“There are going to be questions about what major oil companies are doing with all the resources they’re accumulating…they can’t escape that.”—U.S. Senator Pete Domenici, WSJ
Now the witch-hunt begins.
With gasoline prices rising (a minimum of 50c a gallon in my part of the country) in the seven days since Hurricane Katrina disrupted a tenth of the domestic refining capacity and much of the energy transportation infrastructure, politicians whose previous “fact-finding” missions to that hurricane-prone region of the country had no doubt been limited to touring the newest casino, are doing what they do best: they’re blaming somebody else.
The above-quoted Senator Domenici’s official web site, for the record, has a handy “On The Issues” segment devoted to four topics: Health Care, National Defense, Taxes/Economic Growth, and Water.
Energy—specifically why energy policy in this country has promoted truck traffic at the expense of railroad traffic and protected car companies from including SUVs in automobile mileage standards—is nowhere to be found in Senator Domenici’s Fab Four topics.
But now that gasoline prices are up in his district—a natural occurrence when 10% of refining capacity gets shut down for a week—Senator Domenici is all over this one.
As will be, I’m sure, my own Senior Senator, Chris Dodd—whose Kennedyesque Big Hair looks really terrific on TV when he starts working up his righteous indignation at whatever it is he wants to get on TV for.
Meanwhile, here at the local Starbucks they sell “Ethos” brand bottled water for $1.85 a bottle.
The bottle contains 1.5 pints of water from the Tomhicken Mountain Springs—which happens to be in Pennsylvania, near Pottsville. Cost: $1.23 a pint.
There are 8 pints in a gallon.
So the Starbucks customer is paying about $9.85 a gallon…for water that comes from a self-replenishing spring, gets put into bottles and shipped to the store as is.
Yet that same Starbucks customer is going to complain bitterly to Senators Dodd and Domenici that it now costs $3.25 for a gallon of gasoline that has been shipped via crude oil tanker from depleting oil fields in Saudi Arabia across 3,000 miles of ocean to an offshore tanker port, pumped through pipes to a refinery in the Gulf Coast, refined via an energy-intensive distillation process into a variety of fuels—jet fuel, diesel fuel, kerosene and even asphalt, not to mention three types of gasoline—and then shipped by pipeline to distribution terminals from whence it has been loaded into tank trucks and hauled up an Interstate Highway to a gas station for the Starbucks customer who is complaining about the High Cost of Gasoline to Senators Dodd and Domenici…
…and doesn’t think twice about paying $9.85 for a gallon of water.
Jeff Matthews
I Am Not Making This Up
29 replies on “Too Expensive…at One-Third the Cost of Water?”
Dodd ! ..Now there is a classic. I recall Front Line doing a show on the Enron type scams and they had Dodd on film ( got big money from Wallstreet ) offering his congrats to thier auditors and soon after the whole scam blew up. ….
Greenberg is right..the shorts to the work
Dude, down here, the cost of petrol (aka gas) is $1.30 per litre (aka quart). Dig it. They’ll be selling Mississippi flood water as a souvenir in the near future.
BTW, not a bottled water drinker myself.
Orange juice costs even more per gallon than SBUX water. The problem isn’t the price per gallon. It is price + volume. I know I spend a hell of a lot more per year on gasoline than bottled water. That’s why the economy is sensitive to gas prices and not the latte/evian spread.
The reason I like the Ethos water bottle is it fits so nicely in my car cupholder. As hard as I try, I can’t get that big, rusty metal oil barrel to fit in the same spot. Seriously, what makes the Senator from New Mexico appear so disconnected is that part of the Permian Basin, one of the most prolific oil and natural gas fields in the U.S., lies (in part) in the southwestern corner of his fine state.
I think you’re spot on, but your math is wrong. 5.3 pints in a gallon, divided by 1.5 pints in each bottle, then multiplied by $1.85 per bottle doesn’t equal $9.80. The actual price is closer to $6.50.
There are 8 pints per gallon, not the 5.3 I originally stated. The $9.85 a gallon is correct.
Jeff,
Great post, I agree completely. The only one thing I will point out, which is a common misconception, is that most of our oil comes from Saudi Arabia (or elsewhere in the middle east.)
Domestically, we only get about 10% of our oil from Middle Eastern suppliers – the rest comes from domestic production and closer oil producing nations, like Mexico.
But yes, maybe if people didn’t insist on using V8 SUV’s as commuter cars, this would all be less of an issue..
How much for a gallon of coffee? 🙂
To my knowledge there is a speed limit of 65 mph in effect in the US. Why does everybody buy 6- or 8-cylinder engines capable of doing double that speed? There is a lot of room for energy conservation on America’s roads.
