View Full Version : Gas in Arizona now $3.00/gal.?
Melonie
04-21-2006, 04:39 PM
rising prices are one thing, shortages are another thing altogether. The gov't didn't plan on the unilateral decisions by Valero and other US refiners to simply stop using MBTE instantly once the gov't mandate was removed - thus making Valero and the other US refiners subject to monster environmental lawsuits had they continued to use MBTE instead of switching to ethanol as the oxygenate fuel additive. Until this May 6th Valero and the other refiners can use as a legal defense the fact that they were mandated by law to use MBTE. But after that date when the federal law change becomes effective, the use of MBTE would have been voluntary, leaving the US refiners wide open for billion dollar suits from the Sierra Club etc. Until it was defeated a few weeks ago, a proposal was floating around Washington to pass a law indemnifying US refiners from future MBTE lawsuits, with the US refiners counting on this measure being passed so they could continue to use MBTE. In a major surprise, this measure was defeated a few weeks ago, with no chance of another vote before the May 6th date when the federal law requiring the use of MBTE as a fuel oxygenate additive is scheduled to go away.
So the US refiners talked with their attorneys and decided to switch to ethanol immediately to cover their butts against potential multi=billion dollar MBTE cancer/pollution lawsuits ... despite the fact that the US ethanol industry currently doesn't have enough production capacity in place to meet the need for fuel additive ethanol use, despite the fact that ethanol must be trucked to distribution terminals instead of being pumped through existing pipelines (to avoid water absorption) and there aren't enough tank trucks around to do this and also deliver blended gas to retail gas stations etc. On top of this the US gov't has long standing import quotas and tariffs in place against imported ethanol, so the refiners don't have a supplemental source of ethanol to make up the shortfall in US production capacity.
End result, a real shortage of blended gasoline despite super-high prices ... especially so for the specially blended gasoline required on the east and west coasts to minimize pollution.
dudeski
04-21-2006, 07:53 PM
Friday April 21 2006. Oil is trading a bit over $75 a barrel on the NY Mercantile Exchange today. I believe that is a record per barrel.
You know, many people are under the assumption, mistakenly, that the oil companies set the price of oil. Little do they know that oil is traded all over the world, denominated in dollars, and when oil rises in Asia, Europe, or America, it rises all over the world.
Every oil producer in the world, even non-American ones, is making more money for the simple fact that the price of oil rose. It isn't the American oil companies setting the price of oil nor President Bush and his "buddies", it's the traders on the oil exchanges setting the price. As long as demand keeps rising, the price will rise as well.
So why are the profit margins of the oil companies rising to record highs? Oil companies, since they produce a commodity that is essential for all of us, should have a regulated amount per gallon that they can make no matter what the price per barrel of oil is. Not a percentage of price, like 10%, but more like .30 a gallon no matter what the cost is.
This country is all about big business, politicians,and wealthy stockholders working in collusion with each other to set policies that undermine all the working classes of people.
The Oprah show today was about the class system in this country and experts predicting the ruination of this country if the greed of those at the top doesn't stop. An heir to the Johnson and Jophnson fortune has been making films to expose how callous and secretive the ultra rich are when it comes to protecting their fortunes, and he appeared on the show.
Our business is slower now because the powers to be don't want to allow busineeses that beat the system to operate. They want everyone to earn a living that is controlled and documented through the system of contols set up by the government and the big business cronies that help set the policies that ensure their wealth.
Deogol
04-21-2006, 09:44 PM
So why are the profit margins of the oil companies rising to record highs? Oil companies, since they produce a commodity that is essential for all of us, should have a regulated amount per gallon that they can make no matter what the price per barrel of oil is. Not a percentage of price, like 10%, but more like .30 a gallon no matter what the cost is.
This country is all about big business, politicians,and wealthy stockholders working in collusion with each other to set policies that undermine all the working classes of people.
The Oprah show today was about the class system in this country and experts predicting the ruination of this country if the greed of those at the top doesn't stop. An heir to the Johnson and Jophnson fortune has been making films to expose how callous and secretive the ultra rich are when it comes to protecting their fortunes, and he appeared on the show.
Our business is slower now because the powers to be don't want to allow busineeses that beat the system to operate. They want everyone to earn a living that is controlled and documented through the system of contols set up by the government and the big business cronies that help set the policies that ensure their wealth.
AMEN! PREACH IT SISTER!
Deogol
04-21-2006, 09:50 PM
After reading about this new law on several sites it seems it is just another scare tactic. They have known this was coming. They say their profit margins are low because they reinvest in the company. Well why is this going to cause problems when they had time to come up with a plan on how to implement this.
Every summer no matter what year it is the price of gas goes up over some crazy reason. Which by coincidence, they want you to believe, it just happens around the time that is the peak of driving season.
Yea, it seems like just a few months ago I was hearing about how $3.00 a gallon was a fluke and it was going to return to "normal."
Apparently someone has an idea of what they would like "normal" to be. Like this guy:
And before the oil apologists come running up about the so called "bad times" - I have to say I have never met a poor oil man.
Melonie
04-22-2006, 03:06 AM
So why are the profit margins of the oil companies rising to record highs?
not to confuse the issue with facts but the profit MARGINS i.e. the percentage of profit earned versus total dollar sales volume, hasn't increased significantly and is actually well below 'normal' profit margins in other industries i.e. computer hardware/software. What has increased to record levels is the total dollar value of profits, based on ever expanding amounts of fuel oil and gasoline being sold and a rising price of everything associated with fuel oil and gasoline.
Oil companies, since they produce a commodity that is essential for all of us, should have a regulated amount per gallon that they can make no matter what the price per barrel of oil is. Not a percentage of price, like 10%, but more like .30 a gallon no matter what the cost is.
OK fine the oil company executives think ... hmmm we can make a 5% pre-tax profit by refining Saudi oil and selling it as gasoline in America, versus making a 15% pre-tax profit by refining the same Saudi oil and selling it to the Chinese. Yup American gasoline prices would be lowered marginally at the expense of oil company profit margins, but we'll also wind up going back to odd-even license plate numbers being allowed to buy 10 gallons of gas on alternating days after waiting in line at the gas station for several hours - because oil companies would wind up shipping Saudi oil to every other country first and then sending anything left over to America. Or maybe they would decide not to ship oil to America at all even if there were 'left over' oil vs the amount the rest of the world wants to buy today, because the rest of the world will surely buy it tomorrow at even higher prices, because the supplies of oil below ground in the big fields are declining, thus by not selling oil today in a regulated America at low profit levels it will leave more oil to be sold next year to the unregulated rest of the world at even higher prices.
There's no escaping the fact that oil is a global commodity and a global business, such that if one country's government (and particularly a country which imports far more oil and gas than it produces) attempts to regulate 'unfavorable' market conditions from an oil company standpoint, and if the rest of the world is hungry to buy that same oil and gas under 'favorable' market conditions, the one country is going to be left with a shortage of 'below world market' priced gas and oil. The same principle also applies to any other global commodity for which there is growing global demand - copper, aluminum, concrete, gold.
The only way that 'below market prices' can effectively be imposed by a government is a Russia-like situation, where more gas and oil can be produced within the country's borders than can be consumed, and where the gov't basically owns/controls the oil companies pumping those domestic oil fields such that the oil company is forced to sell its product domestically at gov't dictated prices instead of exporting it at much higher prices. This situation certainly can't apply to America, even if drilling were allowed in the ANWR and off both coasts, because America's percentage of domestic supply is so low (and falling) and because America lacks the global authority to force the Saudis / Nigerians / Venezuelans and/or the multinational oil companies to do anything different (short of using military force anyhow).
