American families have cut expenses to the bone, but stagnant wages still make keeping up with inflation impossible for the middle class. (Photo Credit: CC BY-SA/Dennis Jarvis/Flickr)

A corporate information service called American Pulse recently conducted a survey that shows how far the U.S. job market has fallen into the mire of class distinction. As the Huffington Post notes, 90 percent of U.S. workers surveyed admitted that they do not expect their stagnant wages to be able to compensate for rising gas and food prices.

‘Permanent midnight’ for the middle class

As the American middle class continues to sink beneath mountains of debt, rising prices and inadequate pay en route to a “permanent midnight” of poverty, faith in U.S. government’s economic policies has declined. Talk of rising inflation and a double-dip recession continues, and families who can ill afford to tighten the belt any more wonder where they can cut back. Provided salaries remain at low levels and prices continue to skyrocket, survey respondents said they’d undergo greater austerity measures in the following areas:

• Only buying necessities: confirmed by 70.5 percent
• Infrequent driving: 63.4 percent
• Spending less on clothes: 58.9 percent
• More bargain hunting: 53.1 percent
• Tightening the personal budget: 50.0 percent
• Buying generic: 49.9 percent
• Buying fewer groceries: 42.0 percent
• No change: 6.6 percent

Adieu, gross domestic product

Historically, consumer spending accounts for about 70 percent of the United States’ gross domestic product. Significant decreases in consumer spending retard economic growth. As the consumer spending growth rate of 2.2 percent in the first quarter of 2011 was much lower than economists had anticipated, the problem becomes obvious.

Nearly half of Americans believe a second Great Depression is rapping at the chamber door, according to a CNN poll. A June Gallup poll reflected shrinking consumer confidence, while a separate poll found that workers are currently less satisfied with their salaries and overall economic condition than they were before recession struck in 2008. Lack of career advancement was a common problem listed by respondents in nearly all recent surveys on the topic.

Breaking the link between profits and raises

Getting a raise used to have some connection to corporate profits, notes Brad Delong in Mother Jones. However, even though U.S. Department of Labor research has shown that U.S. worker productivity has surged, income has remained stagnant for most Americans. Data indicates that if the median U.S. household income had kept pace with the state of the economy since 1970, it would currently be $92,000, rather than $50,000. U.S. CEOs are making more money than they have since 2007.

How to ask for a raise, just in case

Sources

American Pulse

CNN

Economic Policy Institute

Huffington Post

Mother Jones

Summer vacation is getting more costly as prices for amusement parks and airfare go up. Image from Wikimedia Commons.

Every year, thousands of American families plan a fun getaway that often involves extensive travel and locations like theme parks. However, the cost of vacations is rising as things such as amusement parks and flights are becoming more expensive.

Cost of Disneyland getting less enchanting

Disneyland, the “Enchanted Kingdom,” is practically a Mecca for American children and for parents wanting to fulfill childhood ambitions for their little ones and see the joy on their face as they get a photo op with Donald Duck. However, the current price of admission may cause many parents to wince. Disney has raised prices, according to WalletPop, for single day admission by 5.3 percent to $80 per person for admission to one of its two Anaheim-based parks. The cost of a three-day pass to both parks now costs $224, though the cost is about $6 less for kids 3 to 9. Costs across all amusement parks went up by 2 percent per year since 2008, when attendance was down. Attendance has been rising again, but so have prices.

Getting there is half the battle

As oil and gas prices have gone up, so has the cost of airfare. Average airfare in the United States has gone up by 10 percent since last year, according to the Los Angeles Times, reaching $247 in the first quarter of 2011. That is an increase from the 2008 peak of $233, observed just before prices went lower in the midst of the recession. Fuel surcharges and baggage fees have been hitting travelers where it hurts, and international travelers will feel the pinch more than others, according to the Wall Street Journal. The average international flight costs 8 percent more this year, at an average of $1,888. Budget airlines are raising prices, too. RyanAir, among the cheapest airlines in Europe, recently raised prices by 12 percent, according to MSNBC. Travelers can also expect to pay more at the destination because hotel prices are also up. The price of a typical domestic hotel room rose 3 percent to $150, and international rooms rose 4 percent to $238 since this time last year.

Aggravation at cost of big vacation

Vacation costs are creeping up, but the biggest effects seem to be confined to people who want to fly to the most popular destinations. A recent American Express survey, according to CNN, found that only 20 percent of respondents were planning on flying somewhere in the U.S. this summer. However, more people were apparently planning on traveling somewhere by car, as 59 percent of survey respondents were planning on taking some form of summer vacation, compared with 51 percent in 2010. However, Americans might actually be a bit more willing to spend on a holiday than people in some other core countries. It is estimated that up to 17 million people in Britain are foregoing a summer holiday entirely, according to the Telegraph.

Sources

WalletPop

Los Angeles Times

Wall Street Journal

MSNBC

CNN

The Telegraph

There are numerous ways to save green at the pumps. / Image: paulswensen/Flickr/CC BY-ND

The rise in the price of gas may be slowing for the moment, but long gone are the days when fuel cost was a minor consideration in our driving habits. Here are several simple things to consider which may save you some green next time at the gas station.

Drive calmly and sensibly

Angry driving is a bad idea from just about any angle. We tend to accelerate more aggressively and drive more erratically when angry. The smoother you accelerate and decelerate, the better your gas mileage will be. Plus you may just save yourself a traffic accident.

Keep your engine tuned up and maintained properly

Keeping the plugs fresh and timed properly makes a huge difference in your engine’s performance. Keep hoses repaired. Change those filters; a clean air filter will improve mileage by as much as 10 percent, and nearly 25 percent of all cars could use a new one.

