[Vision2020] The Price of Gas

Tue Apr 12 00:10:23 PDT 2005

Mr. Harkins,

You write,

"But Donovan, surely you realize that if the price of oil hasn't really 
increased in real dollars for about 40 years, that the products that use oil 
will adjust by that fractional increase."

That comment is full of assumptions. First, not everything used oil in the 
60's ike it does now. Everything is made out of plastic now. Second, we have 
more things, more materials. Third, you assume that all costs rise for 
everything. This is not true, the cost of many goods have decreased. Next, 
you assume that your calculation of oil and inflation is correct. Not all 
things rise in value and cost equally at 6.5% per year. Finally, you assume 
the year that you picked, 1964, was a good representative year of the 
1960's. 1964 might have been a bad year for gas.

I do not think you can compare living standards of 1960 to 2005. There is 
too much difference. Rent and medical costs are more, and wages are lower. 
You also need different stuff to live. You cannot compare the times and 
changes on those levels. It is just not comparable. It is totally different 
worlds.

But yes, I am always game on taking about the economy.

Take Care,

Donovan J Arnold

>From: Jeff Harkins <jeffh at moscow.com>
>To: vision2020 at moscow.com
>Subject: RE: [Vision2020] The Price of Gas
>Date: Mon, 11 Apr 2005 22:26:18 -0700
>
>Donovan
>
>It's a good thing that so many of the uses of oil are recyclable - like 
>plastic and lubricants.
>
>It is also good that the price of oil is encouraging the refining of sour 
>crude for gasoline products.  As I recall, only about 7% of oil produced is 
>sweet.  But Donovan, surely you realize that if the price of oil hasn't 
>really increased in real dollars for about 40 years, that the products that 
>use oil will adjust by that fractional increase.
>
>In any case, I was musing about the cost of gasoline for my lawn mower.  If 
>you would like to discuss product costing and the forces that drive the 
>marginal revenue product to the marginal cost, I'm game.
>
>At 09:59 PM 4/11/2005, you wrote:
>
>>Mr. Harkins,
>>
>>Yes, the gas price at the pump is a problem. But it is not the costs of 
>>mileage that hurts us the most. It is that costs go up for everything when 
>>oil goes up. Think about how a product is made and gets to you and how 
>>much oil it uses.
>>
>>The product might be made out of oil, like plastic
>>The product in made in a plant that uses oil for lighting and energy to 
>>run the plant
>>It is wrapped in plastic made out of oil
>>It is shipped on a boat to the US that uses oil to get here
>>It is then loaded on a truck that uses oil to get the store
>>The store then uses oil to light the building
>>You then use oil to go to the store to buy the product
>>THe workers use oil to get to work and live
>>The computers that manage the product use oil
>>
>>All these steps use oil and the cost of making and the costs are pasted on 
>>to the buyer.
>>
>>It is these factors that drive prices up on everything. The $15 at the 
>>pump per month is not the major problem for the majority of people. It is 
>>the cost of everything going up at once that is the problem. What is worse 
>>is that right now there are no clear and affordable alternative to oil. 
>>Our technology in this area has been suppressed largely in part by oil 
>>production companies.
>>
>>Take Care,
>>
>>Donovan J Arnold
>>
>>
>>>From: Jeff Harkins <jeffh at moscow.com>
>>>To: vision2020 at moscow.com
>>>Subject: [Vision2020] The Price of Gas
>>>Date: Mon, 11 Apr 2005 20:31:04 -0700
>>>
>>>I was thinking about the price of gas today (I had to fill up my gas cans 
>>>for yard duty) and the sticker shock really hit - for a moment.  Hey, it 
>>>was $12.50 to fill up a 5 gallon can.
>>>
>>>Having been raised in Dallas, I recall that gas was selling for as low as 
>>>.179 per gallon in the early 60's.  In 1964, I recall the price was about 
>>>$ .199 per gallon.  Just for fun, let's calculate the price today, if the 
>>>average inflation rate was about 6.5% per year.  I was surprised - if you 
>>>invested $ .199 in a savings account in 1965 and held it there for 40 
>>>years (2005) - compounded at 6.5% annually, the amount you could withdraw 
>>>would equal approximately $2.48.  Interesting huh?  Guess we have been 
>>>getting a pretty good deal for the past 40 years.
>>>
>>>S0 just how much will the gas price increase affect a person.  Assume 
>>>that you drive about 12,000 miles a year.  Also assume that you drive a 
>>>vehicle that gets about 15 miles per gallon. This means that you will use 
>>>about 800 gallons of gas.  The price is up about $1 since the first of 
>>>the year.  If it remains at about $2.50 per gallon, it will cost you 
>>>about $800 more per year. Under these assumptions, you will spend about 
>>>$2,000 for gas for the next 12 months. Hmmm -   food for thought.
>>>
>>>
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>>
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>>
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