That last point, while politically incorrect, had a great deal to do with the behavior of oil producing nations and multinational oil companies through both world wars, the Korean war, the Cuban missile crisis etc. It wasn't until after the Vietnam war that the oil producing 3rd world countries were 'safe' in assuming that America would no longer intervene militarily to guarantee a continuing supply of cheap oil for export to the USA. I'm trying to stay on the financial side of this point, because it is extremly significant. Prior to America's pullout from Vietnam, America's influence in the middle east was quite pervasive and the price of worldwide oil and gasoline were kept very low by making sure that the middle eastern countries produced more oil than the world demanded (history lesson - Shah of Iran - a fundamental turning point for the global oil and gas business).
It isn't the American oil companies setting the price of oil nor President Bush and his "buddies", it's the traders on the oil exchanges setting the price. As long as demand keeps rising, the price will rise as well.
While this is true for the price of crude oil, it's not exactly true for the price of blended gasoline at the pump. First you've got the issue of state road tax on gasoline and diesel fuel, which in my state at least is over 50 cents per gallon. Then you've got the various 'Heinz 57' state and local requirements for special fuel additive blends, which requires the addition of ethanol and other additives which are not only much more expensive than raw gasoline but which also creates major inefficiencies due to the separate refining and transportation of something like 40 different blends to different regions rather than being able to refine and transport huge batches. Then you've got new low sulfur restrictions on which crude oil is now suitable for refining versus which crude oil is not, which forces American refiners to buy the more expensive low sulfur crude from such troubled places as Nigeria and Venezuela.
These cost factors ARE under the control of the US gov't, and so far nobody has called for the gov't to address them. However, after Katrina disrupted refining capacity last fall, it was arguably the gov't's temporary order rescinding the EPA, state and local 'Heinz 57' fuel blend requirements and postponing the low sulfur restrictions at the first sign of shortages and skyrocketing gasoline prices that alleviated widespread American gasoline shortages, that kept the price of American gasoline from skyrocketing in the face of shortages, and that eventually allowed the price of American gasoline to drop by 50 cents a gallon or more, because the order effectively allowed imported refined gasoline (with whatever additives and sulfur content) to be sold throughout the USA. That temporary order has recently expired of course.
~
The other issue no one is saying a word about in the media is that many of Iraq's oil fields are still unoperational.
The Iraqi oil sector has been crippled by attacks on energy installations, political wrangling, lack of funds and mismanagement since the U.S.-led invasion in 2003. To reverse output declines, it needs to ensure the flow of funds and restore security to allow for maintenance and development.
http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nL21125415&imageid=&cap=
http://academic.evergreen.edu/g/grossmaz/philligr.html
Melonie
04-22-2006, 05:12 AM
Our business is slower now because the powers to be don't want to allow busineeses that beat the system to operate. They want everyone to earn a living that is controlled and documented through the system of contols set up by the government and the big business cronies that help set the policies that ensure their wealth.
Not to be too cynical, but why is it OK to call for the US gov't to intervene in a special way to minimize the profitability of oil companies, while it's not OK for the US gov't to enforce the same IRS and state prostitution/lewd conduct laws towards exotic dancers which apply to all other Americans and minimize the profitability of exotic dancing ? This thread is starting to get me wound up ...
Calling for the US gov't to intervene on oil companies to reduce profits in order to reduce gas prices at the pump has, at it's core, a belief that Americans are somehow entitled to keep using equal amounts of gasoline/energy in the future without having to sacrifice another part of their weekly budget / standard of living in any significant way, despite fundamental changes taking place in world market economics. Imagine if the same principle were applied to a different commodity ... say lap dances.
In the state of Michigan, lap dances have sold for $20 each for years. Michigan union auto workers were accustomed to buying 10 lap dances a week, and still being able to afford their mortgage payment, food, sending their kids to college etc. However, because of auto industry layoffs, the relative price of lap dances as a percentage of customer income has now risen substantially - in exactly the same manner that the relative price of gasoline has risen as a percentage of American income in general. Therefore if the same logic as the call for limiting oil company profits / forcing down the price of gasoline were applied, there would be justification to call on the state of Michigan to mandate that the price of lap dances in Michigan clubs be lowered to $10 so that former union autoworkers now working in 'market pay rate' jobs could still afford them. After all, even at $10 a dance, exotic dancers in Michigan would still be earning average hourly rates which greatly exceed what they could earn in other more conventional lines of work, right ?
Attempting to force down the price/profitability of private dances to keep them 'affordable' relative to customer disposable incomes would also have precisely the same effect as attempting to force down the price/profitability of gasoline. Like the oil company executives, exotic dancers would immediately plan to redirect their commodity for sale at higher prices outside the jurisdiction (i.e. dancers would be moving in droves to Indiana, Illinois and Ohio) ! Michigan lap dance customers would also see the same result ... a shortage of top-notch dancers from which to buy $10 private dances ! Controlling prices to below-market levels always results in shortages - this is a fundamental principle of free market economics whether the commodity involved is gasoline or prescription drugs or electricity or lap dances !
Note : the only difference in the above comparisons is the relative value of the US dollar ! In the case of gasoline incomes are in constant US$, while oil prices in US dollars is rising. In the case of lap dances, US dollar autoworker incomes are falling while lap dances are in constant US$. In both cases the relative change in the price of the 'commodity' as a percentage of customer disposable income is increasing, and in both cases the proposed gov't action would be targeted to restore the price of the 'commodity' back to its previous percentage of customer disposable income.
Actually, there is another difference as well. Exotic dancing businesses (essentially) are all privately owned, such that any gov't intervention would (essentially) only affect the profits/income of the clubs and dancers. But all of the major oil companies are publicly owned, such that any gov't intervention would not only affect the profits/income of oil company executives and employees, but also the profits/incomes of individual investors, pension funds, etc. who purchased oil company stocks in the expectation of earning a reasonable profit/income. "We have met the enemy ... and it is us !"
~
Well being a resident of Michigan and I frequent strip clubs from time to time, I can assure you lap dances are not $20.
From my experiance they range from $35 to $50 each. Unless your a woman getting a lap dance ;)
Oil-Company Profits The price-at-the pump is the sum of all the input costs plus, perhaps, some additional markup because of market power. We can tell if there's market power by checking the price increases.
Because there are 42 gallons / barrel, when the price of oil goes up by $10, say from $55 to $65, the price of gas should go up by $10/42 = 24˘ (popNote). It’s actually gone up faster than this, so we know oil companies are exercising some market power and passing through a “markup” not just their actual costs.
Check out this link. It shows in a graph how gas prices increase whenever there is a war in the arab world. I will not drawn any conclusions because that would be politcal.
http://zfacts.com/p/35.html
I don't know if price fixing is the answer. Carter tried that and failed miserably. Some kind of regulation needs to be in place if the price of gas does not reflect the price per barrel.
Some would say it is tied to the commodity exchange. Just because Mircosoft shares go up doesn't mean I pay more for a pc though.
Niceguy
04-22-2006, 08:56 AM
The Europeans in the EU imposed an "excess profits tax" on all oil companies in 2005 to recirculate the profits back into society. I note with amzement that the largest company in the US in terms of assets and profit is now Mobil Exxon, surpassing General Electric
(which is almost impossible to do) and Walmart.
Carried to logical extremes, since gasoline is a highly inelastic commodity (something you gotta have at any price) if gas hit $10 per gal. the oil companies would in short order
hold second mortgages on everyones house (going into debt to pay for the fuel), and have nearly all the profit the entire society in the US produces to pay for fuel. In this extreme situation, it is clearly an example of where a purely market driven economy does not work.
This present gas situation is where the US government should step in, but under the present far right ideology will not because "the market fixes all things."
In the short term, the market can cause serious disruptions in essential goods and services.
This is why we supposedly have a strong government. I'd say its pretty weak right now.