Check your tires

If your tires are not fully inflated, they add resistance. Properly inflated tires are also safer and they last longer. And while you are at it, keep the tires properly aligned. Badly aligned tires wear faster and make your engine have to work harder.

Watch your speed

The faster you go, the more gas your car eats. Gas mileage usually decreases rapidly at speeds above 60 mph. Following the speed limits will get you there more cheaply, and possibly save you the cost of a speeding ticket as well.

Keep windows closed

Opening windows creates drag and is actually a bigger gas waster than running your air-conditioner.

Reduce weight

The less you are packing around, the more efficiently your car will run. An extra 100 pounds in your vehicle can reduce your MPG by up to 2 percent. So take anything you don’t need out of that trunk. While you are it it, take off luggage racks and other accessories when they are not being used. They add resistance and therefore decrease fuel efficiency.

Turn it off!

If you have to idle for longer than 45 seconds, turn off your engine. And “warming up” your car is unnecessary with most modern cars. If you just start and go, you will save the gas burned up while it idles.

Car pools and public transportation

Look into alternative options. Taking a bus to work will save a lot of money at the pump. And there are many advantages to car pooling. Not only do you split travel expenses, but many cities provide commuter lanes for cars with multiple passengers. It might even get you to work faster!

Planning ahead, combining trips

With a little planning, many trips can be consolidated, saving you a lot of miles as well as time. If you need to get gas, groceries and to pick up the kids today, why not leave a little early, fuel up and get the groceries on the way to the school? Then maybe you can even get the kids to help you unload when you get home. Or maybe that is wishful thinking.

Sources

Mpgplus
US Dept of Energy
Walletpop

Gas prices are nearing $4 per gallon now, but experts see summer relief on the way. (Photo Credit: CC BY/futureatlas.com/Flickr)

The average U.S. gasoline price hovered around the $4 mark last week, but experts predict relief by summer, reports North Carolina’s High Country Radio network. A 15 percent decrease in crude oil prices may not have affected fuel costs noticeably yet, but experts like Fred Rozell of the Oil Price Information Service predict that gas prices should begin falling soon. Once they do, the decline should remain steady.

Gas prices fall along with demand

Oil investors, who managed to drive up the price of crude in the first place, see a supply-and-demand situation at work. As U.S. consumers are planning their road trips more carefully and resorting more to public transportation for their workday commutes, fuel demands have naturally decreased. Oil supplies have continued to rise, which has driven down the price. Another potential factor is that because oil is priced in U.S. dollars – and the dollar has risen of late – foreign investors have found oil less appealing. So while the price of crude oil has fallen to less than $100 per barrel for the first time in two months, the higher value of the U.S. dollar has scared away some who would normally buy with foreign currency.

Consumer gas demand has not risen with economy

Dan Kaffine, an assistant economics and business professor at the Colorado School of Mines, told NPR that he has seen research that suggests significant change in consumer behavior.

“There is a broad [base of] literature out there that says that, in the short-run, a 10 percent increase in price will lead to roughly a 1 percent decrease in consumption,” said Kaffine.

Numerous economists had predicted that gasoline demand would return to previous levels as the economy began to improve, but that trend has yet to occur.

Worldwide, oil consumption is growing at an alarming rate, particularly in high-growth areas of the world like China and India, says Aaron Brady, director of global information company IHS-CERA’s Global Oil Research Team. If this trend continues at its current pace, falling U.S. gas prices may be merely an aberration on the road to an unprecedented gas price explosion.

Big oil CEOs have seen this coming for years

In 2009, ExxonMobil CEO Rex Tillerson stated during an Economic Club of Washington speech that improved MPG standards, the rise of hybrid vehicles and increased use of ethanol have all led to lowered gasoline demand. However, an emerging factor that may be even more significant in the decline is the aging baby boomer population. According to the U.S. Census Bureau, the 65-and-older age group is the fastest-growing segment of the population. Retirement, declining vision, decreased reaction time and arthritis all tend to translate into less time behind the wheel.

Sources

GoBlueRidge.net
IHS CERA: Energy Strategy
NPR.org
U.S. Census Bureau

Will the falling gas price trend continue?

The price of silver has risen to historic heights and deflated, all within a week. Image: Flickr / sirqitous / CC-BY

In the last few days, prices on of some of the most important commodities have plunged. The effect this plunge may have on some prices may not be immediately noticeable, but it will affect most consumers.

Precipitous drop in commodity prices

In the last seven days, prices of several commodity items have dropped by huge amounts. Silver, gold, coffee, oil, gasoline and copper have all dropped by 5 percent or more. Silver is down by more than 27 percent over its high last week. On Thursday, May 5, oil fell to 13 percent below its May 2 high price. In short, almost every major commodity has fallen. Some blame this fall on dropping demand, others on reports that some very wealthy investors were making huge profits off gold and silver investments.

The effect of commodity prices

Commodity prices do have an effect on the prices everyday consumers pay. This is most easily seen in the pairing of oil and gas prices. Gasoline tends to spike in price a few months after oil prices spike; the delay is because of the time it takes to refine oil into gasoline. For most commodities, products made with those commodities increase in price when the base price increases. When the price of a commodity drops, however, the processed products usually do not also drop in price. For consumers, this means that the price of coffee and silver products will not likely drop, but those prices will not increase nearly as quickly.

Speculation causing price spikes

Commodities are usually considered a safe haven for investors who shy away from the volatility of the securities market. In the last few months, precious metals and commodity prices have been spiking as investors look for a safe place to put money. Gold recently reached a historic high, and silver has been following a similar trajectory. This has caused many investors to buy into the market, expecting that the price would continue to move up, a classic action that creates a bubble. This bubble in prices seems to be deflating, creating a bear market situation.

