prove this isn't a "Speculatory bubble" in oil prices; start releasing oil from the SPR. If it's a speculatory bubble, the fact that oil prices have been going up is therefore one of the main things that has been driving oil prices up, not lack of supply or high demand or any thing of that sort. If you were to impose a downward correction on the market by pushing more oil out there, that would hypothetically be the pinprick popping that bubble.

 

What's probably more likely is that if the spike keeps increasing, we'll see the same effect, as $4 and $5 a gallon gas keeps pushing people to drive less, thus driving down demand.

[southsider2k5]

Curious to hear SS2K5's thoughts on this.

http://www.mcclatchydc.com/homepage/story/39611.html

 

The interesting thing is that the total speculative long position in front month Crude Oil as of Monday was 25,000 contracts. A week before it was 50,000, and the price had only falled about $5. If this was a speculative bubble, it would have been a much bigger price slam with that kind of liquidation of the specs. In other words the vast majority is hedging and/or taking delivery. I think I posted and article on here in the last couple of days that talked about the fundimentals of speculation in futures versus a buy and hold product and the fundemental economic differences in them.

[southsider2k5]

It'll never actually happen, with good reason, but I read today an interesting suggestion for how to prove this isn't a "Speculatory bubble" in oil prices; start releasing oil from the SPR. If it's a speculatory bubble, the fact that oil prices have been going up is therefore one of the main things that has been driving oil prices up, not lack of supply or high demand or any thing of that sort. If you were to impose a downward correction on the market by pushing more oil out there, that would hypothetically be the pinprick popping that bubble.

 

What's probably more likely is that if the spike keeps increasing, we'll see the same effect, as $4 and $5 a gallon gas keeps pushing people to drive less, thus driving down demand.

 

So what is to stop OPEC from dropping supply to keep prices high? (see how that works? )

[Balta1701]

So what is to stop OPEC from dropping supply to keep prices high? (see how that works? )

In that case, the U.S. makes a fortune because we start selling oil that we bought at lower prices for $130, and we use that money to fund a legit alternative energy research program.

[southsider2k5]

In that case, the U.S. makes a fortune because we start selling oil that we bought at lower prices for $130, and we use that money to fund a legit alternative energy research program.

 

A fortune? We don't have that much oil in there in reality. Especially when you consider that is supposed to be an emergency fund.

[NorthSideSox72]

Curious to hear SS2K5's thoughts on this.

http://www.mcclatchydc.com/homepage/story/39611.html

I read a different article but on the same topic. These lawmakers aren't really getting it. Speculators in the market have to both open AND close their positions without taking delivery - so their presence has zero effect on supply and demand in the actual purchasing market. And if the theory they are going on here, is that the speculators drive up the prices then the actual buyers have to pay that increased price, then they are fairly ignorant of basic market dynamics. Think about this... let's say the market normally has 10 speculators and 10 hedgers. Now, with more speculators coming in, let's say its 20 speculators to 10 hedgers. One might think that the extra speculators and their cash would cause the price to go up, right? Except, that won't work, because those 20 speculators now have to sell to 10 hedgers. That will depress the price back down, since there is more supply than demand in the space. So, yet again, the only way to truly have a lasting rise in price is to have more actual delivery demand.

 

Now, I will add one caveat here, or one wildcard - market regulation. There are some segments of derivatives trading, some involving energy products, where the CFTC just isn't regulating the markets. And what that COULD do is encourage some illegal, market maniuplating activities, which may artificially riase prices. Some have suggested the CFTC should have more coverage in these areas (and others), and I do actually agree with that. Of course, BushCo and Congress have been consistently cutting the CFTC budget, and CFTC is in a near hiring freeze, mostly because they don't really understand the CFTC. Now, suddenly, they need them to do something. But that's another story.

 

[Controlled Chaos]

Oil Executives Try to Educate Senate Democrats, But Democrats Appear Hopeless

 

Earlier today, the Senate Judiciary Committee summoned top executives from the petroleum industry for what Chairman Pat Leahy thought would be a politically profitable inquisition. Leahy and his comrades showed up ready to blame American oil companies for the high price of gasoline, but the event wasn't as satisfactory as the Democrats had hoped.