Melonie
04-23-2006, 05:17 AM
Because there are 42 gallons / barrel, when the price of oil goes up by $10, say from $55 to $65, the price of gas should go up by $10/42 = 24˘
Whoa, not even close. The price of crude oil only constitutes about 44% of the cost of refined gasoline at the pump. Another 14% comes from the cost of refining + fuel additives + oil company profits. Another 13% is attributable to the costs of transportation / marketing / distribution i.e. getting the gasoline from the refinery to the pump. Yet another 27% is attributable to federal and state road tax. (EIA 2003) Since 2003 the probable percentage of crude oil cost contribution has risen, and the percentage of state and federal road tax has stayed the same. The cost component of refining + fuel additives has risen significantly, partially because of the Katrina damage to refineries and the switch from MBTE to ethanol.
Additionally, a barrel of crude oil cannot be efficiently refined to exclusively produce gasoline. Thus with most efficient refiing, one barrel of crude produces 19.5 gal of gasoline, 9 gal fuel oil, 4 gal jet fuel, and the remaining 11 gallons go to lubricants, feedstock for plastics, asphalt etc. A heavier demand for gasoline vs these other products decreases refinery efficiency and further increases refining costs.
you might want to sort through to get a better perspective on the actual market economics of gasoline. The link also contains some interesting figures on oil company profit margins for 2005 ( ranging from Exxon at 11% to Chevron at 7% ) versus a whole bunch of other large corporations ( Citigroup at 33%. Microsoft at 32%, CocaCola at 21%)
Carried to logical extremes, since gasoline is a highly inelastic commodity (something you gotta have at any price) if gas hit $10 per gal. the oil companies would in short order hold second mortgages on everyones house
Housing is an equally inelastic commodity. Why not ask that the US government require mortgage lenders to not adjust ARM mortgage payments upward even though average global interest rates are rising ? The obvious answer is the same as for every other attempt to regulate the cost of a 'commodity' at below market levels ... a shortage of future mortgage loans would instantly develop, as investors deploy their capital elsewhere at higher rates of return.
As I see it, the bottom line here in terms of gasoline / fuel oil prices, ARM mortgage payments etc. is that the average American has been living beyond his means for years. This was made possible by excessively high pay rates (by global standards), by uncharacteristically low interest rates (the fallout from stagnant economies in Japan and Europe mostly), and by relatively low energy prices ( the result of collusion of arab and south american oil producers to maximize production and accept lower prices for their crude). Well, global pay rates are now having a very real effect on US union wages, Japan's and Europe's economies are finally picking up resulting in rising interest rates thus rising ARM payments, and the arab and south american oil producers are no longer content to keep pumping more crude oil without raising prices (no thanks to the Chinese who are ready to pay those higher prices).
Ultimately, the lifestyle / standard of living of average Americans cannot be sustained in light of these global changes. GM has already been nearly bankrupted in an attempt to preserve an 'unjustified' lifestyle / standard of living for its employees. Let's not do the same damage to American oil companies because, just like the auto industry, if we do we'll eventually wind up buying even more expensive gasoline from Total Fina in the future in the same way as we're buying Honda's today.
!~
First of all the rise in the price of gas has nothing to do with " an attempt to preserve an unjustified lifestyle".
If you actually took the time to look at what I posted you would see the writer does take all that goes into the price of gas into consideration. If I have to break it down I will.
Oil-Company Profits The price-at-the pump is the sum of all the input costs plus, perhaps, some additional markup because of market power. We can tell if there's market power by checking the price increases.
Here he is stating the same as you have. That there are alot of differant variables that go int the price of gas. These variables are already in the price itself before any price increase is added.
Because there are 42 gallons / barrel, when the price of oil goes up by $10, say from $55 to $65, the price of gas should go up by $10/42 = 24˘ (popNote). It’s actually gone up faster than this, so we know oil companies are exercising some market power and passing through a “markup” not just their actual costs.
Here the writer is saying that if the reason, given out to the public, for the price increase of gas is the cost of oil per barrel ( and they always use this excuse). The math doesn't not add up at all. All the other costs are already in the price of gas, when oil shoots up a barrel they jack up the cost of gas beyond what the increase is.
The reason why Americans are living outside of their means is not just because everyone wants to pretend they are rich. It is also because
May 10 (Bloomberg) -- U.S. corporate profits surged 87 percent from the third quarter of 2001 to the end of 2003, according to Commerce Department figures. Wages and salaries grew 4.5 percent.
The increase in workers' pay was the smallest for the first nine quarters of any recovery since World War II, real wage gains after factoring in inflation were 1.1 percent.
http://quote.bloomberg.com/apps/news?pid=10000103&sid=aCttIAcLPoXs&refer=us
The story is the same for 2004 and 2005. This is a free market run amuck. If the way that we do business is so fair why is the EU sanctioning us for breaking our own trade agreements? http://www.iht.com/articles/2006/02/13/business/wto.php
Just because it's a corporation doesn't mean what they do is right at any cost. Whether its conceding to union demands they know they cant keep, price gouging at the highest level of basic necessities, or raking in giant profits while giving works a pay raise that doesnt even keep up with inflation.
Global changes or not. Even China and India are getting under bid by the Philippines and other smaller Asian countries. Where does it stop? When every one is working for nothing while corporations continue to gain more and more profits?
Deogol
04-23-2006, 10:44 AM
Whoa, not even close. The price of crude oil only constitutes about 44% of the cost of refined gasoline at the pump. Another 14% comes from the cost of refining + fuel additives + oil company profits. Another 13% is attributable to the costs of transportation / marketing / distribution i.e. getting the gasoline from the refinery to the pump. Yet another 27% is attributable to federal and state road tax. (EIA 2003) Since 2003 the probable percentage of crude oil cost contribution has risen, and the percentage of state and federal road tax has stayed the same. The cost component of refining + fuel additives has risen significantly, partially because of the Katrina damage to refineries and the switch from MBTE to ethanol.
Additionally, a barrel of crude oil cannot be efficiently refined to exclusively produce gasoline. Thus with most efficient refiing, one barrel of crude produces 19.5 gal of gasoline, 9 gal fuel oil, 4 gal jet fuel, and the remaining 11 gallons go to lubricants, feedstock for plastics, asphalt etc. A heavier demand for gasoline vs these other products decreases refinery efficiency and further increases refining costs.
you might want to sort through to get a better perspective on the actual market economics of gasoline. The link also contains some interesting figures on oil company profit margins for 2005 ( ranging from Exxon at 11% to Chevron at 7% ) versus a whole bunch of other large corporations ( Citigroup at 33%. Microsoft at 32%, CocaCola at 21%)
Housing is an equally inelastic commodity. Why not ask that the US government require mortgage lenders to not adjust ARM mortgage payments upward even though average global interest rates are rising ? The obvious answer is the same as for every other attempt to regulate the cost of a 'commodity' at below market levels ... a shortage of future mortgage loans would instantly develop, as investors deploy their capital elsewhere at higher rates of return.
As I see it, the bottom line here in terms of gasoline / fuel oil prices, ARM mortgage payments etc. is that the average American has been living beyond his means for years. This was made possible by excessively high pay rates (by global standards), by uncharacteristically low interest rates (the fallout from stagnant economies in Japan and Europe mostly), and by relatively low energy prices ( the result of collusion of arab and south american oil producers to maximize production and accept lower prices for their crude). Well, global pay rates are now having a very real effect on US union wages, Japan's and Europe's economies are finally picking up resulting in rising interest rates thus rising ARM payments, and the arab and south american oil producers are no longer content to keep pumping more crude oil without raising prices (no thanks to the Chinese who are ready to pay those higher prices).
Ultimately, the lifestyle / standard of living of average Americans cannot be sustained in light of these global changes. GM has already been nearly bankrupted in an attempt to preserve an 'unjustified' lifestyle / standard of living for its employees. Let's not do the same damage to American oil companies because, just like the auto industry, if we do we'll eventually wind up buying even more expensive gasoline from Total Fina in the future in the same way as we're buying Honda's today.
!~
So in short, you're saying that America's Capitalistic system should yield no greater benefits than China's communist system or Mexico's elite system?
