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Author Topic: FUEL $$$ WTF  (Read 115287 times)
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W1ATR
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« on: April 12, 2011, 09:14:12 AM »

Ok, now I'm just looking for some opinions here, and not a gubmint argument thread.

It's been the constant topic lately in over the road contractor circles regarding the ridiculous expense of fuel. (Personally dropping 400 a week per truck here at $4.25 a gallon) Last week was a bad example, but we did a large job that required a few trucks on site and a couple pieces of fuel guzzling equipment. I have my sunoco receipts in front of me right this minute, and they total more than $3000 for the 10 day job.

At a time when we need every penny possible to push this thrashed economy forward, high fuel is hammering people and causing them to pull back their spending either in fear of even higher future gas/oil expenses, or just flatly, no money left over from their weekly nut to buy anything but fuel for their vehicles.

So the question is: Should the Federal regulators take the fuel away from the oil speculators? Would this help to normalize fuel costs, or would it do more harm than good?

Nice easy question, right? I figure with the diverse and highly intelligent group here, this is a good one for conversation.

Please again, no political ugliness or I'll be the first one to ask Steve to slam the door.

J

   
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KL7OF
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« Reply #1 on: April 12, 2011, 09:23:38 AM »

Slam the door....There isn't anything good to say   it is very ugly politically....
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WD8BIL
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« Reply #2 on: April 12, 2011, 09:26:38 AM »

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Should the Federal regulators take the fuel away from the oil speculators?

The last thing you want is the Feds getting involved even more than they are. More than half the cost of fuel goes to taxes in one form or another.
Sure the Fed tax at the pump is ONLY $0.185/gal but the companies are also taxed for importing the oil, refining, storing and distributing. Everytime they move or deliver the comodity it is taxed.
Which, of course is passed on in the price.

Here in Ohio the pump tax is $0.28/gal. The State also adds transport taxes on the tankers using the highways.

So it ain't hard to see where the money is going and who/what is responsible for the major expense.


What is needed is a more sane tax structure.
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flintstone mop
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« Reply #3 on: April 12, 2011, 10:15:29 AM »

There is a rumor that these price increases are not going away and we will be paying the magical $5.00/gal gasoline.......sorry for you diesel owners. It isn't because of Summer travel.
And agreed..........our economic recovery is shot and raising the debt ceiling is heading the USA to the brink.
The viscous circle begins............pass it on to the consumer.
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Fred KC4MOP
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« Reply #4 on: April 12, 2011, 10:37:28 AM »

try $9.50/gal as it is here in Greece.
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« Reply #5 on: April 12, 2011, 10:41:52 AM »

No way for this not to get political.

Lower demand.

Car pool. Leave the SUV at home. Slow down 5 MPH on the highway.
Plan trips so less unnecessary ones are eliminated.

If the demand does not fall the price will continue to climb.

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WD8BIL
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« Reply #6 on: April 12, 2011, 10:49:59 AM »

You're right to a certain extent, Dave.

But when those who explore, drill, refine and bring the comodity to market are pulling 9-12 cents a gallon profits and the govment, which does not a damn thing, is raking in $2+ a gallon something is wrong.
With a sane tax structure the free market would be able to regulate itself with the natural supply n demand laws.
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Ott
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« Reply #7 on: April 12, 2011, 11:56:51 AM »

try $9.50/gal as it is here in Greece.
Curious... if you know, why is it $9.50 a gallon in Greece?  Raw materials, taxes, price fixing, profiteering?
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K1JJ
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« Reply #8 on: April 12, 2011, 12:15:14 PM »

Speculators add liquidity to a market. Most speculators lose their asses in the markets, especially with wildly swinging markets like these. The futures contracts, options and cash market agreements are mainly for commercial users to hedge their product use and supplies. Without the speculators to take the other side of a transaction when the commercials/hedgers need to, the commercials would be trying to hedge against each other, creating much bigger price swings. This has been proven.