Sources

Sydney Morning Herald
Christian Science Monitor
Inflation Data

Gas prices are continuing to rise, and people are starting to feel the pinch. Image from Wikimedia Commons.

Rising gas prices are beginning to take a heavy toll on Americans’ personal finances. Recent data indicates that personal incomes and gross domestic product are beginning to be affected by the rising cost of fuel, as more money has to be spent at the pump. Prices are inching ever closer to the record high price set several years ago.

Nine states and the capital hit $4 per gallon

As of Friday, April 29, nine states and Washington D.C. had an average price of $4 for a gallon of gas, according to CNN. The national average gas price reached $3.90 with an increase of 2 cents overnight. The cost of gas has been going up for the past 38 consecutive days, and shows little sign of stopping.

The continued increase in gas prices has been credited to increasing prices of crude oil and scheduled spring maintenance at many American oil refineries. The price of crude oil has increased 20 percent since the start of the year to $110 per barrel. Refineries, where oil is made into gasoline, often shut down for short periods in spring for annual maintenance.

Americans feeling the pinch

While high oil prices certainly don’t hurt speculators or oil companies, the consumer has been feeling the pinch. The Commerce Department, according to USA Today, noted that consumer spending picked up only 0.2 percent in March, and the rate of GDP growth slowed to 1.8 percent for the first quarter of 2011 compared to 3.1 percent in the last quarter of 2010. People are begrudgingly paying more at the pump, and it isn’t because they more gas. According to Reuters, the American Petroleum Institute observed that from March 2010 to March 2011, demand for gas rose by only 6.1 percent. The cost of gas, on the other hand, rose by 22 percent over the same period.

Government is not amused

In response to the rising gas prices, the government is looking into curbing subsidies and tax breaks for oil companies. Bloomberg reports that the proposed 2012 budget submitted by President Obama included cutting $46 billion in oil company subsidies, and members of Congress are beginning to chime in. Max Baucus, chair of the Senate Finance Committee, submitted a bill with similar intent. However, other members of Congress are skeptical, as they believe cutting subsidies will reduce oil company investment, and that gas prices aren’t set by oil companies such as Exxon or Shell. However, oil companies are certainly not complaining about climbing prices. Exxon, for instance, recently reported a 69 percent increase in first quarter income.

Sources

CNN

USA Today

Reuters

Bloomberg

Make your own biodiesel fuel and save a bundle. (Photo Credit: CC BY-ND/Chemistryland)

Gasoline prices are out of control, prompting more consumers to consider alternative fuels. For diesel vehicle owners, biodiesel is an environmentally conscious option that costs less than $1 per gallon. Biodiesel fuel can even be made at home. While there are pros and cons to the process, it’s hard to deny that running a diesel vehicle on biofuel is cheaper in the long run than gasoline.

Biodiesel requires a diesel car and production kit

Your vehicle must have a diesel engine in order to take advantage of biodiesel fuel, and you’ll need some equipment to make biodiesel. Bankrate writes that several companies offer do-it-yourself biodiesel kits, ranging in price from $400 to $5,000, depending upon the quantity of biodiesel you want to produce, pump and store at one time. Thankfully, the Alternative Fuel Vehicle Refueling Property Credit can make up for up to 30 percent of the cost of making biodiesel fuel at your primary residence. Remember that for your 2011 taxes.

Putting the bio in biodiesel

The time required to make the fuel can be as little as a few hours, depending upon the production kit used. The big question is what suitable organic substance you’ll use to make biodiesel fuel. Soybean oil is most commonly used in the U.S., although any old yellow grease taken from cooking oil will work. Get friendly with your local greasy spoon restaurants and they may let you haul away their grease for free.

The only caveat to this path is that restaurant grease may be too dirty to produce the highest-functioning biodiesel fuel. Impure biodiesel can also expose your gas tank to bacteria, mold and fungus and can end up costing thousands of dollars to repair. The more expensive production kits filter out impurities, but of course you have to pay more for the most efficient kits. The purest biodiesel is B100 or B99. That means the fuel is 100 or 99 percent biodiesel, with the rest being petroleum diesel, says Bankrate. However, an 80/20 mix may be less likely to clog your fuel injectors if you live in a colder climate. Consult with your automaker if you’re unsure of which mix to use.

Cost on percentage

How much you save using biodiesel fuel instead of standard petroleum diesel depends in part upon the mix. If you’re able to obtain free soybean or cooking grease, production costs should ideally average out to about 70 cents per gallon for the other required ingredients specified by your production kit. As stated above, equipment will cost extra. But it beats living with high gasoline prices.

Sources

Bankrate.com

How Stuff Works

Journey to Forever

More on making biodiesel fuel

Fuel prices are often a concern for consumers -- and the CFTC and FTC have agreed to cooperate in investigations. Image: Alesist / Flickr / CC BY-SA

For the second time in three years, gas prices are quickly heading toward the $4 per gallon mark. Now, two federal agencies have signed an agreement intended to help fight manipulation of the petroleum market. The effects of this increased enforcement, however, could be difficult to discern.

Federal Trade Commission tries to address gas prices

In late 2008, gas prices quickly rose up and above $4 per gallon. About one year later, the Federal Trade Commission signed a “Final Rule” that officially prohibited “fraud or deceit in wholesale petroleum markets, and omissions of material information that are likely to distort petroleum markets.” Since the issuance of this rule, the FTC has been investigating possible manipulations that could be increasing the cost of oil, and therefore fuel. Despite these investigations, the FTC has not officially charged or fined any company with manipulation.