Pamela
04-23-2006, 10:54 AM
Today at the pump $2.99 a gallon...SUX. Melbourne, Fl.
P.
Melonie
04-23-2006, 11:46 AM
So in short, you're saying that America's Capitalistic system should yield no greater benefits than China's communist system or Mexico's elite system?
no, I'm saying that when America and China are both competing to buy a limited supply of Mexican oil, that the price of that oil is going to increase.
I guess I'm also saying that while the standard of living of unskilled American workers might deserve to be 5 times better than unskilled Mexican workers or unskilled Chinese workers because of our better system (not to mention the greater 'forced generosity' of skilled American workers vs Mexican elite or Chinese upper class), that the standard of living of unskilled American workers doesn't necessarily deserve to be 10 times or 20 times or 30 times as high. Average unskilled wage levels in China are, what, $60-$100 per month ? American poverty level annual earnings (with social benefits) are 20 times that high. American unskilled union labor is often 50 times that high.
Global changes or not. Even China and India are getting under bid by the Philippines and other smaller Asian countries. Where does it stop? When every one is working for nothing while corporations continue to gain more and more profits?
it will never stop as long as the 'lowest cost foreign worker' is able to cross the border of a higher wage country and undercut labor rates, and it will never stop as long as goods produced in a low wage country can be freely sold in a higher wage country undercutting sales of domestically produced products. This is the essence of global economics. Eventually everything will either rise to the highest level of exploitation or sink to the lowest common denominator - in other words, the rich will get richer, the poor will get poorer, and the middle class will be bled to death in the meantime.
I'm not saying that this should happen, or that it's right or wrong that it might happen, only that some elements are happening already and that those elements are already putting heavy downward pressure on US standards of living. So far many Americans are avoiding facing up to that issue by making up the difference with borrowed money, with equity extracted from their home, etc. but the unlimited amounts of subprime credit which have previously made this possible are going to dry up in a big hurry. When this happens a readjustment in American standards of living will HAVE to take place. Either the standard of living of unskilled workers must go down, or the standard of living of middle class skilled workers must go down with governmental 'forced generosity' confiscating more of their earnings to subsidize the standard of living of the unskilled workers.
Rising gasoline / energy prices are a strong catalyst for this sort of change, since the amount used and the corresponding total purchase price of energy is being uniformly distributed over the unskilled / poor. the skilled / middle class, and the elite / rich.
~
Melonie:"it will never stop as long as the 'lowest cost foreign worker' is able to cross the border of a higher wage country and undercut labor rates, and it will never stop as long as goods produced in a low wage country can be freely sold in a higher wage country undercutting sales of domestically produced products. This is the essence of global economics. Eventually everything will either rise to the highest level of exploitation or sink to the lowest common denominator - in other words, the rich will get richer, the poor will get poorer, and the middle class will be bled to death in the meantime.
I'm not saying that this should happen, or that it's right or wrong that it might happen, only that some elements are happening already and that those elements are already putting heavy downward pressure on US standards of living. So far many Americans are avoiding facing up to that issue by making up the difference with borrowed money, with equity extracted from their home, etc. but the unlimited amounts of subprime credit which have previously made this possible are going to dry up in a big hurry. When this happens a readjustment in American standards of living will HAVE to take place. Either the standard of living of unskilled workers must go down, or the standard of living of middle class skilled workers must go down with governmental 'forced generosity' confiscating more of their earnings to subsidize the standard of living of the unskilled workers."
I will make a judgement. IT IS WRONG. Companies giving employees a 1.1 percent raise
(which is the national average across the board no matter what class you are in)after inflation is wrong. Forcing companies to pay a fair wage is not "forced generosity" it is what the worker deserves when the company is raking in 87% raise in profits.
By legislation and corporation policies we have been forced into this corner. It is time we pushed back. ( I wont say how because that would be political)
Melonie
04-24-2006, 04:02 AM
By legislation and corporation policies we have been forced into this corner. It is time we pushed back. ( I wont say how because that would be political)
Well, let's try to keep it on the economic side. There is a unionized company located near where I live that makes China plates. Workers have been strike for 6 weeks now because the new contract offers a 3% pay raise and an increase in insurance co-pays. Your proposal sounds like you're calling for gov't to force the China company to sign the new union contract, or enact leglslation that accomplishes the same result. Assuming that this gov't action was taken such that the employees got the pay raise and medical benefits you feel they 'deserve' ...
How many American customers will pay an even higher price for locally made China plates when imported Asian china plates are on sale right next to them for 1/2 the price right now ? How many jobs will remain at the local China company three years down the road ? Who will wind up paying for the unemployment checks, the food stamps, the medicaid, as more and more local China workers lose their jobs ? Who will wind up having to pay higher taxes to make up for the lost revenue when the jobs are lost altogether and the company goes bankrupt ?
The root of the problem is the same as I described above ... unless the borders are closed to foreign competitors importing of China plates thus leaving them with no choice, American consumers are not going to pay a lot of extra money to buy American made China plates which have little or no quality advantage over imported ones.
As to the 87% raise in profits, much homework is needed to discover where those profits originated. Because of the special tax legislation in effect last year, a good portion of any increase in profits of US companies came from repatriation of FOREIGN profits - earned by sales of foreign made products produced by foreign workers in factories owned / built by US companies in foreign countries.
I am not saying that the government should come in and force companies to sign union contracts.
The government should provide an incentive ( whether in tax breaks which is what they do to encourage companies to go over seas which is why the EU is sanctioning us) for companies to pay a living wage as a standard. A wage that at least keeps people above the poverty line. With incentives the government is not making a broad reaching law that mandates it. I am sure there are many other ways that the government could encourage fair wage practices in addition to this. No matter where a worker lives if they are an employee by an American company these rights should be extended to them as well. Proper incentives will also encourage companies to balance their books in a much more fair fashion.
I am not against free trade, capitalism, or a free market. What I am against is our government encouraging our companies to go over seas. I am against companies taking advantage of workers ie Enron while corporate heads make off with millions. No matter where profits come from a portion of that money should be passed on to workers as well as everyone else in the company, not a chosen few.
Gm and other companies have agreed to union demands they knew they couldn't keep. The reason for a down fall of any company does not just lay at union workers feet alone. If a company can not concede to a union contract, they should provide the reasons why and work out an agreement. Whether they concede knowing they cant meet the contract or just say no without a reason at all, both undermine the employees and the company as a whole.
Immigration in this country needs to be addressed in a more broad reaching manner than it is. I do agree that illegal workers are under cutting the American work force. With better border security and a temporary worker program, illegal workers wouldn't be forced to work for less and with the right solutions it would not undermine American workers.
If we dont make sure, on some level, that companies provide a reasonable wage and benifits more and more people will be on public assistance. I wonder how many Walmart employees have had to go to free health clinics and some form of entitlement program for health care. If companies don't do their part the cost is past on to the tax payer one way or another.
Even though I disagree with you on differant topics Melonie, I do want to thank you. Debating these issues with you has been a great way for me to learn. Not just about this topic but many.
Melonie
04-24-2006, 04:24 PM
Even though I disagree with you on differant topics Melonie, I do want to thank you. Debating these issues with you has been a great way for me to learn. Not just about this topic but many.
that's what it's all about ! I hope that you also realize that sometimes my 'devil's advocate' points and arguments don't necessarily coincide with my own personal opinions on the subject.
f we dont make sure, on some level, that companies provide a reasonable wage and benifits more and more people will be on public assistance. I wonder how many Walmart employees have had to go to free health clinics and some form of entitlement program for health care. If companies don't do their part the cost is past on to the tax payer one way or another.
