Kevin's Watch

In part it is price gauging. In part, it is also that they have to raise their price so they can afford the next shipment of gas, which will cost them a heckuva lot more...

And -- to discuss SUV's -- my little Jeep Liberty actually gets better gas mileage than my old car did. As does my son's Chevy S10. We won't talk about my husband's huge Dodge Ram -- but he's a builder and has to drive something that big for carrying materials for his jobs. But you would faint if you knew how much it costs for him to fill up his tank.

duchess of malfi wrote:In part it is price gauging. In part, it is also that they have to raise their price so they can afford the next shipment of gas, which will cost them a heckuva lot more...

Well, crap!
There goes some of my anger.
I never thought about it that way before.

ur-bane wrote:Although the US economy took a blow, a recession is not likely happen.
Sure, we may have shortages of goods and less exports until the ports reopen, but that's hardly a recession. The US economy has been growing at a steady 3.5-4% over the past year. It's weathered storms in the past, and should do so again.

What's started happening in the last few days is that companies (like mine) have started charging a fuel surcharge. Who do you think that is going to get passed on to? Everything we buy is shipped somewhere by either truck, plane, ship, or train. All those things run on petroleum products. All facets of life will be impacted.

Now, let's look at fuel costs for us. Let's look at Joe Average. Last year when gas was $1.50 he was spending $750/year on gas (25mpg vehicle, 15,000 miles/year). Now at (let's be generous) $3.15/gallon he's spending $1890/year. That's $1140, but let's call it $100/month to make the numbers easy.

Now, take that $100/month, and add in everything else that you usually buy, but increase the cost by 10%. Would it be fair to say that that amounts to another $100? So what happens? We have less disposable income, so we go out less, we don't buy as many luxury items, and we don't invest as mutch in the market; in other words, we're not feeding the economy. Ergo, recession.

Now, I may be taking the bleak view, however my industry has been driving the economy for the last 3 years. We're about to get screwed, the guys in LA are going to make a mint at the expense of the rest of the country (hint-if you're planning any construction work, buy the material TODAY). When housing starts fall off (which we all think they will), then there's going to be trouble.

Well, it hit 3.799/gal here. I am furious. Unbelievable.

Cail--if I gauge you correctly you work in the lumber/construction industry....which just so happens to be one of the few industries expected to not take a hit from Katrina. Lucky dog. However, although consumer spending will decrease, it is a long-term projection of decreased spending and poor economic growth that makes a recession.

NO will be rebuilt, and the ports will reopen. 10.5 billion was just approved for the cleanup effort, and additional funds are expected for rebuilding. While Katrina's effect will be felt in the immediate future, your predictions are still (although they make sense and are a bit on the high side) what I consider "worst case scenario."

Economists are predicting a lull in the economy in terms of consumer spending and a .2% decrease in GNP, but nowhere have I found anything stating a recession is imminent. 13 quarters of growth are in jeopardy, but again, the economy was at a point where it can take a short term hit.

It's really too early to tell exactly what will happen, but the lumber/construction and energy industries stand to gain from Katrina. The rest of us will just have to wait and see.

BTW---I see exactly what you mean in terms of the steamroller effect of reduced consumer spending, but again, recession will only be brought about by prolonged reduced spending and GNP reduction.
But, your words "be prepared" still hold true.

Actually, construction is going to take a huge hit. All resources will be diverted to the South. We tried to place orders today for plywood (which usually comes in in a week), we're being told we'll get it sometime in October. Oh, and it's twice as expensive as it was last week.

I'm taking the long view on this. If NO is rebuilt (and Biloxi for that matter), we're looking at 4 years minimum, and costs that are going to run into the trillions. If this isn't a recipie for recession, I don't know what is.

Let's see the incredible rise in gas prices could not have come at a better time as I was downsized on Tuesday. Oh Happy Day.....

Bummer. I've been downsized several times and it has always sucked. On the bright side, I've always ended up in a better job. So here's hoping you do, too.

Lorelei wrote:Let's see the incredible rise in gas prices could not have come at a better time as I was downsized on Tuesday. Oh Happy Day.....

So sorry - hope you get an even better job!

Yeah, me too. Good luck!

(I hate the term 'downsizing'... it always makes me think, 'Honey, I Shrunk the Employees!")

Nice Syl...

Edge wrote:Yeah, me too. Good luck!

(I hate the term 'downsizing'... it always makes me think, 'Honey, I Shrunk the Employees!")

