The impact of Oil is unmistakeable — from crimping consumer spending to affecting major purchase decisions to weighing on equities — it is neck and neck with interest rates for the most influential market factor lately.
The WSJ notes that high oil prices is crimping SUV sales. The big, inefficient and deadly vehicles (which always seem to be in my way) are Detroit’s most profitible cash cow. Don’t think the secular bull market in energy over the past few years hasn’t contributed to GM’s woes.
And yet, Gasoline remains cheap. That’s right, it is a relatively inexpensive commodity. It takes 100 million years to create; Then it needs to be explored and found, drilled into and pumped out of the ground, shipped, refined in gasoline, then transported to your local gas station where some guy pumps it into your car for about two and half bucks a gallon — and thats for high octane premium.
(Sold to me — I think its a steal).
Hey, its not like you don’t have other options. The Journal and Consumer reports put out a chart of "most fuel-efficient vehicles by category." There are lots of hybrid models coming out. You could go pure electric. Or, you can adapt your driving habits to be more fuel efficient (I drive a stick, but not for that reason).
As a kid who grew up loving muscle cars, I assumed that by the time I was 40 gas would be $5 a gallon (which it is in Europe). So I don’t complain about gas under $3. I tank up thankfully. Then I turn off the dynamic skid control, lay a patch of rubber and carve up some twisty back roads. That much fun for that little money is a bargain at twice the price.
How cheap is this drilled, transported, refined gasoline? Cheaper than water:
Other "Refined" Products Compared with Gasoline:
Product Unit Cost Price per Gallon Lipton Ice Tea $1.19/16 oz $9.52 per gallon Ocean Spray $1.25/16 oz $10.00 per gallon Gatorade $1.59 /20 oz $10.17 per gallon Diet Snapple
$1.29/16 oz $10.32 per gallon Evian water $1.49 /9 oz $21.19 per gallon Whiteout $1.39 /7 oz $25.42 per gallon Brake Fluid $3.15/12 oz $33.60 per gallon Scope $0.99/1.5 oz $84.48 per gallon Vick’s Nyquil $8.35/6 oz $178.13 per gallon Pepto Bismol $3.85/4 oz $123.20 per gallon
$21.19 for WATER – and the buyers don’t even know the source. No wonder Evian spelled backwards is Naive.
Be glad your car doesn’t run on Scope, Whiteout, Pepto Bismal or Nyquil.
UPDATE: April 1, 2005 11:45am
Yes, I was being a bit snarky in my description of Gasoline as cheap.
If you are of middle income or higher, than Gas is indeed an inexpensive part of your budget. However, if you are on a tight budget, than its an increasingly burdensome expense lately.
We see this in the same store numbers from Wal Mart and Target — WMT in particular — as the stock has made fresh 52 week lows; their clients are much more price sensitive than Target’s . . .
Rising Gasoline Prices Threaten Viability of Biggest SUVs
Jeffrey Ball And Joseph B. White
The Wall Street Journal
March 22, 2005; Page B1