FTC and CFTC agree to cooperate

The Commodity Futures Trading Commission (CFTC) is a smaller agency than the Federal Trade Commission, with a much narrower focus. Commodities and Futures are products that make financial investments in physical products, rather than companies. Today, the CFTC and FTC signed a “Memorandum of Understanding” that allows the two agencies to share non-public information about the fuel market. This sharing of information is intended to give both agencies a broader view of the petroleum market, and hopefully ferret out abuses and manipulations in the market.

What affects fuel prices

Gas and fuel prices, like all product prices, are affected by a variety of factors. A jump in oil prices takes a few months to reach market as fuel prices, and consumers often feel the pinch. Geopolitical conflicts, costs of refining, demand for fuel and even the cost of crops all effect the price of fuel. Consumer sentiment also has a strong effect, and nervousness about fuel prices can be a self-feeding loop that increases prices. There are often accusations of oil companies gouging on fuel prices, though the FTC and CFTC rarely find enough evidence to prosecute perceived offenders.

Sources

The Price Of Fuel
FTC
CFTC

Musings of a full blown energy crisis are becoming more common as gas prices near record highs. Photo from Wikimedia Commons.

Rumors of an energy crisis are beginning to become more than mere whispers as gas prices inch closer to a record high. The national average cost of a gallon of gasoline has been steadily increasing for weeks, putting pressure on households and industries. The price hike shows no sign of slowing down.

Price of gasoline quickly rises 20 cents

The nationwide average cost of a gallon of gasoline has risen by nearly 20 cents in the past few weeks. A Lundberg survey put the cost of a gallon of gas at an average of $3.76 as of April 8, according to Reuters, up from $3.57 on March 18. The price of gas has increased by nearly $1 in the past year. The current record for gas prices in the United States was set in July of 2008, at $4.11 per gallon. Currently, large cities in the U.S. are averaging more than that. California, according to CBS, has already reached a statewide average of $4.14 per gallon as of April 8.

Gas prices could clip wings of airlines

The air travel industry is set to withstand a battering as the cost of jet fuel is increasing, according to CNN. Jet fuel costs go up with the price of petroleum, which recently climbed to $112 per barrel. The record was in 2008, when the cost of oil hit $150 per barrel and airlines took an enormous hit to their bottom lines. Shares of major airlines have begun to fall on stock markets because of the increasing cost of oil. On April 8, the stock price of Delta fell by 4 percent, Jet Blue fell by 5 percent and UnitedContinental stock fell by almost 7 percent. Costs of oil and gasoline are not likely to decrease, as analysts do not believe that unrest in the Middle East is subsiding. Airfare increases have already been noted this year, and there are likely to be more as the cost of fuel keeps going up.

Consumers cutting back

There are already signs of consumers not wanting to grin and bear greater costs of a gallon of gas. Credit card companies, according to Daily Finance, have noted falling gas sales for the past five weeks, and 70 percent of the nation’s gas station chains have noticed the same. People are beginning to cut back on the amount of gas they purchase and trade in less fuel efficient vehicles for economically friendly gas sippers. Sales of hybrids, according to USA Today, have increased by 37 percent since the start of the year. The increase in price is leading to lower demand, as fewer people are willing to pay the increased cost of fuel.

Sources

Reuters

CBS

CNN

Daily Finance

USA Today

Despite rampant speculation, oil and gas prices are expected to stabilize when consumers reach their breaking point. Image: CC Walter Baxter/Geograph

Oil prices are soaring, and gas prices are approaching levels not seen since the summer of 2008. The U.S. has huge oil and gasoline stockpiles, but speculators betting on risk and fear have pushed oil prices up 21 percent in 2011. Some analysts think the oil rally is about to end, however, as rising oil and gas prices reduce consumer demand.

Oil rally continues, for now

In early trading Friday light, sweet crude for May delivery rose to $111.90 a barrel on the New York Mercantile Exchange, the highest level since September 2008. U.S. gas prices reached an average of $3.70 this week, their highest level since the summer of 2008 as well. Analysts credited a number of factors to the oil price surge. A looming government shutdown is weakening the dollar, which makes dollar-based commodities such as crude oil more affordable for traders betting with other currencies. The markets are also betting that the conflict in Libya won’t end in the near future; Libya has reduced its oil production of 1.3 million barrels a day to a trickle. But as U.S. consumers pay a little more every day at the pump, the U.S. is awash in oil. According to the U.S. Energy Information Administration, U.S. oil inventories rose by 2 million barrels in the week ending April 1. Crude refinery input rose to more than 14 million barrels per day.

Speculators suspend law of supply and demand

The U.S. used to blame OPEC for its oil shocks, but OPEC’s role in higher oil prices has been diminished. At an oil conference in Paris, the oil minister of the United Arab Emirates said that there is little OPEC can do to control prices. Mohammed bin Dhaen al-Hamli said that OPEC is providing the market with the oil it needs. Oil prices are rising, he said, because traders are ignoring market fundamentals and betting on worst case scenarios. Oil speculators are being aided and abetted by the Federal Reserve, which has been giving hedge funds and pension funds money at zero percent interest so they can bet on rising commodity prices. Analysts estimate that because of speculators, oil futures are $15 to $20 higher than they should be. The next betting frenzy could be triggered by elections this weekend in Nigeria, where output of 2.2 million barrels a day could be disrupted by violence.

Is the oil tipping point on the horizon?