Cail wrote:Actually, construction is going to take a huge hit. All resources will be diverted to the South. We tried to place orders today for plywood (which usually comes in in a week), we're being told we'll get it sometime in October. Oh, and it's twice as expensive as it was last week.

I'm taking the long view on this. If NO is rebuilt (and Biloxi for that matter), we're looking at 4 years minimum, and costs that are going to run into the trillions. If this isn't a recipie for recession, I don't know what is.

Trillions? The total population of the affected states is not much over 10 million, and large areas of those states were not damaged at all (particularly Alabama, the most populous of the three). At a rough guess I'd say five million people lived in the areas hit by the hurricane. A trillion dollars would provide $200,000 per person for rebuilding, or about $500,000 per household. That's got to be more than the replacement cost of every building, power and sewer line, highway, street, canal, and levee, even assuming everything had to be built from scratch. And it won't be: most buildings and infrastructure are heavily damaged, but a lot can be salvaged and rebuilt.

I can see the total cost running into the hundreds of billions, but not trillions. With the U.S. GDP running to about $12 trillion per year, that's a hit, but not a huge one compared to the national economy.

The construction industry, you know, is not going to take a huge hit; it's just that most of the construction will be in the Deep South for some time to come.

By the way, even a doubling in the cost of gasoline is not going to add 10 percent to consumer prices. Before Katrina, with oil at $60 a barrel, the U.S. was spending about 8 percent of its GDP on energy. The cost of all energy, not just oil, would have to increase by another 125 percent to add 10 percent to the overall price level. That could theoretically happen, but not because of this one disaster.

While Katrina was a terrible and unmitigated calamity for all who lived in her path, she wasn't big enough to throw the United States into a tailspin. There's no point in making wild predictions of nationwide damage.

There's no point in making wild predictions of nationwide damage.

Agreed - great post!

dlbpharmd wrote:Agreed - great post!

Thank you!

Well, yes and no. We've already spent more than 10 billion dollars, and NO is still underwater. I know demo and construction, and I'm telling you, this is going to cost a fortune.

i agree with Cail, we will be spending much more money than they are predicting. when Galveston was hit in 1900, they raised the entire island. will they attempt something like that in NO?

and speaking of gas, a local station owner (he has a bunch of stations around here) was rumored to be storing gas for a large price increase. he had shut down all of his pumps, and then the local paper printed a story about this. he reopened all his pumps with no price increase. after many anger consumers confronted his clerks and called his hq.

Think about the bucks here. Over 10 billion spent so far, and they're still evacuating people. And wait 'till the mosquitos start spreading disease all over the South. And like Dennis said, if they raise NO, it's going to cost a fortune more to cart in all the fill dirt.

Oh, and we're assuming that the EPA won't shut the whole city down and declare it a biohazard (the Superdome's already been declared one).

But then I read a story like this and it warms my heart....www.cnn.com/2005/US/09/05/katrina.bars.reut/index.html

High Lord Tolkien wrote:I'm surprised and curious, Ryzel.
Surprised because I thought Norway produced a lot of oil.
Curious because I wonder what causes the high price if your country does.
Is it all tax?
Or is it the grade of the oil that makes it cost a lot to turn into gas.
Just wondering.

Norway does produce a lot of oil, but somehow that does not translate into lower oil prices. Actually the grade of the north sea oil is quite good I have heard, so turning it into gas should not be a problem.

No, it is mostly taxes and a generally high price level.

High Lord Tolkien wrote:I just paid $3.099 (I've always hated that damn .009 cent!).

So let me see if I understand this right.
The gas that was sitting in the stations tanks (lets keep it extremely simple) for the past week was purchased and delivered 2 weeks ago at a certain price.
That same gas that has already been paid for at a lower price has now increased 50% at the retail level because of *FUTURE* gas purchases by the station?

How is that not unethical and not gouging?
(and I don't need the definition of gouging, thanks)

Ok, let me jump in here with a little bit of knowlegde that floated my way recently.

First: I do not know how this is done in the US, but here in Norway gas station owner buy their gas from the companies but they sell them according to a price scheme that the companies run. Or more properly, they can sell at any price they like OR they can be guaranteed a certain return on their investments because the companies finance the price 'wars'.

What this translates to when the prices of oil (and gas) go up in the world market is that the big oil companies (which has huge stores of gas) suddenly find themselves with assets that are worth a lot more than they were. This means that their capital value goes up and it follows that if they want to maintain the same level of RONCE (Return on Capital Employed, I think) they have to EARN MORE MONEY - hence prices go up. No doubt this is obvious to those of you that have studied economics.

Personally I think it is just greed, but it is a system of greed called capitalism (I think).