LRS - Myths Legends and Tales

GAS RAGE!

With gas prices soaring to new heights it seems more than ever that now is a great time to own a motorcycle.  However, that isn't to say that it doesn't hinder riders from the joys of the road either.  It might even dent your weekend plans.  Leisure rides are being cancelled and people are electing to stay indoors for excuses of weather or gas prices.  While weather may be an honest consideration, and gas no less a concern it is a shame to know that we are electing to stay indoors when the whole world is at our fingertips.  Today we’ll whine and moan about gas prices and end up being really thankful for US gas prices.  Join us in this weeks Myths, Legends and Tales from the road.

Why is gas so expensive?  Is there anything we can do to keep costs down?  Will it only continue to skyrocket year after this year?  These are the questions on all our minds as prices jump to nearly five dollars a gallon over most of the nation.  While many countries have very little pity for us because they are lucky to have $10.00 a gallon gasoline, we have always had much better pricing and would prefer to keep it that way.  Join us in this very informative article from http://gaspricesexplained.org. 

A Global Commodity

A host of factors, many of them uncertain, affect the price of crude oil and the products made from it. The roller coaster rise and fall in gasoline and diesel prices over the last few years tracks changes in the cost of crude oil. Those changes are determined in the global crude oil market by the worldwide demand for and supply of crude oil. Weak economic conditions in the U.S. and around the world in 2008 and into 2009 led to less demand, which helped push prices down. With the worldwide economic recovery underway, demand is on the rise again but unrest in the Mideast and North Africa has put supplies at risk. This combination of rising demand and reduced supply helped to push prices higher. Crude oil prices are set globally through the daily interactions of thousands of buyers and sellers in both physical and futures markets, and reflect participants’ knowledge and expectations of demand and supply. In addition to economic growth and geopolitical risks, other factors, including weather events, inventories, exchange rates, investments, spare capacity, OPEC production decisions and non-OPEC supply growth all figure into the price of crude oil.

Rising Global Demand World oil consumption is expected to grow as the global economy rebounds.

The world’s demand for oil increased sharply for several years, peaking at 86 million barrels per day in 2007. However, the global economic slowdown in recent years reversed this trend and demand fell for two consecutive years to just 85 million barrels per day in 2009, or 1 million barrels per day less than at its peak before rebounding in 2010. The Energy Information Administration expects growth to accelerate over the next two years reaching 88.8 million barrels per day in 2012 and nearly 89.7 million barrels per day in 2013. The EIA projects consumption in the Organization for Economic Cooperation and Development (OECD) countries to be nearly flat in 2012 and 2013. Growth is concentrated in the non-OECD countries, including China, Brazil, and the Middle East with world gains of about 0.8 million barrels per day expected in 2012 and another 0.9 million barrels per day in 2013.

Supply Surplus crude oil capacity is expected to increase.

The amount of surplus crude oil capacity, which is the amount of oil available to meet surges in demand or disruptions in supply, increased in 2009 as demand for crude oil declined along with the global economic slowdown. EIA projects that OPEC surplus production capacity will increase from about 2.3 million barrels per day in 2012 to 2.6 million barrels per day at the end of 2013. We produce 55 percent of all the oil and petroleum products we consume. The rest is imported, with most of it coming from our neighbors in North America. In fact, Canada is the largest supplier to the U.S., accounting for 29 percent of our imports compared to 14 percent for Saudi Arabia. One way to enhance our nation’s energy security is to continue to diversify our sources of supply.

Risk

There are accumulating risks to the development of oil and natural gas.

The National Petroleum Council (2008) examined a broad range of global energy supply, demand and technology projections through 2030 and concluded that “the world is not running out of energy resources, but there are accumulating risks to continuing expansion of oil and natural gas production from the conventional sources relied upon historically.” These risks include political instability in the Middle East and North Africa, the resurgence of resource nationalism in Latin America, civil unrest in Nigeria, piracy off the African coast, transit vulnerability in the Caspian, energy subsidies in Asia, extreme weather around the world, and restricted access to resources in the U.S. These risks create significant challenges to meeting projected energy demand.

Exports?

Increased exports are good for America and the world.

American exports are not causing gasoline prices to rise. Less than 10 percent of U.S.-produced gasoline and diesel is exported. U.S. refiners produce fuels primarily for American markets and always have. More importantly, the U.S. has a long history of exporting some fuels and importing others to balance global demand, which benefits the consumer.  The U.S. comes out ahead trade-wise because finished petroleum products that are exported are higher value than the imported crude used to make them. So this helps lower the trade deficit.

Exports also mean jobs for Americans, including well-paying U.S. refinery jobs that are maintained when demand for certain refined products is low in this country. The challenge is for Washington to adopt energy policies that will benefit U.S. consumers and preserve a strong domestic refining industry.

Gasoline Taxes One reason the price of gasoline can vary by state is state taxes.

The average nationwide tax collected on each gallon of gasoline sold at the retail station is 49.5 cents. Of that, 18.4 cents per gallon goes to the federal government; the rest ends up in state and local government coffers. The amount of gasoline taxes collected by states can vary widely, from just 26.4 cents per gallon in Alaska, to as much as 69.6 cents per gallon in New York. In addition to excise taxes, other taxes can also apply, such as sales taxes, gross receipts taxes, oil inspection fees, county and local taxes, underground storage tank fees, and other miscellaneous environmental fees. These additional taxes contribute to the difference collected among states.

Profits Oil industry profits are comparable to those in most other industries.  

The oil and natural gas industry is one of the world's largest and most capital -intensive industries. It has to be to effectively compete for global energy resources. The industry's earnings make possible the huge investments necessary to help ensure America's energy security. The latest data for the first quarter of 2012 shows the oil and natural gas industry earned 7.5 cents for every dollar of sales, compared to 8.9 cents for every dollar of sales for all manufacturing. Other sectors, such as the pharmaceutical, computer and the beverage and tobacco industries, earned three times that and more.

After reading this, I'm left just being thankful that our prices are not as high as most of the rest of the world. Over the next few years it's a guess what can happen to the cost of fuels, but many think that it will continue to rise. All I know for sure is that I will keep filling my tank and riding as long as I can. Hope to see you on the road! Thank you to http://gaspricesexplained.org, for this in depth analysis and interesting read.