There are signs that oil and gas prices have risen to a level that U.S. consumers can no longer afford. Gasoline demand has fallen 3.7 percent over the past four weeks. Some analysts are saying that oil prices will reach a tipping point soon, unless another crisis in the Middle East or a Nigerian meltdown play into the hands of oil speculators. Before the Fed’s second quantitative easing plan (QE2) began last fall, oil was at about $90 a barrel. As rising prices continue to constrain consumer demand, when quantitative easing ends in June and the free money spigot is turned off, oil and gas speculators could reduce their position by as much as a third, stabilizing crude oil prices at between $85-$95 a barrel.

Sources

Wall Street Journal

New York Times

Industrial Fuels and Power

Fortune

Orders for durable goods, such as office equipment like photocopiers, fell over February. Photo Credit: Joseph Barillari/Wikimedia Commons/CC-BY-SA

Weak demand has caused orders of durable goods to fall over the past month. Orders for durable goods, or manufactured goods that last for long periods of time, rose in January, but rising prices may have put a damper on the willingness of businesses to order such goods. However, orders for transportation items such as cars and planes were not affected.

Transport manufacturers untouched by falling demand

Orders for durable goods, such as computers and other office equipment, have been falling for consecutive months, but transportation has not been touched, according to AOL News. Orders for cars and trucks rose by 1.9 percent during February. Orders for commercial aircraft rose by 26.7 percent. However, orders for new defense aircraft dropped by 18.4 percent, as new planes and helicopters are not a priority to a cash-strapped Congress. Orders for all durable goods, excluding transportation, fell 0.6 percent during February, marking the fourth month of declining durable goods orders in the past five.

Consumer prices ticking up

Energy costs are directly affected by oil prices and gas prices, and speculators have been driving the price of gasoline steadily up for consecutive weeks, causing the cost of consumer goods to rise, according to CNN. For instance, the prices of Folgers and Maxwell House coffee were raised by Smuckers and Kraft, the parent companies of the brands. Consumer prices for essential goods have been slowly but steadily rising, and increased energy costs ensure that trend will continue. However, prices of non-essential goods, like the iPad 2, are expected to hold steady as consumers will hold off on gadgets if food prices go through the roof.

Expensive summer likely ahead

The increase in the price of gasoline is not due to a shortage of supply. However, the cost of a gallon of gas is still rising, which could have a negative effect on retailers and consumers, according to MSNBC. Transportation costs affect goods, in that the more it costs to get things like Huggies diapers and T-shirts to stores, the more stores have to charge for them. Given that businesses are cutting back on durable goods, and producers are raising prices, consumers are likely to see an increase in the cost of food and other essential items. Producers can charge more for a gallon of gas or coffee or a loaf of bread because those are items that people will always buy. However, because demand is staying low for non-essentials, according to CNBC, people can still score a cheap iPad if they can afford to part with the cash.

Sources

AOL News

CNN

CNBC

MSNBC

Delta Air Lines is reducing service to Japan, along with other major airlines, as the disasters there as well as rising fuel prices are wreaking havoc with the airline industry. Image from Wikimedia Commons.

Delta Air Lines has announced that flights to Japan will be reduced in the wake of the tsunami and earthquake. Falling demand and rising costs have caused numerous airlines to cut service to and from Japan after the nation was rocked by natural disaster. The entire airline industry is facing falling revenues and rising fuel prices.

Major airlines cut service to quake-ravaged Japan

The number of flights going in and out of Japan is being reduced across the board, as major airlines have too little demand and costs are too high to keep sending flights, according to Bloomberg. Service to and from Japan is being reduced by the Qantas JetStar line, Singapore Airlines, Cathay Pacific Airways and Korean Air Lines, as the earthquake that struck on March 11 has crippled demand.

Delta, according to Reuters, will reduce service levels 15 to 20 percent until May. The company estimates that the quake, tsunami and nuclear disaster will cost it $250 to $400 million. However, American Airlines has not yet announced it will reduce its service to Japan, which is provided through a joint venture with Japan Airlines. More than 9 million people fly to the U.S. from Japan each year.

Fuel prices wreak havoc with airlines

Airlines worldwide have been contending for the past several months with rising jet fuel prices. Rising oil prices due to unrest in Libya and the Middle East have been part of the increased cost of jet fuel, but harsh winter conditions during the past few months have also negatively impacted fuel prices and airline revenue. As a result, air fare increases are being implemented by numerous airlines. Southwest Airlines, for instance, has already had to raise air fares six times since the beginning of the year, according to Forbes, despite a 13 percent increase in the number of passengers flying with Southwest since the same period last year.

Expect summer vacation to cost a bit more

The increases in oil, gasoline and jet fuel prices have nothing to do with any actual shortage of supply caused by unrest in Libya, which provides only 2 percent of world supply, according to CNN. Speculators raise prices because of fears that the unrest will spread.

Unfortunately means that a full tank of gas is going to cost more during the summer, and some people may need installment loans to finance plane tickets for summer travel. How much more costly air tickets will become remains to be seen, but projections seem to indicate that the cost of travel will continue to rise for some time.

Sources

Bloomberg

Reuters

Forbes

CNN

If gas prices rise too high, more people will start using public transportation rather than get personal loans to fill up the tank. Image from Wikimedia Commons.

A new study suggests that if gas prices reach $4 per gallon, it could make drivers so desperate that they might start using public transportation. The national average for a gallon of gas is still below $4 per gallon, so until pain at the pump sends people headed for the bus station, there are still plenty of ways to save on gas in the meantime.

