What is a fair price for gasoline (per gallon)? (expenses, buy, tax)
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I remember the cost of gasoline was about $1.20 a gallon for most of the 1990s. Then once Bush started as President and China started booming the cost went up up and up.
Now it is finally coming down. I heard someone say when they saw gasoline at $2.68 a gallon in OK, that the price for gasoline is finally getting fair again.
Just what is a fair cost for gasoline in today's world? At what price would you feel that everyone involved in the process would get their fair share? Hopefully you can give out a dollar amount.
Last edited by Refugee56; 10-15-2008 at 08:41 AM..
The cheapest possible price while still ensuring adequate supply to meet demand at any given time.
Simple economics.
Best to forget about notions of "fairness," as those always tend to muddle things.
Agreed, 'fairness' is all relative, the person who has a 2-mile commute isn't going to be effected all that much whether gas is $1.20/gallon or $4/gallon compared to the person w/the 20 or 30-mile commute. Both definitions of fairness will probably differ quite a bit.
If oil were like most everything else and stayed close to the average 4% yearly inflation rate. Gas was around $1.20/gallon in the late 90s, so in 10 years, that would put it near $1.65/gallon. However, it's not, it has way too many other variables that come into play, hence, the crazy spikes and falls that we see in the oil market.
To me personally, would be content w/gas around $2 even/gallon. I don't want it to go so low that alternative fuels aren't continually explored and developed and that people return to their old driving habits that helped get us in the mess we have been in this year. But we have 2 fairly fuel-efficient cars that get in the upper-20s MPG. Someone w/an SUV probably wouldn't be content til $1/gallon. Which is yet another reason fairness is all relative.
None of this is about fair price. But it does not mean anyone is trying to cheat you, either.
The market does not really work well on this commodity, other than today's price was/is today's bid.
In normal commodity markets, higher prices mean more product is produced or demand drops, and lowers prices. Does really fully work that in the oil realm anymore. Worldwide production has about maxed, so now all we are dealing in lowered demand to drop prices.
Right now, it is dropping because the world economy and demand is dropping even faster than oil production. As production drops lower, the price may tend to go back up while the economy keeps dropping. This is all pretty much a no-win game for the buyers (US). It is best to not play games where you cannot win.
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I remember the cost of gasoline was about $1.20 a gallon for most of the 1990s. Then once Bush started as President and China started booming the cost went up up and up.
Now it is finally coming down. I heard someone say when they saw gasoline at $2.68 a gallon in OK, that the price for gasoline is finally getting fair again.
Just what is a fair cost for gasoline in today's world? At what price would you feel that everyone involved in the process would get their fair share? Hopefully you can give out a dollar amount.
Gas at the 7-11 up the street from my house was $2.46 a gallon this morning.
From a manufacturing basis and valuation I think a fair market price for a gallon of gas is $1.41.
1 barrel of oil with delivery to the US cost about $6.00 and contains 42 gallons of oil. It cost $.50 a gallon (gas) to refine it into gasoline and you get approximately 20 gallons of gas from a barrel of oil. This equates to $.62 a gallon to purchase and refine it. Add a fantastic 15% markup and you end up with a manufactured cost of about $.73 a gallon.
Add delivery charges of $.20/gallon to local gas stations and a generous $.05/gallon station markup and you are at $.98/gallon. Add that $.43 fed tax and you have $1.41.
$4/gallon. Still far cheaper than in much of the civilized world.
I'm one of those not much affected though -- 7 mile commute with no other cars around, about to start a new position at work working four days a week and two of those from home, so only 28 miles/week 48 weeks/year --> 1344 miles/year, car gets 24 MPG. If gas went from $4/gallon to $12/gallon, that's only $37 extra per month in mandatory driving expenses. If I buy a house, it will be in an area that is even closer to work. I know all of the economy is affected, but I wouldn't feel it at the pump, at least as far as my mandatory travel.
What I'm trying to say is that it's easy for me to say that $6 gas would be okay, because I'm trapped in my perspective in a sense. If I commuted 6 days/week, 30 miles each way, in an SUV that got 13 MPG, I'd have a completely different perspective.
Personally, I saw some definite good coming out of the high gas prices. I think prices will come back up next year, but based on the economic outlook they may not rebound to 2008's highs until 2010 or 2011.
Pre-2001 we saw prices in the $1.15 range regularly. In the summer of 2001 there was a jump in price. I don't remember why but it went from ~$1.15 up to ~$1.50. That was a big jump and it made my cheeks pucker at the time because I was a poor college kid. Luckily it went back down after a few months but it seemed to hover in the $1.25-$1.35 range after that.
Then Sept 11th hit and following entry of war in afganistan and Iraq we saw gas prices rise steadily as the war went on.
And then there was that b**** Katrina. Gas shot up to $2.50-$3.00/gal almost overnight....and stayed there....for quite a while. It seemed to rise and fall depending on any number of things between $2.00/gal and as much as $3.25/gal.
Then there was 2008...wtf???? Come the hell on. We've seen it at $4/gal at it's highest this summer.
I guess I had no problem at all with the price when it was less than $1.75/gal but I wouldn't whine too much if it was back at $2/gal. Anything less than $2 is fair I guess....but we're not likely to sustain that for more than a short time if we get back to those levels.
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