The bottom line is this... if it were so easy to profit speculating from these huge commodity swings, everyone would be doing it. But it is extremely difficult to predict market direction for a week,a  day or even the next hour... or the next tick.

There is a pattern when prices soar for the govt to over regulate the free markets. This will only cause more problems. Looking over hundreds of years of price data for any major commodity will show these "adjustment" periods when for whatever reason supplies are less and demand is big causing price to ration the supply. The real reasons are open to discussion, but the pricing mechanisms in the form of speculators are not the blame.

T
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WA1GFZ
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« Reply #9 on: April 12, 2011, 12:16:57 PM »

Our Rep told me Congress intends to study the problem.
My response to him, " that is just an excuse to do nothing, How about you guys grow some balls"
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KD6VXI
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« Reply #10 on: April 12, 2011, 12:28:10 PM »

Try 8 trucks running full time, 600 miles a day.  4800 miles at 6 miles to the gallon....  That's 800 a DAY.

At 4 dollars a gallon.   My daily fuel receipts are more than your 10 day.

I feel ya.  Fuel surcharges in trucking are non-existant now...  Yeah, we HAVE them, but they are NOWHERE near what we need to make up for lost revenue.

Prices for freight haven't gone up much, either.  It's become a break-even game for me, after paying drivers, a million dollars worth of insurance on each truck, etc.


The price of fuel is ridiculous... And like others have pointed out, its not a seasonal spike...  This is the oil industry down to the station owners profiteering off the current events in the middle east.  Hasn't disrupted our oil gathering abilities one bit, but a station owner here ADMITTED he's raising rates due to the 'climate in the mideast'...  Yeah, he's from there somewhere.  I saw his fuel receipts for the last 3 months (not all, but representative), and his costs haven't increased much at all.  BUT, diesel HAS increased at the pump AT HIS STATION almost 75 cents a gallon.

And it's 9.50 or more a gallon in other countries because their government doesn't provide the subsidies that the US of A does.  The Feds subsidize our gas MORE than they tax it.  Fuel to the US Government is a net LOSS, after taxes.

--Shane
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flintstone mop
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« Reply #11 on: April 12, 2011, 12:59:46 PM »

No way for this not to get political.

Lower demand.

Car pool. Leave the SUV at home. Slow down 5 MPH on the highway.
Plan trips so less unnecessary ones are eliminated.

If the demand does not fall the price will continue to climb.



Dave.....
It perfect sense.................but what do I see.............more SUV's ..............more HUGE trucks being sold that get a whopping 20MPG  and people driving faster than ever before.

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Fred KC4MOP
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« Reply #12 on: April 12, 2011, 01:07:40 PM »

My vehickel took a mileage  dive when they forced us to use 10% ethanol. So, higher cost at the pump, as i'm getting 10% less gas and paying the 'same' price, and less mileage so I have to pay for more fuel. As far as the tax subsidy, its $0.50 on the ethanol, so i'm getting screwed there as well.

And yes, it is all about me.

Your mileage may very.

klc
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Bill, KD0HG
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« Reply #13 on: April 12, 2011, 01:16:18 PM »

The discussion continues!
(Replace Adolph with Hugo Chavez or your favorite middle-east despot)



* carpool.jpg (15.75 KB, 224x288 - viewed 928 times.)
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W7TFO
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« Reply #14 on: April 12, 2011, 01:52:25 PM »

Bear got it right. 

The US spends a ton of military $ (a subsidy) to guard oil in one form or another on the way to us from the areas where it subject to damage.  Reason is there isn't enough to satisfy demand in 'friendly' places.  Plus off-shore wells are just as bad as nuke plants in terms of incipient danger to us & the environment.

Other countries just add the costs in so it is high compared to us.  That makes one hell of a difference in the pump price.

Ethanol added is just a gimmick to get more $ for corn producers like ADM, and doesn't do anything good for engines.

