Refinery issues change battlefield in gas price war

Friday, the corner station raised its regular price to $3.85.  At the time, I thought that they were once again charging into No Man's Land and that they would retreat back into the $3.68 trench, just as they did last time.  I realized differently yesterday, when I saw that the three stations down the street were all at $3.84.  The best that would happen would be that the corner station would match their prices, which it did today.

So, what's happening?  It's not the flooding, as that was a month ago.  It is oil prices?  According to Stuart Saniford at Early Warning, it shouldn't be.

Brent has dropped to the low end of the range of $100-$120 that it's traded in for the last couple of years.  At this level it strikes me as cheap...

Here's the graphical update Stuart provided.


That's the big picture, but what does the situation look like now?  Time to ask Reuters, which reported Oil rallies for third day, shrugging off firm dollar.

Oil rose for a third straight session on Friday, supported by a raft of strong economic data from top oil consumer the United States that also boosted U.S. equities, even as the dollar hit a multi-year high.
...
Brent crude settled up 86 cents at $104.64 a barrel, after an earlier rise of more than $1.

U.S. oil rose 86 cents to settle at $96.02, its third straight rise. U.S. crude has swung between $97 a barrel on May 6 and $92 a barrel on May 15.

According to the calculator at Econobrowser, gasoline should be at $3.45 when Brent is at $104.64.  So it's not the oil.

It turns out that it's the refineries again, as USA Today reprinted in the Detroit Free Press reported Friday: Refinery woes cause nationwide gas price spike.

Troubles at several oil refineries are driving gasoline prices sharply higher in the Midwest, and the regional shortages are expected to boost pump prices nationwide.

While the USA may be dripping in new found crude oil deposits and early May supplies were at their highest levels since the early 1930s, issues at a handful of refineries that turn crude into gasoline and diesel fuel underscore how kinks in the supply chain can cause quick surges in what consumers pay at the pump.

Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have spiked up to 27 cents a gallon the past week alone. Behind the rise: outages and extended maintenance has curbed output at refineries in Joliet, Ill., Whiting, Ind; Tulsa, Okla, and Eldorado, Kansas.

I don't expect this to go away soon and neither does USA Today...

Nationally, prices average $3.60 a gallon after beginning 2013 at $3.29. Some industry observers thought this year's prices had peaked at $3.78 in February after sliding to $3.50 April 29. But the Midwest's refinery issues are now expected to keep propel prices for several weeks, perhaps to $3.85 a gallon nationwide.

...Or Stuart Saniford, after noting that Brent is cheap.

Saudi Arabia isn't going to let it go much lower (at least not for any length of time), and any number of things in the world could go wrong to make it go higher.  In particular, I continue to have more faith in the future appetite of Chinese and Middle Eastern motorists to consume oil than US frackers to find it.

The commodities traders think that gas prices will go up, too, as Reuters mentioned.

U.S. gasoline has risen for nine out of 12 sessions, including the last three, despite a Wednesday report showing an unexpected year-on-year build in gasoline inventories ahead of the summer driving season.

On top of both the refining situation and oil price fundamentals, summer driving season has begun.  I expect gas to briefly hit $4.00 right around July 4th.  Good thing I'll finally get that bike I've been thinking about.

Robots are coming for our jobs

The idea of robots taking our jobs, which bloggers like Chad/escapefromwisconsin at The Hipcrime Vocab and Stuart Saniford at Early Warning have been writing about for years, has popped its head up in mainstream science reporting.  While Chad and Stuart have been pessimistic about the prospects, Discovery News on YouTube takes a more optimistic view in Robots Are Stealing Your Job.

Robots are awesome, but beware: they're after your jobs! Trace looks at the work robots are doing today, that once required a human touch.

I don't think either Chad or Stuart would be so comfortable with the situation.  Instead, they might agree more with Seth Fletcher of Scientific American.

Yes, Robots Are Coming for Our Jobs—Now What?
M.I.T. economist Erik Brynjolfsson explains how technology has affected economic growth and productivity, and how human workers can adapt

Fifteen years ago Deep Blue beat Garry Kasparov in a game of chess, marking the beginning of what Massachusetts Institute of Technology economist Erik Brynjolfsson calls the new machine age—an era driven by exponential growth in computing power. Lately, though, people have been feeling uneasy about the machine age. Pundits and experts seem to agree that the robots are definitely taking our jobs. At last week’s TED conference, Brynjolfsson argued that the new machine age is great for economic growth, but we still have to find a way to coexist with the machines. We asked him to expand on a few points.
...
Throughout most of modern history, productivity and employment have grown side by side. But starting about 15 years ago they started becoming decoupled. Productivity continued to grow, even accelerate, but employment stagnated and even fell, as did median wages for the people who were still working. This was an important milestone, because most economists, including me, used to be of the mind-set that if you just keep increasing productivity, everything else kind of takes care of itself.