Otherwise I agree about the outrageous prices for bottled water, especially in the context that we can live without combustion engines but not without water.
I don’t get the outrage. Bottled water is a discretionary expense unlike the 15 gallons of gas I need to get back and forth from work. If bottled water hits a certain price point most consumers will not cut back they just won’t buy it at all. In addition most consumers are not buying 15 gallons of water at SBUX!
Kevinmr, that’s right – bottled water is a discretionary expense – and people are STILL buying! while complaining about high gas prices. With all the processing that goes into producing gasoline I am astounded that it only costs $3/gallon.
Small Investor Chronicles
With all the processing that goes into producing gasoline I am astounded that it only costs $3/gallon.
Why? (1) The unit denominator is gargantuan and (2) The refiners and the shipping industry haven’t generated positive economic returns in many decades.
My four cylinder Acura was the best “energy play” of the past two years for me.
It’s really no less comfortable or capable than my old V6 Audi for any normal purpose, and uses about 1/3 less gas.
Friends laughed at me for “going downscale.” Right now, the only thing I’m regretting is perhaps going even a bit smaller.
-btc
Hmmm – I guess this means that if the supply for bottled water is just as “inelastic” as the supply for oil is, when will politicians get around to talking about “price controls” on our excessive demand for bottled spring water and non-fat lattes? Where’s Richard “Tricky Dick” Nixon when you need him for economic stability (lol)?
The President of the United States should have the national speed limit lowered to 55 miles per hour.
As Jeff had posted , Harry Truman answered his phone. He uncovered huge scams in the defense industry. With Katrina front and center does ANYONE in this country or in the middle east have ANY idea where all that taxpayer money that was for rebuilding Iraq has gone ? ….Is anyone watching whats going on over there ? Watching before or after Katrina ?
We need a satellite radio blog
“(2) The refiners and the shipping industry haven’t generated positive economic returns in many decades.”
Makes sense – especially with $1.25-like prices of the 90’s.
…and people still talk about “greed”.
Small Investor Chronicles
“The President of the United States should have the national speed limit lowered to 55 miles per hour.”
Yes, it is the primary role of the president to set the national speed limit. Oh wait, that’s not the president’s job. And there is no national speed limit. It’s clearly not handled at the national level.
almost forgot. ..I was at Point Pleasant NJ the last week . Its a family shore town. Homes on the beach go for 3 million on down. I couldn’t help but notice the forsale signs popping up. …I think when Jeff called the housing top a few weeks ago i think he was dead on. We could use a real estate pro to monitor the business for the blog
The Federal government can restrict speed limits on interstate highways. Carter did it in the 1970’s to combat the Arab Oil Embargo. The stick is federal highway funding to the states. The legal basis is the Interstate Commerce clause, which provides that the federal government has authority over interstate commerce.
Sammy Hagar wrote a rock song about it too, “I Can’t Drive 55.”
http://www.redrocker.com/icd55-lyrics.html
Tahoe Kid and Rvac, in 1974 Congress set a national speed limit at 55 MPH. Note that it was an act of congress, not an order from President Carter. The declaration was enforced by threatening to withhold highway funds to states that didn’t comply with the decree, though in truth, the states were free to choose whatever speed limit they wanted—it’s how Congress could ignore the confines of federalism’s pesky notice that highways were a matter of state jurisdiction rather than within the federal control (wait for it, wait for it…) interstate commerce.
By the standards of 1970’s vehicle efficiency, it was believed at the time to offer a 17%-per-mile drop in fuel consumption. The bigger problem in gasoline prices was that the energy market was dramatically unstable rather than everyone’s Dodge Chargers drank too much petroleum.
However, all federal controls on speed limits were lifted by an act of congress (see a pattern developing?) in November of 1995. This was in no small part because the political climate had changed to a more federalistic approach to government where states exerted greater control over their affairs than the national government, regardless of the Interstate Commerce provisions.
By the way, crank up your Sammy Hagar cassette again. The Red Rocker didn’t really like the low speed limit, it was pretty unpopular.
I remember that Sammy Hagar video as he disregarded the speed limit of 55 and flew away in his Ferrari. A lower speed limit would not bode well in Southern California. People drive 80+ mph in the fast lanes without worrying about being pulled over. However, a few conscientious drivers do voluntarily reduce their speeds when gas prices hover around $3… to around 70 mph. I’m not too fond of driving under these conditions, and I miss the nice public transportation systems in places like Boston and NYC.