... and at some point, the whole situation snowballs to the point where the tax burden on higher skilled higher paid i.e. middle class employees reaches the point where their own standard of living is no better than that of their unskilled, unemployed neighbors. When this happens, it will then become a turning point depending on whether there are enough registered voters still employed to vote to slash entitlement program benefits thus stop their own tax rates from rising, or enough unemployed / underemployed / social program benefit recipients to vote themselves continued access to the fruits of their productive neighbor's labor. In the first case, the standard of living of American unskilled workers will drop to perhaps 10 times the world average instead of the current 20 times. In the second case, the higher skilled / higher paid / 'middle class' taxpayers will have no choice but to start 'voting with their feet', or simply give up on making an extra effort.
... but we're WAY off the original topic of this thread, which was rising gasoline prices. I predict there will soon be a call for a new entitlement program ... gas stamps ... to go along with the already existing entitlement programs to provide discount fuel oil / natural gas / electricity for eligible 'poor' Americans !
Yekhefah
04-24-2006, 05:38 PM
Just an FYI, everyone...
Premium is now over $4/gallon in Beverly Hills. And it's still rising.
Predictions are everywhere that Southern California will see $5 gas by September.
BrunetteGoddess
04-24-2006, 05:50 PM
Ay. Guess it's good that my car has been sitting in the garage for a while now? Still have a full tank from a month ago.
Gotta love econoboxes. 38/40 mpg.
Melonie
04-25-2006, 03:49 AM
Just an FYI, everyone...
Premium is now over $4/gallon in Beverly Hills. And it's still rising.
Predictions are everywhere that Southern California will see $5 gas by September.
As I understand it, this is almost entirely due to California road taxes plus California requirements for several 'boutique' fuel additive blends being required to sell specific blended gasoline in specific areas during specific seasons. With refiners having their hands full just trying to produce enough basic fuel additive summer blends using Ethanol instead of MBTE, they're in no hurry to shut down mass production in order to run several 'small batches' of gasoline with the different 'boutique' fuel additive blends required for sale in California.
Don't worry about shortages though. When regional storage tanks start to go empty, the Governator will have no choice but to request a waiver from the EPA/DEC so that Californians can buy basic blend gasoline (as was the case after Katrina last fall) despite the environmental effects. The price probably won't drop all that much either. Plus the added demand for basic blend gasoline in California (and probably New York and other 'boutique' states as well) will cause gas prices to rise further in the midwest, southern states etc. to nearly match east and west coast prices.
Jay Zeno
04-25-2006, 03:34 PM
So what I take from this is:
Because it costs more for cleaner-emission blends, air pollution is what you get for making gas cheaper. Cheaper gas is more important than cleaner air.
Suburbs are on the way out because they are not fuel-efficient, with personal vehicle driving over longer distances carrying the burden of more fuel use than more efficient public transportation systems. You should move into a more centralized area of the city.
However, if you do choose to stay in the suburbs, you should drive a big, fuel-inefficient car because buying a smaller fuel-efficient car puts American car workers out of jobs.
It's OK for corporate management to have huge raises and bonuses, and the common worker's raises should be kept as low as possible, or the business will risk losses.
Something tells me that if Americans reduced their fuel consumption an average of 10% per vehicle over the next month, gas prices would go down. That is unproven and unprovable, of course.
http://reuters.myway.com/article/20060425/2006-04-25T205955Z_01_N24353665_RTRIDST_0_NEWS-BUSH-ENERGY-DC.html
WASHINGTON (Reuters) - President George W. Bush, in trouble over soaring gasoline prices, ordered a probe on Tuesday into any price gouging, called for an end to tax breaks for Big Oil and suspended putting oil into the U.S. emergency stockpile.
As a short-term measure, Bush also gave the Environmental Protection Agency authority to suspend federal clean-burning gasoline rules this summer that are forcing consumers to buy expensive new gasoline blends.
Bush was acting to reverse prices that have soared above $3 a gallon in many parts of the country and are contributing to a new low of 32 percent in his job approval rating, according to a CNN poll.
Bush, trying to stave off a potential election-year problem for Republicans eager to hang on to control of the U.S. Congress, acknowledged Americans are in for tough times during the summer driving season.
"Energy experts predict gas prices are going to remain high throughout the summer. And that's going to be a continued strain on the American people," he told the Renewable Fuels Association, a group advocating expanded use of ethanol as an alternative fuel source.
Bush said the Justice Department and the Federal Trade Commission had urged state attorneys general to vigorously enforce laws against price gouging and illegal manipulation that may have contributed to rising gasoline prices.
..........A former Texas oil man who in recent months has advocated curing America of its addiction to oil, Bush was unusually blunt with oil companies enjoying record profits. Exxon had $36 billion in profits last year and gave a $400 million retirement package to ex-chief Lee Raymond.
He said they should use some of their largesse to invest in new refineries and researching alternative fuel sources. The fact that no new refineries have been built in 30 years is frequently cited as a reason contributing to soaring gas prices.
Bush called on Congress to take away from the oil companies about $2 billion in tax breaks over 10 years, such as subsidizing research into deepwater drilling.
Bush had signed the tax breaks into law as part of a comprehensive energy bill last summer. He said the tax breaks are now unnecessary at a time of "record oil prices and large cash flows."
Melonie
04-25-2006, 03:50 PM
Because it costs more for cleaner-emission blends, air pollution is what you get for making gas cheaper. Cheaper gas is more important than cleaner air.
this is a hot button political point, and a debatable scientific point, but also a very real economic point where 'mandatory' use of low sulfur crude, small batch 'boutique' fuel additive blend requirements, and the 'mandatory' use of ethanol versus MBTE as the fuel additive do contribute significantly to the recent increases in the price of gasoline at the pump.
Suburbs are on the way out because they are not fuel-efficient, with personal vehicle driving over longer distances carrying the burden of more fuel use than more efficient public transportation systems. You should move into a more centralized area of the city.
Probably true for blue collar workers, not necessarily true for upper middle class and the 'rich'. It is an undeniable fact that the suburban lifestyle is more transportation intensive, since both commuting to distant jobs and delivery of products to local stores involve much greater distances. Whether or not Americans can continue to afford these added (and increasing) transportation costs is logically related to the percentage of their disposable income which must be spent on gasoline/energy. In other words if you're earning $1 million dollars a year, it doesn't matter a speck if you have to spend $50 versus $250 a week for gasoline, but if your total weekly household budget is $500 it matters a great deal.
Something tells me that if Americans reduced their fuel consumption an average of 10% per vehicle over the next month, gas prices would go down. That is unproven and unprovable, of course.
Actually, it's very proveable. If Chinese demand rises by the same number of bbls of oil that American demand drops, and if not enough new oil wells come online to replace the declining production of oil wells in existing fields, the price of oil and gasoline will continue to rise despite a drop in American consumption ! Oil is a global commodity for which there is a rising global demand, thus any unilateral action taken by America cannot, by itself, reverse the global trend.
Jay Zeno
04-25-2006, 06:50 PM
Probably true for blue collar workers, not necessarily true for upper middle class and the 'rich'. It is an undeniable fact that the suburban lifestyle is more transportation intensive, since both commuting to distant jobs and delivery of products to local stores involve much greater distances. Whether or not Americans can continue to afford these added (and increasing) transportation costs is logically related to the percentage of their disposable income which must be spent on gasoline/energy. In other words if you're earning $1 million dollars a year, it doesn't matter a speck if you have to spend $50 versus $250 a week for gasoline, but if your total weekly household budget is $500 it matters a great deal.
1) Not all non-mega-urban areas are suburban. Fully one-fifth of the country's population lives in "rural" areas, or areas with communities of less than 2,500 people. Or at least, that's my memory. I would venture, subject to confirmation, that a substantial number also live in communities of 2,500-250,000 that are too far removed to be suburban.
2) Cost of transportation is not the only criterion. Try buying property in the depths of the urban crush at anywhere close to what houses go for farther out. Arguably the money that the "suburban" dweller saves by moving into town would be more than overcome by the mortgage payment. Or they could lessen the mortgage payment by submitting to a lower quality of life. Choices, choices.