I run only vintage Diesels here, and get by a bit by adding in every form of used oil I can get my hands on to 'stretch' the mileage.  .  ATF. Hydraulic. WMO.  Fryer.

The herd with jillions of miles on 'em:
'67 Mack 10-wheeler
'80 Benz 300SD
'85  "      300TD
'90 Ford F350 7.3 IH.

The newer electronic/urea ones won't let you do that with either sensors or regulations.

73DG
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K1JJ
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« Reply #15 on: April 12, 2011, 02:08:47 PM »

Though very important, oil is just another major commodity. Right now the price of most commodities is approaching or greatly exceeding historic highs.   Soybeans, Wheat, Corn, Cocoa, Copper, Gold, Silver, Platinum, Cotton, Lumber, Hogs, Cattle, (Beef) Sugar and others have made new historic highs, some never seen before.  

No one has complained about the price of beef or cotton yet, but they are both about doubled from last year. Even coffee is approaching old 1970's highs.

Oil bothers us more cuz it's in our faces due to our driving and heating uses.

I think the overall cause is simply cuz it takes more US dollars to purchase commodities. The reckless $Trillion Dollar+ spending spree of the last two years (and earlier) is finally playing out.

It's strange how this economy is doing everything it can to screw the average consumer. Wages are lower and harder to get, while house prices are falling and commodities are soaring.  At the same time interest rates are so low the average old person or saver can barely get a return on their money when invested "safely".  


I've always believed the markets find a way to eventually screw the majority, but in this case it's doing it in spades.. Wink  We're seeing deflation in some markets and inflation in others... bizzare.

But this price bubble too will pass and we will be reading in the news of the great commodity crash in the  future. The froth has reared its head lately. It always seems like it will go on forever at the top.

Even today commodity prices are getting hammered down – the signs of a building top.


T
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k4kyv
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« Reply #16 on: April 12, 2011, 02:25:44 PM »

I heard an interesting news item this morning.  The US balance of trade has recently IMPROVED, despite our purchasing more stuff from overseas with the slight improvement in our economy.  The reason is, the hike in the price of fuel has caused consumption to drop.  Imported oil is the primary source of our trade deficit, far more significant than foreign made automobiles and consumer electronics combined, plus all the junk we "consume" from Wal O'ChinaMart and other retail outlets.

The majority of the price paid for fuel in Europe goes to taxation. The commodity itself should be about the same or slightly less than ours due to their proximity to oil sources in the Mid-East, Russia and Africa. Not to debate whether that is good or bad (convincing arguments can be made both ways), the policy is basically to tax fuel as heavily as possible without totally tanking the economy. This reduces consumption thus promoting conservation and efficiency, while helping to fund the generous social safety nets that have long existed in most of the "pro-western" European countries.

And yes, the presently bloated military budget to protect our overseas "interests" which just happen to lie in oil-producing regions of the world, should be included when calculating the petroleum subsidy.
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WD8BIL
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« Reply #17 on: April 12, 2011, 02:38:26 PM »

Quote
The Feds subsidize our gas MORE than they tax it.  Fuel to the US Government is a net LOSS, after taxes.

In fact, Mr. Obama propose cutting the subsidies completely in his 2011 budget proposal.

Assuming the subsidies have been relatively constant the last 25 years lets do some math.
Being generous lets say the subs were, on average, $35B. Times 25 yrs that's $900B. Round it up to $1T......

Now, according to the Congressional Research Service the major oil companies paid $2.2T in revenue for the same period.

" As the experience of the past quarter-century has shown, governments have actually “profited” more from the oil industry than the industry has earned for its shareholders."