I thought perhaps it might be a good thing if the President “proposed” a national speed limit of 55 MPH. After all, he was able to lead us to war, (Congress must approve,) and to fiscal distress (Congress must approve,) so why can’t he ‘lead’ us to ‘energy conservation?” He can. He can ‘recommend’ better gas mileage for vehicles, (CAFE standards,) he can ‘suggest’ more aggressive research on alternative fuel, and then, he can get out of the way. President Kennedy didn’t get us to the moon. He led us there.
Jeff, I find your comparison of bottled water to gas frankly ludicrous. I guess you hedge fund types don’t understand that people have to put gas in their cars to get to work and take the kids to school. It’s not a choice Jeff, THEY HAVE TO!!! Consumers don’t “have to” buy Starbuck’s bottled water; they can simply drink tap water. I am not making this up..
rvac,
Bush probably won’t say anything… that family made their fortune from oil.
roberto,
I think Jeff was just pointing out what a posh-society we live in, where people feel they need to buy bottled water. I agree with your point that all we need is tap water to survive… but that’s not how most of us Americans think and behave. There was a good article about water tasting (between tap and bottled). You might want to google it or something because it would support your point. But I’m not sure that was Jeff’s point. I thought he was just pointing out how ridiculous this water’s poshish-norm was relative to the oil situation. I don’t think you should blame “hedge fund types” for the water hype… instead blame Hollywood and our American vulnerability for buying into that “bottled water is much better than tap water” promotion. It is kinda weird that we’d buy water at three to four (or more) times oil prices. But then again… water comes at a higher rank to oil when it comes to survival.
Jeff is right that Gas in the US remains relatively cheap — but nobody wants to hear this with Gas between $3-4 dollars.
Here’s some specifics as to exactly how cheap even $4 gas is in the US
Other “Refined” Products Compared with Gasoline:
Product Unit Cost Price per Gallon
Lipton Ice Tea $1.19/16 oz $9.52 per gallon
Ocean Spray $1.25/16 oz $10.00 per gallon
Gatorade $1.59 /20 oz $10.17 per gallon
Diet Snapple $1.29/16 oz $10.32 per gallon (preferably Peach)
Evian water $1.49 /9 oz $21.19 per gallon
Whiteout $1.39 /7 oz $25.42 per gallon
Brake Fluid $3.15/12 oz $33.60 per gallon
Scope $0.99/1.5 oz $84.48 per gallon
Vick’s Nyquil $8.35/6 oz $178.13 per gallon
Pepto Bismol $3.85/4 oz $123.20 per gallon
Gas prices from around the world
Netherlands Amsterdam $6.48
Norway Oslo $6.27
Italy Milan $5.96
Denmark Copenhagen $5.93
Belgium Brussels $5.91
Sweden Stockholm $5.80
United Kingdom London $5.79
Germany Frankfurt $5.57
France Paris $5.54
Portugal Lisbon $5.35
Hungary Budapest $4.94
Luxembourg $4.82
Croatia Zagreb $4.81
Ireland Dublin $4.78
Switzerland Geneva $4.74
Spain Madrid $4.55
Japan Tokyo $4.24
Czech Republic Prague $4.19
Romania Bucharest $4.09
Andorra $4.08
Estonia Tallinn $3.62
Bulgaria Sofia $3.52
Brazil Brasilia $3.12
Cuba Havana $3.03
Taiwan Taipei $2.84
Lebanon Beirut $2.63
South Africa Johannesburg $2.62
Nicaragua Managua $2.61
Panama Panama City $2.19
Russia Moscow $2.10
Puerto Rico San Juan $1.74
Saudi Arabia Riyadh $0.91
Kuwait Kuwait City $0.78
Egypt Cairo $0.65
Nigeria Lagos $0.38
Venezuela Caracas $0.12
What our friend here Barry fails to say is that the products these guys keep comparing gas to aren’t a necessity. What kind of logic is it to compare gas to Gatorade or gas to Lipton Ice Tea? I really think you hedgies are losing all concept of reality. Again a person doesn’t “have to” buy Gatorade or Lipton. My god why is this so hard to understand. Oh and Barry forgot to mention one thing when comparing the price of gas in let’s say all of Europe to the U.S. TAXES! Stop comparing apples to oranges.
“Roberto”: Barry’s point is, I think, excellent. Even after stiff state and local taxes, the U.S. retail price of gasoline is very cheap compared to a lot of other products that nobody thinks twice about.
This encourages wasteful consumption, which makes us more dependant on foreign oil and opens us to the risks of disruptions such as Katrina exposed.
Nobody, as far as I know, is suggesting that anybody “has to buy” Gatorade.
This is silly. Liter for liter, starbucks water costs more, but it’s not a valid comparison. Pound for pound, a hamburger costs more than a car. Does that mean I should no longer eat and use the money to buy a car? Ludicrous!