Americans may have a limit when it comes to gasoline

A new study purports that Americans may soon be pushed to a breaking point when it comes to gas prices, according to USA Today. The study, by the American Public Transportation Association, asserts that if the price of gas rises to a national average of $4 per gallon, public transportation systems will deliver an additional 670 million trips per year. In other words, people will only be able to tolerate gas prices to a certain point before turning to cheaper alternatives, as few will stand for having to take out personal loans to fill up their tanks. The APTA also asserts that ridership will rise with each dollar more per gallon, estimating that $5 per gallon will result in an additional 1.5 billion rider trips per year, and $6 per gallon will result in an additional 2.9 billion trips per year.

Public transportation can save money

Utilizing public transportation can save a lot of money, though many avoid it because of a perceived lack of convenience. The American Public Transportation Association projects that at a national average gas price of $3.47 per gallon, riding the bus can save a person $825 per month, and up to $9,904 per year. This figure includes savings on gasoline and on parking. The national average cost of a monthly parking pass is estimated by the APTA to be $161.56 for a parking space in a downtown business district, which is less than a bus pass would cost.

Gas costs can be gotten around

There are ways to circumvent rising gas prices,  if a person does not want to take out installment loans to buy a new hybrid, according to CNN. There are such things as gas station coupons, though they can be hard to locate and usually are only for one gas station. Warehouse clubs, such as Costco and Sam’s Club, offer gas discounts to members, and some gas station rewards cards can offer steep discounts off the cost of a gallon of gas. However, any savings from a gas station credit card can be effectively nullified by a high interest rate, so purchases should be paid off immediately before allowing interest to accrue.

Sources

USA Today

American Public Transportation Association

CNN

Unrest in Libya is said to be causing gas prices to rise, but Libya doesn't affect gas prices in the U.S. Image from Wikimedia Commons.

Gas prices have begun to climb as a result of unrest in the Middle East, and recent hikes in price began as Libya was plunged into a civil war.Libya is a major petroleum exporter, but not to the United States, which imports very little oil from Libya.

Libya did not cause rise in U.S. oil and gas prices

Petroleum is a very sensitive commodity. Everyone needs it, and potential disruptions of supply can have consequences like the price of gasoline shooting through the roof. During the past few weeks, Libya has been plunged into a brutal civil war. Libya is a major petroleum exporting state, and as a result the price of crude oil is fluctuating wildly and the price of gas has been rising due to concerns about world supply. However, industry insiders insist that domestic oil and gas supply in the U.S. are in good shape, according to USA Today. Most of the rise in prices in the U.S. has to do with market speculators and the fact that gas prices always start rising before the summer months. Wall Street, Moammar Gadhafi, is driving up gas prices.

Libya not a big provider to U.S.

Libya is a member of the Organization of Petroleum Exporting Countries (OPEC) and exports a lot of crude oil. However, the United States does not receive much from Libya. According to the U.S. Energy Information Administration, a division of the Department of Energy, the United States imported 22 million barrels of crude oil from Libya in 2009, 283 million barrels of crude from Nigeria, 347 million barrels from Venezuela and the 357 million barrels from Saudi Arabia. The claims that unrest in Libya could have a tangible effect on the oil supply in the United States, and therefore gas prices, are inaccurate.

Saudi Arabia the real danger

One country that really could put a dent in American crude oil imports is Saudi Arabia. Currently, pro-democracy protests are beginning to take place in Saudi Arabia, according to CNN, and there have already been crackdowns by the Saudi government. Demonstrations or protests by members of the public were outlawed once they began occurring in other countries. If Saudi Arabia were to be paralyzed by widespread revolt, gas prices would skyrocket in the U.S. However, most experts on the region are convinced a revolt similar to the ones in Egypt, Tunisia or Libya isn’t likely to happen in Saudi Arabia.

Sources

USA Today

CNN

U.S. Energy Information Association Statistics on oil imports

Gasbuddy

Gas prices have been rising for the past two weeks, and there is speculation that an energy crisis may be imminent. Photo Credit: Micov/Wikimedia Commons/CC-BY

The average gas price is rising in every U.S. state and may hit $4 per gallon soon. Unrest in Libya, a major petroleum exporting country, has caused the price of petroleum to rise, which is causing the price of gas to rise as well. There is speculation that the U.S. government will tap its reserves to ease market conditions.

Government may tap emergency reserves to ease burden

Continuing turmoil in Libya brought oil exports in that country to a standstill, leading to a spike in oil prices. Currently, the average gas price per gallon hit $3.51 on Monday, March 7, according to CNN, and gas prices are on track to possibly hit $4 by summer. Prices have been rising daily for the past two weeks, increasing by 34 cents over that time. To curb runaway prices, the Obama administration is considering tapping into the U.S. Strategic Petroleum Reserve, according to Reuters. The Reserve is a storage facility that contains nearly 730 million barrels of crude oil, roughly equal to a one-month supply of oil for the entire United States. However, administration officials maintain that reserves will only be used if needed. The last release from the reserves was in 2005, after the Hurricane Katrina disaster, and it has only been used three times since it was established during the Nixon administration.

Prices skyrocket

Since Libya has plunged into unrest, there has been some trepidation in the world market for oil, but not because of a drop in supply. Libya produces less than 2 million barrels per day, and exports little oil to the United States. Saudi Arabia, by contrast, produces more than 12 million barrels per day, according to the Department of Energy. The Saudi government has also increased oil production by 25 percent, which will cover any losses due to a drop in production in Libya. The rise of gas prices is not due to a shortage in supply; rather, markets are uneasy because political turmoil is spreading to other oil exporting countries. A revolt in Libya is not catastrophic in terms of world oil exports, but revolts in Saudi Arabia would be.