1) + 2) = 3) The fact is that, transportation notwithstanding, new urban areas are designed for the upper middle class to "rich," and our urban areas simply could not absorb a crush of people moving in to enjoy the benefits of public transportation, and generations of people who have enjoyed the comforts and qualities of single-family homes and personal transportation would be miserable in a much more crowded urban life.
4) Because people will want to stay in their suburbs, in their small cities, in their large towns, in their small towns, and in their isolated homes, if transportation costs become untenable, then economic pressures will find a way to enable continuation, whether it's extended public transportation, changes in vehicles, or some other factors.
Actually, it's very proveable. If Chinese demand rises by the same number of bbls of oil that American demand drops...
That's what I meant by not provable. I do not believe you will see a concerted effort on the part of Americans to drop consumption.
I agree that oil is a worldwide commodity. It'll follow supply and demand. If American demand did drop - not likely in the near future - and other demand rose, well then the supply evens out, and prices climb with the rest of the economy, assuming that the rise in demand elsewhere not only matches volume but profitability.
Just musing. You go to other countries where gas prices have been high, and towns are scattered across the country, and you simply see a lot more smaller, more fuel-efficient vehicles. I do have to wonder if the economics of fuel will drive us (ha, ha) to that. Time will tell.
Melonie
04-26-2006, 03:16 AM
1) + 2) = 3) The fact is that, transportation notwithstanding, new urban areas are designed for the upper middle class to "rich," and our urban areas simply could not absorb a crush of people moving in to enjoy the benefits of public transportation, and generations of people who have enjoyed the comforts and qualities of single-family homes and personal transportation would be miserable in a much more crowded urban life....
4) Because people will want to stay in their suburbs, in their small cities, in their large towns, in their small towns, and in their isolated homes, if transportation costs become untenable, then economic pressures will find a way to enable continuation, whether it's extended public transportation, changes in vehicles, or some other factors.
Well, this is exactly what I have been talking about in regard to a downward shift in the standard of living of some suburban Americans being the 'forced' result of higher fuel prices plus higher interest rates plus lower pay rates for unskilled workers. Nobody says that the 'forced' changes are going to go over well. But when any American worker is forced to leave a $27+ an hour (union) job and faces options of $15 an hour replacement jobs something has to give. Similarly when the cost of commuting to a $27 an hour job goes from $100 a week to $200 a week within 2 years plus the price of home heating and other utilities doubles within 2 years plus the cost of property taxes doubles within 2 years, something also has to give. The only real difference is that the first case is the result of a (union) company going bankrupt, and the second case is the result of the worker himself going bankrupt. Granted that the inevitable will be postponed as long as possible via re-mortgaging their home to the hilt, maxxing out credit cards etc. but eventually the cash flow equation will force the acknowledgement that many suburban homeowners simply can't afford to remain suburban homeowners. As to investments of 'public' money to subsidize suburbanites, no chance. Rich and poor city dwellers will never vote to approve billions of gov't dollars going to suburban infrastructure improvements at the expense of their own perks/social welfare benefits (reference roads and bridges falling apart in Upstate NY)
The 'tin foil hat' crowd would argue that new urban environments are actually heading towards a 'two class' system, where the 'rich' urban property owners are also the business owners and the landlords, and where nearly everyone who isn't 'rich' is a 'subsistence' worker and/or social welfare benefit recipient and a tenant living in a rental property. The term 'subsistence' in this case means that the worker's earned income after taxes will cover rent and utilities and urban retail products/food/clothing and urban transportation, but will never provide for sufficient savings potential to build enough 'wealth' or 'down payment' to change their basic status as a worker/tenant. In other words, America seems to be headed toward the European socio-economic model, but without the socialist based legal and economic structures to go along with it (so far).
As to the USA switching to really small really fuel efficient vehicles, Daimler Chrysler has been trying to get approval for their line of Smart cars for sale in America for the last several years. However, because American pollution limit laws are based on percentages rather than total volume, the tiny three cylinder engines in such minicars can't pass American emissions limits even though they only generate 1/3th as much pollution volume as a big V8 (which generates a lower percentage but a higher total volume). Also, American insurance companies have balked at insurance coverage for minicars because of the potentially much more serious injuries/damage resulting when a 1300lb minicar collides with a 6000lb SUV or a 60,000lb semi. However, one private company is doing conversions to actually meet American standards ... but with a vehicle cost well above $20,000 ! See
Thus sales of Kias and Hyundai's and next year's Chery's are safe from European minicar competition ~
Niceguy
04-26-2006, 08:24 AM
Gas seems to be holding at $2.80-$2.95 here in north central non Chicago Illinois. (As of late April 2006.) A momentary pause in the march of prices per gal. upward.
Should be an intresting summer with geo political events, and of course the ever popular hurricane season opens June 1.
Jay Zeno
04-26-2006, 06:47 PM
Denver's light rail is extending out to the suburbs. The bus system has been there for decades.
I think I see some of our different perspectives. Loss of union jobs and getting driven out of suburban housing is not a universal experience. I see rampant suburbanization going on in Colorado - combined, paradoxically enough, with a resurgence of central business districts (downtowns). However, that resurgence isn't driving by the economics of suburban expense, because inner urban residences are expensive. Rather, it's driven by the charm of urban life, a charm which is apparent to a fairly encapsulated market segment.
I don't see a crash in car size. Actually, I don't see anything. But if gas costs continue to climb, I think the market will drive a steady lessening of car size and a heightening of fuel efficiency, a three-cylinder car nothwithstanding and being at the radical end of the spectrum of American vehicle sensibilities. If the traditional American manufacturers (as opposed to the new American manufacturers, e.g., Honda, Toyota, Mitsubishi) fail to anticipate the market correctly, they'll be in ever more trouble.
Melonie
04-30-2006, 10:19 AM
Again, in the 'real world' of US roads, there IS NO MARKET for tiny cars from any manufacturer. The environmental lobby doesn't want tiny cars approved because their 3 cylinder engines create proportionately higher levels of exhaust pipe pollutants. The insurance/safety lobby doesn't want tiny cars approved because of the vastly higher probability of fender-benders turning into total write-offs, and the vastly higher probability of minor injuries turning into fatalities, when a tiny car collides with a truck. In general, the vast majority of US consumers with 2.3 kids don't want to be driving tiny cars either because they're uncomfortably small.
Proof of the point ... Daimler Chrysler's SMART brand is the foremost line of tiny cars produced anywhere in the world ... and have tried to get them approved for sale in the USA to no avail. A third party company ZAP has embarked on a program to retrofit SMART cars with necessary US pollution and safety modifications, and is now able to sell modified SMART cars in 45 states (still can't meet the pollution requirements of the toughtest states) ... at a cost in excess of $20,000 per ... to a US market consisting mainly of rich environmentally minded individuals who wish to make a social statement (same market segment that hybrids appeal to). However, this presents no challenge whatsoever to Kia's and Hyundais and soon to be imported Chery's from China (estimated cost US$7,000 new).
Most blue collar Americans can figure out that, even at $5 per gallon, buying a new car costing $7,000 or even $10,000 that gets medium gas mileage results in much less total cost than buying a $20,000+ new tiny car that gets unbelievable gas mileage. This is further reinforced by the fact that your average American can actually fit into the front seats of the $7,000 or even $10,000 car, while squeezing into the $20,000 tiny car results in bruised knees and muscle cramps !
Logically extended, your argument leads to the inevitable conclusion that the primary effect of high gasoline prices on new car sales will be to leave the very expensive luxury segment pretty much unaffected (if you can afford a $50,000+ car you won't even notice an extra $50 a week in gasoline cost), is going to put a major dent in the medium price medium mileage segment (the bread and butter of US auto manufacturers) and will create vastly increased demand for the lowest cost new vehicles i.e. Kia, Hyundai, soon Chery and Geely from China, against whom it is simply impossible for US manufacturers to compete given higher US labor, benefit, environmental and safety compliance costs.