But there’s no economic law that says everyone has to benefit equally from increased productivity. It’s entirely possible that some people benefit a lot more than others or that some people are made worse off. And as it turns out, for the past 10 to 15 years it’s gone that way. The pie has gotten bigger but most of the increase in income has gone to less than 1 percent of the population. Those at the 50th percentile or lower have actually done worse in absolute terms.

Chad at The Hipcrime Vocab came to the same conclusion beginning very early in his examination of robots and automation, beginning with What Are People Good For?  As for Stuart, he thinks the loss of jobs to robots will be the major effect of the Singularity, not everyone becoming cyborgs or the machines enslaving or killing off humanity.  Just the same, this is yet another piece of evidence demonstrating that we live in science fiction times.

Nablopomo for December: Work

What's this month's theme?

WORK.

December kicks off a new addition to the BlogHer conference family -- BlogHer PRO -- and what better way to celebrate it than to consider how work fits into each of our lives?

More and more, the work we do isn't falling into clear-cut, 9-to-5 boundaries. Some work is unpaid but moves us closer to our overall goal. Some work doesn't feel like work at all because it's so much fun.

And, of course, we'll need to spend the month daydreaming your ideal work to make sure you're doing the work you really want to do (and if you're not, maybe January will be a time to start down a new path!).
...
So start thinking about what feels like work and what feels like play. And join us on the BlogHer.com homepage and on Facebook, where we'll be talking about work and sharing career tips daily through midmonth!

This should be easy.  I blog about my work a lot; all one has to do is look at the entries with the tags stories I tell my students, Oakland Community College, and Examiner.com, as well as real life and education.  Look for more of those this month.

Also, I blog about other people's work all the time.  I use the fruits of their labor whenever I quote an article, press release, or blog post.  Speaking of which, I should start quoting The Hipcrime Vocab, Early Warning, and Calculated Risk more often.  The first is very interested in the nature of work (escapefromwisconsin is of the opinion that the 9 to 5 job is both an anomaly and a trap).  The second is interested in the prospects for work (Stuart Saniford thinks that widespread employment is in danger from automation).  The third is just a great source of information about the economy, including employment.  Should I write a sustainability textbook, I'd use Bill McBride's graphs to illustrate it.  Paul Krugman has even more lavish praise.

CR is an example of the sort of economic reporting and analysis people would be following if they really wanted to know what was happening, rather than “reporting” that reinforces their prejudices. (But enter CR’s comment threads at your own risk — the usual suspects show up in force). CR’s analysis, more than anyone else’s, gave me a heads-up on the housing bubble, and has helped me along the way on many other issues.

Oh, yes, I should be quoting Krugman more, too.  Looks like I have my work cut out for me for this month.

A bigger picture on gas prices in Michigan

Calculated Risk has an interactive graph in Update on Gasoline Prices, where you can input up to three locations in the U.S. and see the history of gas prices for time spans down to one month and up to five years. The default setting is to show the U.S. average for the past six months. Below is that graph showing the average prices of unleaded regular in Detroit and Grand Rapids in addition to the default results for those same six months, which just happen to coincide with the span of time when I started blogging about oil and gas prices.



As you can see, gas prices in Michigan have been above the national average for most of the past six months. Detroit prices have only dipped below those of the nation as a whole briefly during mid-May, late June, and early August before their current drop. Grand Rapids has had it even worse, only once falling below the national average once during that same period, also in late June.

Both cities are currently farther below the national average than they have been the entire past six months. Their prices are also at their lowest levels since mid-February, when prices began shooting up as a result of Arab Spring. It's about time the state got some relief, which might help with reducing unemployment.

One of the odd things about the graph is that gas prices aren't dropping as quickly as oil prices. In fact, examination of the chart expanded out to a full year shows that the last time oil prices were this low, unleaded regular was below $3.00/gallon. Right now, one gallon averages between $3.30 and $3.40. Bill McBride of Calculated Risk has an answer for that.

This graph show[s] oil prices for WTI [West Texas Intermediate]; gasoline prices in most of the U.S. are impacted more by Brent prices.

We're looking at wrong crude oil index!

Stuart Staniford on the value of education

I surfed over to Early Warning because one of his posts was featured in a Mother Jones article about energy constraints on the U.S. economy, but that's not what I inspired me to post this entry. Instead, Stuart posted Returns to Education, which included this graph of the average lifetime earnings of Americans based on their level of educational achievement.




