PowerSwitch

On the face of it there seems to be little complaining about the price of fuel, People seem to accept that prices will just go up for whatever reason China the dollar etc.
Is it just that in Europe we don't spend that big a % of our money on petrol and/or people will continue to fill their tanks ahead of just about every other purchase?
My thoughts are using this logic, drivers in Europe will simply price the third world out of their fuel, given that the average moterist probably spends as much on lunch coffee and newspapers on a daily basis as they do filling up their car, the price will have to significantly increase before middle class Europeans start car pooling or leaving their car at home.

Hmmm, maybe we are just getting used to it?

I filled my car up with diesel at the end of last week and it took nearly ?60. That is a lot of money in anybody's books. Okay when you start to think about it being 12 odd gallons of very dense energy that can do a lot of work, you start to think differently, but even so ?60 to fill a fuel tank!

I think we relate to fuel in our cars based on historic prices and these have always risen over time.

When you start to compare the price of 12 gallons of diesel/petrol with 12 gallons of coffee or coke or beer or whiskey and you think about it, your perception changes completely and you end up concluding it is very cheap!

But I know the next time I fill my tank up I will not think it is cheap!

Yep ? for the average man, fuel is cheap. An average 10,000 miles a year in an average 40mpg car costs ?1,135 at ?1 per litre (?908 at 80p and ?1362 at ?1.20 per litre). That price isn?t going to have any significant impact on the average motorist (compare with largely fixed costs of depreciation, insurance, servicing, tax, tyres etc). There are lots of other things that people spend there money on they would be happy to give up before cutting fuel purchase.

At the national level the UK uses some 1.7 million barrels per day, 620 million per year. At $90 that?s a value of $56bn. The UK economy is around $2 trillion per year so we?re looking at less than 3%, in an economy that?s been growing at 2-3% per year. Our growth has easily outpaced the run up in oil price.

The price of oil isn?t nearly as important as the mainstream commentators make out. What?s important is the magnitude of oil available. Doubling the price has little impact, reducing the quantity even by 2% will have a serious impact. So as long as the oil keeps flowing, we?re okay, largely irrelevant of price.

Of course for countries far poorer than the UK even small changes in price have a direct effect on the quaintly available ? it?s the reduced quantity that is the problem rather than the price. The UK is a long way from being priced out of the oil market.

clv101 wrote: The UK is a long way from being priced out of the oil market.

Yes we are a long way from being priced out of the market, but lots of things are going up at the same time, especially food and fuel. At some point things are going to have a cumulative effect and people on a tight budget will stop spending so much on luxuries just so they can continue to have their "necessities"

Neil

Neily at the peak wrote:

clv101 wrote: The UK is a long way from being priced out of the oil market.

Yes we are a long way from being priced out of the market, but lots of things are going up at the same time, especially food and fuel. At some point things are going to have a cumulative effect and people on a tight budget will stop spending so much on luxuries just so they can continue to have their "necessities"

Neil

Spot on! I'd even go further and say many are already living on necessities alone.

Was it Frank Sinatra or one of his contemporaries who said, "Wine, women and song are so expensive that there's no money left over for luxuries"?

So the obvious conclusion is that as nominal demand keeps rising, and supply is static or falling, the price will keep rising until <someone> is priced out of the market to balance supply and demand. $90 oil prices out countries like Zimbabwe and Nepal. Which country (or block of countries) is next on the list, and what is their drop-out price? We could presumably map the relative economic strength of each country to their oil consumption and plot the oil price needed to balance a given supply shortfall. We could could
then map estimated future demand and predict the market price.

Of course two complicating factors are the falling value of the dollar and the economic slowdown due to the credit bubble (and presumably rising
energy prices).

I do not know how much longer the whole economic house of cards can defy gravity. After that, this kind of 'business as usual' analysis is meaningless.

RalphW wrote: Which country (or block of countries) is next on the list, and what is their drop-out price? We could presumably map the relative economic strength of each country to their oil consumption and plot the oil price needed to balance a given supply shortfall. We could could
then map estimated future demand and predict the market price.

If I remember this correctly the average income needed to support a car is roughly $6,000USD , so as this figure rises it would seem to quickly eliminate alot of Africa, China followed by South American countries and the poorer Asian countries. Marginal driving would drop quickly, marginal public transport will be priced off the road, and there would be rationing of diesel and oil for the numerous generators that are used in these countries.

When I go for a trip (to London, the West country, or wherever) I often check the train fares. The result is invariably that I discover that fuel is amazingly cheap in comparison, so I go by car.

I have a big petrol car, but then I also have a family of five. It's getting dearer, but it's still a bargain. So I keep using it, I whinge to Mrs Livered about 110p petrol but I still don't mind that much.

Yeah those of us who have to go by public transport everywhere, we can't understand what all the fuss over petrol prices is about. The 'real' cost of driving around is still going down (just): the real cost of public transport goes up and up.

Neily at the peak wrote:Yes we are a long way from being priced out of the market, but lots of things are going up at the same time, especially food and fuel.

Food prices may now be rising but it is from a very low base. Food prices have been dropping for decades. Actually, in terms of effort needed to get it, food is probably about the cheapest its ever been since we climbed down from the trees and starting walking to find it.

Mr Livered wrote:When I go for a trip (to London, the West country, or wherever) I often check the train fares. The result is invariably that I discover that fuel is amazingly cheap in comparison, so I go by car.

I have a big petrol car, but then I also have a family of five. It's getting dearer, but it's still a bargain. So I keep using it, I whinge to Mrs Livered about 110p petrol but I still don't mind that much.

In comparing the train fare with the price of petrol consumed by your car for the same journey, you are placing zero value on your personal safety and that of Mrs Livered and the Liveredlings (?). I've no reason to think you are a particularly irresponsible driver but statistically your safety is much greater on the train than in your car. It's a bit of a market failure, though I don't know how it could feasibly (in political terms) be addressed, that train companies are forced to provide a standard of safety to customers who aren't prepared to pay for it

In addition to safety - other factors no included in the petrol vs train ticket comparison are the fixed costs of motoring which for an average car are just as much as the petrol. Of course you can't "save" them unless you give up the car totally. This creates a step effect, below say 4000 miles a year the fixed costs aren't worth it. The depreciation, tax, insurance, service etc saving buys a lot of train tickets!

Less economic but still important is time, sitting on a train you can read or sleep, not recommended whilst driving.

emordnilap wrote:Was it Frank Sinatra or one of his contemporaries who said, "Wine, women and song are so expensive that there's no money left over for luxuries"?

I like it . . . going to steal this for my signature on another forum!

I'll complain if you like . It cost me ?69.80 to fill my home with diesel yesterday . And I had to buy it from the evil Tesco because the only other local petrol station is the even more evil Esso .