Real Estate, The Economy, and News: Gasoline Prices

Showing posts with label Gasoline Prices. Show all posts

Friday, May 19, 2017

Memorial Day Weekend Predicted to See Record High Number of Vacationers

National holidays, especially those that fall at the beginning or the end of a weekend, tend to lead to travel plans for a lot of Americans. The three- or four-day weekend is the perfect time for many vacationers to spend some time away from home with their family and friends. While holidays like Thanksgiving, Christmas, and New Year's usually lead to a lot of travel plans, many people prefer the shorter weekend trips over Veteran's Day or President's Day. According to Hugo Martin's L.A. Times article, the upcoming Memorial Day weekend is expected to break records in terms of the number of vacationers.

According to experts, this phenomenon could be due in large part to falling gas prices. As the cost of gasoline goes down, it becomes cheaper to travel, which is encouraging for people who want to go on vacation. It's expected that the prices will stay low at around $3 per gallon, which is the cheapest they've been over Memorial Day weekend since 2009. Partially due to the low gas prices, most of the vacationers are expected to be driving. In fact, statistics show that around 2.52 million will be driving to their destinations, a 2.9% increase from last year.

Similarly, there is expected to be a 3.4% increase in the total number of vacationers, up to 3.03 million Southern Californians, according to the Auto Club of Southern California. This will be the sixth consecutive year where the number of travelers increased, potentially a sign of a strengthening economy, in which consumers feel secure enough to spend money on travel. Some of the top destinations for travelers include San Francisco, San Diego, and Las Vegas, as well as famous landmarks like the Grand Canyon and some national parks.

The biggest increase of all, however, is among the number of Californians choosing airplanes as their mode of transportation. Over this Memorial Day weekend, over 300,000 Californians are expected to fly on commercial airlines, which is a 6.2% increase from last year's numbers. Even with all of the recent issues with airlines, the growing numbers could indicate that people are traveling further, which means that they are taking more time off of work than just the three-day weekend. That could point to growing comfort with the state of the economy or better financial management on the part of consumers looking to go on vacation.

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Friday, July 8, 2016

U.S. Takes Second Place in World Oil Reserves

The top oil-producing countries in the world are Russia, Saudi Arabia, Canada, and the United States. A few short years ago, the US was dead last in that hierarchy based on estimates of total recoverable oil throughout each country. As shown in Rob Nikolewski's L.A. Times article, a recent study by Rystad Energy has shown that the United States has beaten out some of its former competition, taking second place behind Canada as one of the world's top oil producers.

The amount of "recoverable oil reserves" is calculated based on how much of a country's oil is both technologically and economically feasible to extract. In other words, if it is too deep to get out or will cost more money to mine than can be earned in the market, then it isn't calculated in the country's total reserves. Leaders in the oil industry have determined that the United States' improved position in the market is likely due to technological advancements, especially those that enable the procurement of shale oil.

Shale oil is a type of oil found in some sedimentary rocks that can be extracted pressurized drilling. It is a type of oil that was previously ignored or not considered useful because it was harder to extract. However, since much of the "easier to access" oil has been extracted and used up over decades of drilling, the technology advanced to keep up with demand. Additionally, other forms of drilling technology, such as hydraulic fracturing, or "fracking," which involves the pumping of pressurized fluid into otherwise-empty oil well in order to force any remaining oil out have added to US reserves. Texas by itself has over 60 billion barrels worth of shale oil, an amount comparable to the total oil reserves in the entire country of Mexico.

The Rystad study concluded that there are approximately 2.1 trillion barrels of oil globally, from over 60,000 oil wells. Over half of the reserves in the US are shale oil deposits, which, since they are more difficult to extract, can incur extra costs. Right now, oil prices are very low, which might seem like a good thing to the average consumer. However, when prices stay low for too long, producers can;t extract more oil in an economical manner, which reduces the total amount in the market, which can cause prices to shoot up.

According to one economist, if oil prices stay below $50 per barrel, miners will not put in the investment to tap shale oil reserves. If prices get closer to $100, he predicts that the US will provide a significant portion of the oil market over the next few years. So, even though the US has plenty of oil deposits in Texas, California, South Dakota, and Alaska, and technology can help the mining along, prices will have to go up in the short-term in order to keep gasoline prices steady in future years.

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Friday, July 1, 2016

Global Economies Stabilizing After Downturn Caused by Brexit

Although the Brexit Referendum sent economies around the world into a steep dive, they seem to be rebounding much more quickly than expected. Investors have been buying more than selling this week. driving the US stock market higher three separate times. However, analysts have also noticed that US bond prices have surged, which indicates that investors are less anxious about Brexit in the short-term, but still worried about its implications down the road. The members of the Associated Press of the LA Times describe in their article some of the ways in which the economy has shifted since Brexit, and what that may mean for the future.