 

The industry lineup was formidable: Robert Malone, Chairman and President of BP America, Inc.; John Hofmeister, President, Shell Oil Company; Peter Robertson, Vice Chairman of the Board, Chevron Corporation; John Lowe, Executive Vice President, Conoco Philips Company; and Stephen Simon, Senior Vice President, Exxon Mobil Corporation. Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.

 

One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market. John Lowe pointed out:

 

I cannot overemphasize the access issue. Access to resources is severely restricted in the United States and abroad, and the American oil industry must compete with national oil companies who are often much larger and have the support of their governments.

We can only compete directly for 7 percent of the world's available reserves while about 75 percent is completely controlled by national oil companies and is not accessible.

 

Stephen Simon amplified:

 

Exxon Mobil is the largest U.S. oil and gas company, but we account for only 2 percent of global energy production, only 3 percent of global oil production, only 6 percent of global refining capacity, and only 1 percent of global petroleum reserves. With respect to petroleum reserves, we rank 14th. Government-owned national oil companies dominate the top spots. For an American company to succeed in this competitive landscape and go head to head with huge government-backed national oil companies, it needs financial strength and scale to execute massive complex energy projects requiring enormous long-term investments.

To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion each day.

 

Because foreign companies and governments control the overwhelming majority of the world's oil, most of the price you pay at the pump is the cost paid by the American oil company to acquire crude oil from someone else:

 

Last year, the average price in the United States of a gallon of regular unleaded gasoline was around $2.80. On average in 2007, approximately 58 percent of the price reflected the amount paid for crude oil. Consumers pay for that crude oil, and so do we.

Of the 2 million barrels per day Exxon Mobil refined in 2007 here in the United States, 90 percent were purchased from others.

 

Another theme of the day's testimony was that, if anyone is "gouging" consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers' anxieties about gas prices by reducing taxes.

 

The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum. Shell's John Hofmeister explained, eloquently:

 

While all oil-importing nations buy oil at global prices, some, notably India and China, subsidize the cost of oil products to their nation's consumers, feeding the demand for more oil despite record prices. They do this to speed economic growth and to ensure a competitive advantage relative to other nations.

Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people.

 

Senator Sessions, I agree, it is not a free market.

 

According to the Department of the Interior, 62 percent of all on-shore federal lands are off limits to oil and gas developments, with restrictions applying to 92 percent of all federal lands. We have an outer continental shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium on the Pacific Ocean, an outer continental shelf moratorium on the eastern Gulf of Mexico, congressional bans on on-shore oil and gas activities in specific areas of the Rockies and Alaska, and even a congressional ban on doing an analysis of the resource potential for oil and gas in the Atlantic, Pacific and eastern Gulf of Mexico.

 

The Argonne National Laboratory did a report in 2004 that identified 40 specific federal policy areas that halt, limit, delay or restrict natural gas projects. I urge you to review it. It is a long list. If I may, I offer it today if you would like to include it in the record.

 

When many of these policies were implemented, oil was selling in the single digits, not the triple digits we see now. The cumulative effect of these policies has been to discourage U.S. investment and send U.S. companies outside the United States to produce new supplies.

 

As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.

 

The problem of access can be solved in this country by the same government that has prohibited it. Congress could have chosen to lift some or all of the current restrictions on exportation and production of oil and gas. Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development.

 

Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Democrats' latest efforts to block energy independence:

 

HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.

HOFMEISTER: Not at all.

 

HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?

 

HOFMEISTER: That's correct.

 

HATCH: It could be recovered at somewhere between $30 and $40 a barrel?

 

HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...

 

HATCH: Well, somewhere in that area.

 

HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.

 

HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.

 

HOFMEISTER: I believe we could.

 

HATCH: And we could help our country alleviate its oil pressures.

 

HOFMEISTER: Yes.

 

HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.

 

HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.

 

The committee's Democrats attempted no response. They know that they are largely responsible for the current high price of gasoline, and they want the price to rise even further. Consequently, they have no intention of permitting the development of domestic oil and gas reserves that would both increase this country's energy independence and give consumers a break from constantly increasing energy costs.

 

Every once in a while, Congressional hearings turn out to be informative.