High gas prices

[Kingdom of Grolsch]

Today I'm going to do research on worldwide prices of gasoline for a uni project, and in my preliminary research I found that here in the Netherlands the price of regular gas is 2.6x that of the US ($ 8.72/US gallon vs. $ 3.35/US gallon national average). While I do know that the government here likes to put extra taxes on everything having to do with crude oil, the difference seems outrageous to me.

Now, I know many active SLU forum members are in the US. So what do you think of it? Should the prices be higher, so people would buy more fuel-efficient cars?

[Deleted]

It might not only be taxes as the US has large reserves of crude which it can keep in the US. The Netherlands being such a small country can't have the same level of reserves and so more tariffs will come into play as well. Where I live in New York prices are in the $3.60s

It seems slightly counter intuitive to raise prices so people buy fuel efficient cars because one of the main reasons people buy better efficiency cars is to lessen the hit of gas on their wallets.

[Kingdom of Grolsch]

Jan 14, 2012 2:06:21 GMT @gunir said:

It might not only be taxes as the US has large reserves of crude which it can keep in the US. The Netherlands being such a small country can't have the same level of reserves and so more tariffs will come into play as well. Where I live in New York prices are in the $3.60s

It seems slightly counter intuitive to raise prices so people buy fuel efficient cars because one of the main reasons people buy better efficiency cars is to lessen the hit of gas on their wallets.

The Netherlands doesn't have a crude oil reserve itself :) However, three of the seven largest crude oil and oil products traders are based in the Netherlands, including the world's largest and third-largest. No top-7 crude oil/oil products trader is based in the US. Europe's largest refinery is in Rotterdam (Shell Pernis). So I guess that balances the no-reserves thing out a bit.

I've talked to several people in the industry yesterday and they say the reasons are:
1) The US is a very consumer-oriented market (i.e. not much export), while the Netherlands is very export-oriented
2) The Dutch government just likes to tax crude oil (indirectly), oil products ("verwijdersingsbijdrage" -> environment tax) and petrol (multiple taxes and sales tax on top of those). That in itself already makes gas 1.9x-2.2x the US national average price
3) The US protects their market very much in comparison to the Netherlands (however in general the EU protects the internal market just as much). Of course there is a good reason for that. The US isn't very export-oriented whereas in the Netherlands nearly 80% of all companies designing/manufacturing products exports
4) In the US, there is a lot of lobbying by the petroleum industry and many, many politicians have been directly or indirectly involved in the industry, while in the Netherlands such a conflict of interest is a no-go in politics. So in the US the industry has much more influence in politics and as such there is less regulation concerning fuel-efficiency

To be honest I'd have thought a country priding itself on innovation and being ahead of all others would do a better job on green technology than energy experts say it does...

Gunir, as for raising prices: history has shown that if gas prices rise, people will buy more fuel-efficient cars. Because if they didn't buy a more fuel-efficient car, they would have to spend even more money ;)

Thanks for helping me out on the reserves thing :D

[Deleted]

Prices in general have gone up worldwide ever since Iran threatened to blockade the Straits of Hormuz.

[Deleted]

^Do you think they will follow through with that threat?

[Kingdom of Grolsch]

Jan 15, 2012 0:17:42 GMT @peacestrivers said:

^Do you think they will follow through with that threat?

Whether they will follow through with the threat to block the Strait depends mostly on how much more the US, EU and Israel manage to anger the Iranian government by not allowing oil trade with Iran. I don't have any numbers on that yet, but I'll talk to the Commodities trading desk at work tomorrow to see what numbers they can give on Iranian oil trading the past week or so. I'll post the charts here if you're interested :)

[Deleted]

Wow thanks! If Iran blokes the straits, Obama won't have to wait until next year to bomb the country, because of its nuclear weapons program. www.infowars.com/obama-tells-allies-u-s-will-attack-iran-by-fall-2012/ Definitely not reassuring.

[Avaerilon]

Well, you know what the Mayans said about 2012... thank goodness I bought a C.D. Victoreen defence kit a few weeks back!

[Deleted]

I know right! First the euro plummeting in value, next Rick Perry(sorry I hate him), and now this? What is the world coming to?

[North American Republics]

The United States has always had people like Rick Perry. They only emerge into the spotlight during presidential election years, thankfully.

The Euro had to support the historically weaker economies of Southern Europe so it was destined to crash at some point.

The "tension" between Iran and the US is nothing. Nothing is really going to happen except the embargo and Iran whining. Don't forget that they said that they were going to send Iranian ships to the US coast. I haven't seen the Iranian flag on a ship anywhere near here. Took me forever, but here's a link to an RT article with a video I saw on television.

rt.com/news/us-mainstream-media-war-849/

[Deleted]

I don't think anything is going to happen; it's just that the markets are delicate and will react to something like this.

[Kingdom of Grolsch]

Yeah, the euro zone has it's problems now. But it won't be ripped apart completely, the more rigid countries will stand, probably including Ireland for sure and most likely Portugal and Spain too. If Mario Monti succeeds at what he has set out to do, Italy might still be in the euro a year from now as well. I and many other people would like to see European leaders make a final decision on Greece. For over a year now they've said "this is the last emergency meeting". Yeah, sure. Personally, I'd get them out of the Euro ASAP. Their economy is a tiny part of the EU and so is their important in the internal market. Right now keeping Greece in the EU is costing the Euro Zone more then it would cost us to get them out of the Euro Zone.

My feeling with US elections is that it is not really serious. I mean, there are only two parties and all candidates are bashing each other and saying different things then they did last year. Here in the Netherlands there are like 16 parties of which at least eight are represented in Parliament. It seems to me US politicians are quite unwilling to make a compromise unless someone or a group of people pushes them very, very hard like S&P had to do last year. I hope it's not going to happen again, but it may just be how Washington works: campaign, say stuff you know you can't make true, do different things than you said you'd do if elected, and start compagining again. I'm not negative towards the US or something, but I find the way politics is organized with only two parties and people needing to be rich before having the ability to get elected a bit odd.

Ok the original topic: oil prices. As promised I talked to the commodities trading desk at work today and I got some charts, only one of which I'm allowed to share. Most of the stuff I'm not allowed to share either because there are specific rules regarding showing research to US persons that are very different from the rules in the EU and/or because they are limited by law to market participants. I hope you understand that I'm not willing to break laws here ;)

What I can share with you, is a chart of all recorded Iranian ocean storage and storage transactions in the past week. The below chart basically says there's a massive uptrend in storage. When a company or country stores more oil then it does on average, they aren't able to sell the oil stored or are expecting higher prices in future.


Please refrain from distributing this chart. Please note the numbers are estimated; numbers from Iran are nearly always inaccurate.

[Deleted]

I saw that the US and other major markets like China and the EU are looking toward Saudi Arabia, Kuwait, Qatar, and the Arab Emirates for oil. Blocking the Straits of Hormuz would block a trade lane that involves nearly 40% of the world's oil. I don't think that Iran is dumb enough to start a fight with the US, NATO, Israel, and the Sunni nations in the Middle East.

[Kingdom of Grolsch]

It would be strange if they did; they'd run out of cash in a matter of days. Iran buys good and supplies mostly for other nations. The government would create a revolt if they blocked the Strait.

[Deleted]

I would like to see the "Arab Spring" flow into Iran.