Check with Gasbuddy

A good way for people to find the most reasonable gas prices in their area is to look at the website Gasbuddy.com. Gasbuddy is a network of websites where members report gas prices they see in their area. The Gasbuddy network extends from coast to coast, so there are few places in the U.S. or Canada that do not have some information posted. There is even a Gasbuddy app available for iPhone, Android and Windows smartphones. Since Gasbuddy relies on people reporting the gas prices they see, the site is fast becoming a resource that is quoted by major news agencies as well as a valuable tool for consumers.

Sources

CNN

Reuters

Department of Energy website for world energy information

Gasbuddy

Oil industry analysts and the Obama administration say tapping the oil reserve would do little to slow rising gas and oil prices. Image: CC Michael Parry/Wikimedia Commons

Rising gas and oil prices tied to Middle East unrest have compelled politicians to demand that the Obama administration tap into the U.S. strategic petroleum reserve. The reaction comes despite a global surplus in oil production capacity and above-average U.S. supplies of oil and gasoline. The administration’s position is that the modest rise in gas prices isn’t enough to warrant tapping into U.S. oil reserves, which could spook international oil markets into further price increases.

Why Congress wants to tap the oil reserve

The U.S. strategic petroleum reserve, the largest in the world, contains 727 million barrels of oil, its full capacity. Nationwide, the average price of a gallon of gas has risen 28 cents in the past 10 days. Senator Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, implored the administration to sell a major portion of the strategic oil reserve to stabilize oil prices and prevent a disruption in oil supplies. Other politicians are saying that in addition to tempering upward pressure on gas prices, selling some of the strategic oil reserve would raise billions of dollars for deficit reduction and help fund programs to reduce U.S. oil consumption, such as tax breaks for electric cars and hybrids.

U.S. not running short on oil

The Obama administration objects to tapping the U.S. strategic petroleum reserve as a reaction to the current spike in gas and oil prices, even though its 2012 budget proposal calls for selling $500 million worth of oil from the reserve to fund certain programs. The administration contends that tapping the oil reserve would send a false panic signal to consumers and markets when the U.S. is not running short on oil. A major oil storage facility in Oklahoma that supplies the interior U.S. has record inventories. Production is expanding in North Dakota, and a new pipeline is pumping fuel into the U.S. from Canada. U.S. crude oil inventories, according to the U.S. Energy Information Administration, are at 346.4 million barrels. U.S. gasoline inventories are at 9.86 billion gallons. Both inventories are at above-average levels for this time of year.

The solution to rising oil and gas prices

Oil industry analysts agree with the Obama administration that tapping into the strategic oil reserve now would have virtually no effect on oil and gas prices, and it would validate the fear that is driving up prices. Those who oppose tapping the reserve believe that rather than an oil supply shortage, a shortage in surplus production capacity is the real problem. Speculators are betting that spreading Middle East unrest will reduce surplus oil production capacity. If surplus oil production capacity in the future were significantly diminished, or perhaps even erased, the real oil price nightmare would begin. Adding the capacity to produce more oil, rather than a temporary infusion from the strategic oil reserve, will put the international oil markets at ease.

Sources

New York Times

Foreign Policy

UPI

The first permit for offshore, deepwater drilling in months was recently issued, just as gas prices are rising. Image from Wikimedia Commons.

The Obama administration has granted a permit for offshore oil drilling to Noble Energy. It is the first offshore drilling permit in months, as offshore drilling operations were put on hold after the BP oil spill. The decision was timely, as oil and gas prices are rising because of political turmoil in the Middle East.

First permit for offshore drilling issued in months

For the first time since the national moratorium on offshore drilling was lifted in October, 2010, the first permit for offshore drilling has been granted by the government, according to the New York Times. The Department of the Interior granted Noble Energy a permit; the permit is technically a re-issue, not permission to start drilling at a new site. Noble has a deepwater drilling rig off the coast of Louisiana that was ordered to suspend operations after the Deepwater Horizon explosion and oil spill in April of 2010. With the new permit, the company is able to resume drilling operations. The rig drills at about 6,500 feet below the surface.

Long wait for permits slammed by judge

The Noble Energy permit was granted a week after federal Judge Martin Feldman, from a court in Louisiana, ordered the Obama administration to process oil drilling permit applications more quickly. However, Michael Bromwich, the Director of the Bureau of Ocean Energy Management, Regulation and Enforcement insisted that the delay was not due to a political agenda and disagreed with the ruling. There are six more permits pending for deepwater drilling operations, though there have been 37 permits issued for shallow offshore drilling. The news that a permit had been issued also led to a moderate rise in energy stocks for companies with stakes in offshore drilling, according to Reuters.

Gas prices rising

Political turmoil in the Middle East has led to a nearly consistent rise in gas prices over the past few weeks, according to CNN. Oil prices have fluctuated, but there have been guarantees from oil producing states, such as Saudi Arabia, that any drop in production would  be made up. Despite those guarantees, the ongoing Libya protests and similar situations in Bahrain, Oman, Yemen and Jordan have not inspired great confidence. Gasoline prices rose by 20 cents over the last week of February, marking a 27-cent rise in the cost of gasoline over the month of February. The average price of gasoline is sitting at $3.34 per gallon, well short of the national high of more than $4.11 in July 2008.

Sources

New York Times

Reuters

CNN

Middle East unrest is driving up prices at the pump, dampening consumer spending when the U.S. economy needs it most. Image: CC Florence van Cauwerlaert/Flickr

U.S. gas prices were 6 cents per gallon higher on average than the night before when Americans awoke Friday morning. Since Sunday, U.S. gas prices have spiked 12 cents per gallon, and the trend is expected to continue. Economists warn that an oil price shock could be a major setback to the U.S. economy.

How high will gas prices rise?