How is that a net loss for the gov.?

http://www.taxfoundation.org/news/show/1168.html
http://www.reuters.com/article/2010/02/01/us-obama-budget-oil-idUSTRE6103RM20100201

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Steve - K4HX
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« Reply #18 on: April 12, 2011, 03:02:45 PM »

Do not bring logic into this discussion. That will never do!   Grin

Why do I not hear anyone complain about speculators when the prices drop? Is the system only broken when prices go up?
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K3ZS
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« Reply #19 on: April 12, 2011, 03:20:49 PM »

I have heard of a way to reign in wild speculation.     Require people that bid up oil futures to actually have some of the means to store the oil.   Right now anyone can buy oil futures and not have anyplace to put it.   One way to save on fuel, that many people don't take advantage of, is using IRS Form 4136.    It is a tax credit for federal highway taxes paid for non-highway use, such as farms, fishing boats, construction equipment or even you lawn mower if you keep track of it.   Invest in an oil company to hedge your personal gas costs.    Gas goes up, stock goes up.    Today Goldman downgraded the oil market.    Oil futures dropped 3% and Chevron dropped about the same.    I don't think politics has anything to do with this.
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WA1GFZ
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« Reply #20 on: April 12, 2011, 03:23:02 PM »

The whole speculator thing is *.  
You buy something and unload it before you have to pay for it.
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WD8BIL
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« Reply #21 on: April 12, 2011, 03:40:37 PM »

Quote
Do not bring logic into this discussion. That will never do!

Sorry, I don't know what came over me!

DOWN WITH THE LYING CHEATING EVIL OIL COMPANIES!!! WE NEED MORE SOCIALIST..... ummmm.... i mean ...... GOBMENT CONTROL!!!
(is that better?)
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KE5YTV
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« Reply #22 on: April 12, 2011, 04:11:47 PM »

Oil is taxed coming and going. I have a few oilwells on my land. I pay taxes twice on my royalities. I pay income plus state sales tax.  Undecided I know ya'll feel my pain.  Wink

Mike
Very, very, very, very small Texas oil man.
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Mike
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WD8BIL
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« Reply #23 on: April 12, 2011, 04:15:32 PM »

Quote
Right now anyone can buy oil futures and not have anyplace to put it.
How can you store something in the future?
You don't need to have a factory in your backyard to invest in Microsoft do ya?
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K1JJ
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« Reply #24 on: April 12, 2011, 04:18:19 PM »

Quote
The whole speculator thing is bullshit.  You buy something and unload it before you have to pay for it.

Before you buy or sell short, for each contract, you must put up $8,000 cash in margin money on deposit at the clearing house that is debited and credited each day from your account to control  42,000 gallons of heating oil or 1,000 barrels of crude oil. Only commercials usually take delivery. In general, less than 5% of future contracts are delivered. In the S&P 500 contract and some other financial markets NONE are delivered - when expired, they are credited to an account in cash. Futures and options are mainly a hedging mechanism for financial risk control..

If you bought just ONE heating oil futures contract yesterday, you would have lost about $6,000 in about 24 hours. Timing is very difficult and the risk is huge.

Believe me when I tell you that most commodity speculators lose their asses in the end.  No one can force a market in one direction for long without getting caught.  Remember in the 90's when oil slipped all the way from $40 down to the $10 area?  Even the oil cartel could not stop that decline.  Speculators have even less power. Same when prices increase, no difference.

A speculator who buys has to eventually sell it = latent  downward selling pressure.
A speculator who sells short has to eventually buy it back = latent  upward buying pressure.
It all evens out in the end and actuallly makes price movement less erratic.. In contrast look at an illiquid market that trades a few times a day. An extreme case is house prices. How liquid are they when you want to dump a house in ten minutes? Look at the commissions.     $500,000 of S&P 500 contracts cost about $10 to move. Liquidity, baby.   Even house speculators got hammered in the last few years.

Without speculators you'd be  biddng 100 and selling at 110.    Speculators provide liquidity to narrow down that spread and make it fair.

If speculators were so bad they would have been outlawed 300 years ago, but the govt at least got that right.

Almost every individual in the stock market is a speculator too. Call them "investors if you like, but when we jump in the stock market we are speculating that our stocks will go up whether held for 5 minutes or 5 years.

T
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