I'm going to add it to my lecture on economics as an example of how society converts social capital, namely the skills, knowledge, and social connections from education, into economic capital, the students' earning power. The graph will join the latest version of this one from Calculated Risk, which displays the historical relationship between educational level and unemployment in the U.S.




Both graphs show the value of education in economic terms, whether in earning power or protection from unemployment. The one from Calculated Risk definitely grabs the students' attention.  I hope Stuart's does as well.

Stuart has many more very interesting graphs showing how the lifetime earnings estimates in the first graph were derived. If you like numbers and graphs and believe in the power of education, I highly recommend reading Returns to Education.

Gas prices now falling as oil rises

On Sunday, I observed:

[R]etail regular gasoline should be no more than $3.25 a gallon when WTI is $85 a barrel. Let's see if gas prices get there, including in Grand Rapids, where they shouldn't be so high right now.

It looks like the prices of gasoline and crude oil are equilibrating, both nationally and locally. From Reuters yesterday.

U.S. gasoline prices drop for second week in a row

Oil prices, which account for about 65 percent of the cost of making gasoline, traded up $2.50 on the New York Mercantile Exchange to settle at $87.88 a barrel on Monday.

According to the handy graph of the relationship between crude prices and retail regular gas prices that Stuart Staniford at Early Warning has provided, a price of about $88/barrel for oil should translate into a $3.40/gallon at the pump for unleaded regular.




So what are gas prices doing?

U.S. retail gasoline prices fell 7 cents over the last week to $3.60 a gallon as of Monday, the second consecutive drop this month, the U.S. Energy Department said.

Still a bit high, but they're falling as oil prices rise. I wouldn't be surprised if oil rises to the low 90s and gas falls to just below $3.50. I could live with that, and so could the U.S. economy.

As for what's happening locally, ask the Detroit Free Press.

Gas prices down 5 cents in state

AAA Michigan said gasoline prices are down 5 cents per gallon over the last week, to a statewide average of $3.69.

The auto club said Monday that the average is about 92 cents per gallon higher than last year at this time.

Still high, but that was last week. Sunday, the price at the corner station was $3.65. When I filled up last night (Monday evening), it had dropped to $3.59/gallon. Good thing I waited. If these lower prices hold up, then AAA Michigan will have another price drop to report next week.

News isn't quite as good if one drives a diesel vehicle. From the Reuters article.

Diesel prices fell 6.2 cents week-on-week to $3.84 a gallon, though that was still up 85.6 cents from a year ago, the department said.

Diesel demand is much less price-elastic than gasoline demand, so expect it to remain more expensive than gasoline. Also, higher prices of diesel are more likely to be passed on to consumer goods as part of the cost of transportation. As for what diesel should cost at the pump for a given oil price, I may have to ask Stuart Staniford that one. He does respond to his commenters.

Oil down worldwide, gas prices up in Grand Rapids

Go figure. From WOOD-TV.

The wild ride on Wall Street - the Dow finished up more than 100 points on Friday - affected the price of oil, which fell to around $86 per barrel.

Strictly speaking, a barrel of West Texas Intermediate (WTI) didn't fall directly to $86 from over $90. On Tuesday, WTI closed at a ten-month low of $79.30 after hitting an intraday low of $75.71. Friday, WTI closed at $85.38 a barrel. While this was down $0.34 (0.4%) from the day before, this is still a rise of more than $5.00 since Wednesday's close and $10.00 from the Wednesday intraday low.

On the other hand, it is a drop from Friday to Friday, as WTI dropped $1.50 (1.73%) from its $86.88 close on August 5, making it the third consecutive week of dropping weekly prices.

As for the price here, when I last checked on Thursday, the corner gas station was selling unleaded regular at $3.49. I'll go look after I post this entry to see if it has risen since then.

UPDATE: Unleaded regular is $3.65 at the corner station. Looks like I should have filled up Thursday.

Finally, Stuart Staniford at Early Warning has this very handy graph up of the relationship between crude prices and retail regular gas prices.




According to this graph, retail regular gasoline should be no more than $3.25 a gallon when WTI is $85 a barrel. Let's see if gas prices get there, including in Grand Rapids, where they shouldn't be so high right now.

Blog recommendation: Early Warning

Early Warning: Threats to Global Civilization

The blogger of this site is examining many, if not most, of the same issues I am using an even more data-based method, a truly global perspective (although mostly focused on Europe, Asia, North America, and the Middle East), and a lot more original writing.  If you want the view from 35,000 feet, read him.  Of course, if you want what things look like on the ground here in Michigan and metro Detroit in particular, read me.  Between the two perspectives, you'll have a good idea of what is going on.

Hat/tip to Nebris, who linked me to Early Warning.