Jay Zeno
04-30-2006, 04:15 PM
Well, I agree that the American consumer market isn't ready for tiny cars. All other reasons aside, they'd be considered ugly and uncomfortable. The cars, I mean.
I don't have an argument. I have an observation. I have an "I think that..." Whether it gets proved right or not matters nothing to me, except to better refine my observations in the future. I think that if gas prices careen out of American consumer control, car sizes of Americans will steadily lessen, although not logically shrink to tiny Chinese/Korean cars. There are too many market variables other than just gas costs to make that a valid straight-line statement. However, gas cost is a very notable variable right now - hence the tendency for the average consumer to look for a higher-mileage car, which usually means smaller car.
Hypothesis: Gas prices spiraling astronomically = consumers shading over to more gas-efficient cars. Is that really a controversial statement?
Melonie
04-30-2006, 04:52 PM
Hypothesis: Gas prices spiraling astronomically = consumers shading over to more gas-efficient cars. Is that really a controversial statement?
Not when you're talking $3 vs $2 gasoline, it isn't controversial at all. However when you start talking $5 or $10 or even higher gasoline two or three years down the road (i.e. the development time for a new fuel efficient small car design) then yes your statement is controversial -
because at some point the majority of consumers holding unskilled/semi-skilled non-union jobs will simply not be able to afford to commute any significant distance to work anymore with gas costing $5-$10+ per gallon. At that point, they no longer need to worry about buying a new car - they need to worry about moving closer to their job and walking / taking public transportation to work.
At the same time, with $5 or $10 or even higher gasoline, the minority of consumers holding white collar / skilled / union jobs will still be able to afford driving their vehicle of choice even if their fuel cost goes up by $50-$100 a week. Yes they will pay some attention to gas mileage i.e. considering a Cadillac with a NorthStar 4-6-8 cylinder engine, or considering a Lexus hybrid SUV - but very few are likely to consider a Hyundai or Kia or a newly redesigned Chevy Metro / Ford Mazda subcompact / Daimler Chrysler SMART.
Put these points together, and the future of small, fuel efficient cars made in America actually looks bleaker for the future than it is today ! Whatever market remains for blue collar workers who can still afford to drive to work will go to the lowest cost option i.e. Chery or Geely or Kia or Hyundai. The white collar upscale vehicle market will be more or less immune to downsizing because of rising gasoline prices and will instead concentrate on technological innovations to marginally improve mileage without making the vehicles much smaller or less luxurious. Thus any major investment by GM / Ford / Chrysler to develop smaller more fuel efficient cars for the US market is, in the minds of some, nothing but a waste of R&D money.
Niceguy
04-30-2006, 05:04 PM
I received an e mail from Toyota Friday trying to sell me their new Yara (Yaro?) brand car. The four door version says it is rated at 38 mpg highway and 31 mpg city. The list msp
is $12,400 plus state sales tax.
It a 4 engine, not a 3 and the price is sure right. Looks Ok by the picture, and the price is right. Unfortunately I bought a new Honda CRV last week, but would give this another look when motor pool car #3 gives out next year as a train grocery shopping car. In the past have bought full size Chyslers, vans and GMC suburban trucks so a Honda is real new to me.
Maybe they called it a Yaris. I'm bad on names and erased the e mail as the spam filer stopped it going into the real in box.
Melonie
04-30-2006, 05:28 PM
yup this is all part of a new movement to bring in very low cost Korean / Southeast Asian / Eastern European built existing subcompact cars to America under a more well known supposedly better reputation brand names ... and in the case of Toyota and Honda an experiment to bring 'upscale' subcompacts sold in other parts of the world to the US for the first time.
"Sales tracker Autodata reports that subcompact cars, led by the Korean-built Chevrolet Aveo, posted segment-wide growth of about seven percent in 2005, compared with only a two percent growth in sales of other car models, and a 0.8 percent decline in sales of light trucks, such as SUV's, pickups and minivans.
The segment is noted for not just good fuel economy but also low price. The manufacturers' suggested list prices for the vehicles range from $10,500 to $14,000, according to price tracker Edmunds.com.
Other automakers are also closer to introducing new subcompacts into the U.S. market. Toyota Motor is bringing the Yaris, its best-selling model worldwide, to the U.S. market in 2006, while Honda Motor plans to have its new subcompact, the Fit, in U.S. showrooms in March.
Mark Fields, Ford's president of the Americas and a former head of Mazda, said that he believes it is not too late for Ford to make a push in the subcompact market, which he sees showing strong growth over the next five years.
"No company today is putting an American stamp on the small-car segment," he told the Journal. "It's always good to be the first mover, but it is not necessarily over if you are not."
from
The Toyota Yaris is supposedly a variant of their european subcompact with the frame stretched to make a bit more room for the American market. The price of a stripped-down Yaris is supposedly going to be in the $12,000 range ... less ABS, less air bags etc. ... meaning that a Yaris with the necessary options to meet CA / NY etc. safety regs will probably sticker in the $14-15,000 range. The Toyota Yaris and Honda Fit will be the first attempts to provide 'upscale' features, quality and reputation in a US market subcompact ... but at a price significantly above that of the Kias and Hyundais and relabeled Korean Chevy's and Fords.
It remains to be seen how this more expensive 'upscale' approach to high gas mileage subcompacts will fly with US subcompact buyers a year or two or three down the road. The basic unknown is whether or not a hard-pressed blue collar worker facing $5-$10 per gallon gas prices will pay an extra $5,000+ for a Yaris/Fit versus a Chinese or Korean subcompact on one end of the spectrum, and whether or not a white collar worker who can easily afford the extra $5,000+ for a Yaris/Fit will choose to drive a vehicle that small versus a Camry/Civic or Lexus/Beemer/Infiniti in exchange for an extra 10-15 mpg on the other end of the spectrum. Fortunately for Toyota and Honda, they can afford to find out without making much of an R&D investment, since these vehicles have already been developed and on sale in other parts of the world for some time.
The American auto companies don't share that position, and must invest heavily in R&D (or turn to their offshore partners to invest heavily in R&D) to come up with something similar to offer. Even so, it is more likely that any American offering is going to be outclassed by the Yaris/Fit, leaving them to try and compete (probably unsuccessfully) with the Kias and Hyundais and soon Cherys and Geelys from China for the lower end market buyers.
~
Melonie, sounds like you are convinced we are all doomed to the sub-sub-sub cracker boxes. I filled up the EXT this morning...it was around 55 bucks based on $2.84 per gallon. It was an admitted ouch but for now I've give up eating out one night a week in order to drive a real vehicle. Which, of course, makes true your previous points about the economic trade-offs LOL
FBR
edited to add: I still have playmoney but the tiproll is getting a bit thinner
Melonie
04-30-2006, 06:02 PM
well actually, because of the insurance / safety concerns about minicars (i.e. your sub sub crackerboxes), it would appear that Americans are not going to be allowed this option despite their extreme gas mileage. I'm actually pissed off about this because I had my heart set on buying the first SMART Brabus Roadster that came into my local Daimler/Chrysler dealer ... they're wicked sexy --->
what we're going to get instead are more subcompacts like we've already got - with Chinese built Chery and Geely subcompacts being priced all the way down to $7,000 new (or so the news stories say) and with 'upscale' Toyota/Honda subcompacts priced all the way up to $14-15,000. As you point out with your giving up one restaurant meal per week to continue driving a 'real' vehicle, I can see big possibilities for the cheap Chinese subcompacts but not much market for the 'upscale' subcompacts. I can also see the day 3 years down the road when $10 a gallon gasoline still equates to a $150 a week fuel bill for suburban subcompact commuters ... which when combined with rising heating/utility bills and property taxes is simply going to force quite a few suburban commuters into becoming city renters using public transportation to get to their jobs.
as to your edit about the tiproll getting a bit thinner, dancers better face the fact that they are a 'luxury' item for an ever increasing number of club customers whose tip rolls are getting thinner with every uptick in oil/gas/utilities/taxes .The girls who can manage to get hired in the 'super-upscale' big city show clubs will probably be as immune from this phenomenon as their banker/broker/lawyer/celebrity customer base is to oil/gas/utility/tax increases.