The jump in pump prices, the largest one-day increase since 2008, is tied to a surge in oil prices. Oil prices have risen more than 10 percent in the last week and hovered at about $98 a barrel Friday after hitting the highest level since October 2008 — $103 a barrel — the day before. Pump prices vary widely in different states, depending on the gasoline tax. Hawaii led the U.S. in gas prices with a $3.757 per gallon average. Wyoming motorists only paid an average of $3.014 a gallon. Energy experts expect gas price increases, which lag behind oil price increases, to continue. This week’s surge in oil prices could result in an increase in gas prices of up to 37 cents per gallon in the next few weeks, according to Moody’s Analytics.

America’s petroleum ball and chain

Rising gas and oil prices are being driven upward by speculators buying oil futures on the bet that the popular unrest and an emerging civil war in Libya could spread instability across the major oil-producing countries of the Middle East. Moody’s said gas prices usually rise about 2.5 cents a gallon for every $1 increase in the price of oil. Economists estimate that each 1-cent increase in gas prices siphons $1 billion a year away from consumer spending. Moody’s estimates that if oil prices average $90 a barrel in 2011, spending on gas will eat up about a quarter of the $120 billion payroll tax cut that Congress had intended to stimulate the economy this year. Most of the money consumers spend on gas doesn’t stay in the U.S. economy. It goes to oil-producing countries where authoritarian governments hoard their riches while the people live in poverty.

Sources

CNN

New York Times

Boston Globe

In a recently broadcast Gadhafi speech, the Libyan dictator blamed unrest on al-Qaida and drug-laced Nescafe. Image: Habib Mhenni/Wikimedia Commons/CC-BY-SA

In a recent Moammar Gadhafi speech addressing unrest in Libya, the North African dictator blamed the Libya protests on odd factors. Gadhafi claimed that unrest was caused by insurgents sent by Osama bin Laden and by the influence of hallucinogenic drugs.  Gadhafi’s regime is quickly losing control of Libya.

Teenagers drinking spiked Nescafe blamed for Libya violence

Libyan ruler Moammar Gadhafi recently gave a speech that was broadcast on Libyan state television. In his speech he laid blame for the Libyan revolt on some unexpected parties, according to Reuters. Gadhafi said in a speech via telephone and broadcast over television that Osama bin Laden and al-Qaida were behind the turmoil in Libya and that violence in the North African nation was due to teenagers taking drugs. He said in the rambling speech that “their ages is 17″ and that al-Qaida agents were putting “hallucinatory pills in their drinks, their milk, their coffee, their Nescafe.”

Opposition holds one third of Libya

Nearly the entire eastern third of Libya is no longer under the command of Gadhafi or pro-Gadhafi forces, according to the Christian Science Monitor. There is still growing unrest and violence in Gadhafi-held cities such as Tripoli, but cities in the areas that have been “liberated,” such as Tobruq and Benghazi, have calmed considerably after military factions loyal to the dictator have been largely overcome. Factions of the Libyan army have been defecting to the side of the protesters as Gadhafi has ordered them to fire on their countrymen.

Oil prices still climbing

Despite reassurances from Saudi Arabia that oil production would not be affected by the Libyan revolts, crude oil prices are still climbing, and the New York Times says it’s because of the Libyan protests . In early trading on Thursday, Feb. 24, oil prices jumped to more than $100 but settled lower at $97.28, causing energy stocks to tumble. It is anticipated that unrest in the Middle East could lead to gas prices rising to $4 a gallon or more.

Sources

Reuters

Christian Science Monitor

New York Times

Gas prices are rising and rising demand, along with seasonal supply restrictions, could result in $4 a gallon gas in 2011. Image: qthrul/Flickr

Gas prices rose to the highest level in more than two years in the week ending Jan. 21. A record global demand for oil in 2010 has been driving the spike in gas prices, along with restrictions in supply. Analysts expect gas prices to continue upward, and U.S. motorists may pay $4 a gallon this spring.

Average gas prices rising

The national average for gas prices was about $3.12 a gallon Jan. 21, according to AAA. The last time gas prices approached that average was October 2008. The price differs from one region to another, depending on such factors as demand and state gasoline taxes. In Salt Lake City gas averaged $2.74. A bank loan is practically necessary for a fill-up in Honolulu, where it’s $3.58. Average gas prices have risen 9 percent in the U.S. since Dec. 1, though oil prices fell on Jan. 21. Benchmark crude for March delivery dropped to $89.11 on the New York Mercantile Exchange. Oil speculators hungry for instant cash are nervous about Chinese plans to cool its overheating economy, which has a voracious demand for oil.

Gas prices a drag on recovery

Oil industry experts contend the world produces 5 million barrels a day more than it consumes. Oil speculators have been driving up gas prices over the last several months. They are hoping the U.S. economy is on the verge of taking off. But higher gas prices may work against a more robust recovery. According to Cameron Hanover, an energy consulting firm, for every 1 cent rise in gas prices, U.S. consumers spend another $4 million at the pump. The average gas price in the U.S. rose 12 cents in the last month, diverting another $48 million — not good news for those who had already budgeted their cash until payday.

What to expect in 2011

Some experts have said gas prices could approach $4 a gallon this spring. In addition to oil speculators, supply factors will have an effect on gas prices. In the next few months gasoline refineries will scale back production in preparation for a switch to summer automotive blends. Americans increase their road miles in the spring and summer. OPEC may also choose to further restrict production to sustain the upward trend in the price of oil. Supply also has yet to recover from the drilling moratorium in the Gulf of Mexico, which the Energy Information said will cut oil production by about 120,000 barrels a day this year.

Sources

CNN

ABC News

KING 5.com