Perfect example ... I was watching 'The Interpreter' recently and had to laugh when a UN diplomat's aid told a SCORES dancer waving her tits in a customer's face "excuse me, miss, please do not touch the prime minister !". In other words, there better be Lexus/Beemers/Infinitis/Lincolns parked in the club's lot if you expect to keep earning decent money just dancing in the future.
Jay Zeno
04-30-2006, 06:08 PM
.....when you start talking $5 or $10 or even higher gasoline two or three years down the road ......
.... the future of small, fuel efficient cars made in America actually looks bleaker for the future than it is today ! I see.
I'm willing to wait and see how it's going in 2008. That'll be the proof, rather than our brands of logic. :)
Melonie
04-30-2006, 06:14 PM
I'm willing to wait and see how it's going in 2008. That'll be the proof, rather than our brands of logic.
Well you can wait, and I can wait, but the American auto companies can't. If they want to have a good subcompact to offer in 2008, they need to invest major R&D money in 2006 i.e. right f$%king now in order to have one ready. This means potentially taking a tremendous R&D expense gamble based only on the same logic and speculation we are currently kicking around.
Given the current GM situation and the costs involved, I'm betting that they'll take a pass on any major subcompact R&D of their own and instead concentrate on raking a share of profits from a Korean / Chinese partner.
Vyanka
04-30-2006, 07:05 PM
I'm getting a freakin' horse. This gas shit is rediculous.
We can go back to Ford's idea, in another thread, that Suv sales won't go down.
We didnt know what compact cars were until the Oil Crisis in the seventies. If history repeats itself we will have them back again.
Melonie
05-01-2006, 06:22 PM
^^ not exactly ... Ford Falcon, Chevy Corvair, Volkswagen Beetle were all on the market in the very early 60's, and didn't sell all that well. In fact Chevy lost their corporate A$$ on their R&D investment into the Corvair, which had been Ralph Naderized and long gone from the US car market by the time oil prices started skyrocketing in the 70's. It was actually the 'second wave' of compact car suppliers i.e Honda and Datsun/Nissan, who really were the ones able to cash in big time on American sales, with Volkswagen doing so-so in America and Ford/Chevy doing pretty poorly in the compact car segment even though they were in the market well before the Asians (and despite the fact that the Chevy Corvair's design was actually very clever and fuel efficient for its time - pioneering the use of turbochargers and aluminum engine blocks some 20 years ahead of the rest of the automotive world).
It is also arguable that a major factor in the successful large scale introduction of Hondas and Datsuns/Nissans into the USA was the very favorable Yen to US dollar exchange rate prevalent at that time.
~
Jay Zeno
05-01-2006, 07:04 PM
I'm no fan of Ralph Nader.
Putting the Corvair aside, the Honda Civic was the real initial thrust into the compact market. Its same-priced ($1,995) competition at the time was the VW bug, and the Honda was a better car in just about every way. It was wonderfully engineered. Then, yes, the Datuns and Toyota Corollas followed.
Detroit's response? The Pinto and the Vega, horrible POS cars, along with Chrysler/Dodge's K cars and the AMC Gremlin and Pacer.
VW discontinued then remade its Bug, and the Honda Civic remains with us about 33 years later. The Pinto, Vega, K cars, Gremlin, and Pacer are long since buried in the Bad Joke Cemetery. It takes more than just making the right-sized car. You also have to make a good, competitive car. The then-U.S. car companies handed the compact market to the Japanese manufacturers by simply failing to compete on an engineering and manufacturing basis. We can hand-wring about yen rates and dumping and government subsidies (and let's remember the government bailout of Chrysler-Dodge), but the fact is that the Japanese manufacturers simply made better cars.
Melonie
05-02-2006, 01:58 AM
We can hand-wring about yen rates and dumping and government subsidies (and let's remember the government bailout of Chrysler-Dodge), but the fact is that the Japanese manufacturers simply made better cars.
To be precise, they were able to offer a better car at the same US dollar denominated price to American customers - and there's no escaping the fact that the yen exchange rate, japanese gov't subsidies, and a protected japanese market allowing them to sell the same cars at much higher prices at 'home' to offset low initial profit margins on US sales gave the Japanese carmakers a giant 'jump start' that American and European carmakers couldn't compete with. Instead the American and European carmakers were forced to offer cars whose true cost of production was far lower in order for their sale price in US dollars to be close to the Japanese offerings while still being able to 'pay their own bills'. Be that as it may ...
In terms of this thread's topic, what the Japanese gov't for Japanese carmakers in the 70's is akin to what Hugo Chavez did last winter ... targeting the sale of a limited amount of heating oil at a (Venezuelan) gov't subsidized low price to 'poor' northeastern US homeowners ... with the specific intent of 'buying' the good will of those Americans and the American media, thus casting a negative light on American competition, as well as diverting attention away from the actual long-range plans of the (Venezuelan) gov't and the potential negative affects on America if/when those long-range plans come to fruition.
Jay Zeno
05-02-2006, 06:53 AM
I stand corrected. I had to look it up. The Ford Pinto and Chevy Vega debuted in 1971 as a challenge to the Toyota Corolla, which was introduced to the U.S. in 1968. The Honda Civic debuted in 1973.
It was my firm belief then, as it is now, that if the American manufacturers had simply made good cars within shouting distance of the price of the Japanese cars, they would have cleaned up on the market, particularly in light of the 1973-1974 oil embargo. I disagree completely that they couldn't compete. They chose not to compete at the same level.
Melonie
05-02-2006, 11:04 AM
again there's no arguing with the fact that in the early 70's the exchange rate was in the 300 yen to the dollar ballpark, making the US$ price of a Japanese car extremely cheap i.e. less costly than Detroit could have even built an equivalent car for without profit margin. By the Carter years, the US$ had devalued to the 200 yen ballpark, making the US$ price of a Japanese car 50% more expensive than a few years earlier. By the Clinton years, the US$ had devalued further to the 120 yen ballpark (where it more or less still is ... a 'fairly valued' level), nearly doubling the US$ price of Japanese cars on top of the previous 50% increase. Recognizing this, in the late 70's the Japanese gov't stepped up to stem slumping US exports by Japanese companies, providing subsidies to Japanese car manufacturers to offset their loss of competitiveness when the Yen exchange rate returned to somewhat 'reasonable' levels. Today Japanese cars are flat out more expensive than US cars, and the Korean Won is undervalued making them the most recent bargain.
lunchbox
05-02-2006, 11:52 AM
embargo
Embargo spelled backwords is 'o grab me'.
You're welcome.
Niceguy
07-05-2006, 05:42 PM
Time to bring this one back. Oil on July 5th exceeded $75 a barrel which in even the cheap markets means gasoline will be exceeding $3.00 per gal. (if not more like $3.25.
TigersMilk
07-05-2006, 05:52 PM
Whhaaaaa. Quit whining gas has been waay over $3/gal for weeks. In fact I dont remember when it was below $3/gal. Its anywhere btwn 3.09 to 3.37 or more here and depending where you buy it in the county.
This (http://www.youtube.com/watch?v=ctLr7R2T_eM&search=brian%20family%20guy) is what I think of your boo-hooing lol;)
Deogol
07-05-2006, 06:56 PM
Whhaaaaa. Quit whining gas has been waay over $3/gal for weeks. In fact I dont remember when it was below $3/gal. Its anywhere btwn 3.09 to 3.37 or more here and depending where you buy it in the county.
Not in TX! Still around 2.79-2.85 here.
is what I think of your boo-hooing lol;)
I closed my eyes and I could have sworn I was watching Fox News Channel.