Britain's departure from the EU, which dropped the value of the euro by over 10%, left economists worried that economies around the globe would quickly follow suit. Fortunately, after a significant downturn, most of the economies are bouncing back quickly. While the amount of investment in the US economy seems to be the same before and after Brexit, there has been a shift as to where investors are putting their money. Oil prices went down. Consumer staple companies and utility stocks, which are known as low-risk investments, have had increased demand.

Investors believe that Brexit in and of itself will not have enough of an effect on the US economy to be significant. However, they worry that if the trend becomes contagious, it will be difficult to combat the negative effects of several countries leaving the EU at once. Overall, though, the economy seems to be on track. The Nasdaq and Dow Jones both increased by 1.3%, and the stock market did well this quarter. Even the S&P 500 improved by 1.9% in the period between April and June. Analysts believe that most of the improvement comes from energy stocks, utilities, and telecom companies.

On Thursday, stock trading started slowly but soon began to rally at normal levels, which may signal that investors have decided to stop worrying about Brexit's effects, at least for the time being. Even the UK's stock market has recouped many losses since last week, due mainly to overseas companies benefiting from the reduced value of the local currency. Around the globe, economies are doing well, or at least not being significantly affected by Brexit. The pound and the euro are still losing value, with the former at faster rates than the latter, but both seem to be slowing. It could be that economists were right: if handled correctly, Britain leaving the EU might only have negative repercussions in the short-run, with unknown benefits in the long-term.

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Friday, December 18, 2015

Federal Reserve Hikes Interest Rates - First Time Since Great Recession Began

For the first time in seven years, since the Great Recession began in 2008, the Federal Reserve has decided to start raising its interest rate. When the recession began, pushing the interest rates as close to zero as possible was necessary to help the nearly crippled economy. The Fed raising their rates could be seen in a positive light, as a sign of confidence that the economy is getting back on track. To others, it could be a preventative measure in preparation for a future economic downturn. Jim Puzzanghera and Don Lee discuss the implications of the rate hike in their recent article in the L.A. Times.

What was seen by some as a vote of confidence in the recovering economy helped investors to feel more confident, which in turn led the Dow Jones average to rally and close up about 224 points, a substantial increase. When the Fed decides that the economy can handle an interest rate increase, this helps the average person to believe that they can more easily trust the economy to keep their money safe. This leads to more investment, which can help the economy even more on its path to recovery. When people believe in the power of the economy, it is more able to grow and meet their expectations.

On the other hand, the increase of the interest rates might be an indication of future trouble for the economy. When the economy is struggling, when the market crashes or a recession hits, the Federal Reserve is able to lower interest rates, which can lessen the impact of the economic downturn. However, if the rates are already near zero and a recession begins anew, lowering the interest rates will have no effect because they are already too low. So, if the Fed raises the interest rates now, the government can start building up revenue so that if and when the economy slows again, they can lower interest rates and pump money back into the economy to give it a jumpstart.

This decision by the Fed, although seen as "historic" by economists, will likely have little effect, at least for the time being. The benchmark federal funds rate, which affects consumer and business loans, has only increased by 0.25%, and the Fed has promised that increases in the future will come slowly. Loans on automobiles and the interests rates on credit cards will probably begin to rise slowly in the coming months, and mortgage rates have already risen slightly. Small businesses, which have been more affected by the Great Recession than their larger competitors, have shown support for the raising of the interest rate, seeing it as a step on the way to a more stable economy. After all, at this point, a quarter of a percentage point does very little to harm business growth and could do much for the future of the economy.

The rate hike has been viewed by many as the turning point for the economy. It may signal an end to the worst of the recession and a new beginning for the economy. The rates, which will grow slowly, at first, are expected to reach 1.375% by the end of 2016, which is pretty low in the grand scheme of things. In fact, the interest rate was over 5% before the Fed started lowering it due to the Great Recession. By some measurements, unemployment is down to 5%, which means that the rate hike could be necessary in order to reduce inflation. Out of fear for issues in the global economy, the Fed decided not to raise rates in September, but since then has decided that the rate hike is exactly what the US economy needs right now.

Some economists believe that the increase is a ploy by the Fed to simply fulfill a promise that was made to raise the rates by the end of the year. Whether this was the Fed's intention or not, it doesn't matter because the rates have gone up and will continue to increase. All agree that the interest rates, when increased again, should go up slowly, so as to not stifle any economic growth that they may cause. While some still fear that the rate hike is a way for the Fed to handle "negative shocks" in the economy, the Federal Reserve Chairwoman, Janet Yellen, assures the American people that the economy appears to be stable for now. She believes that the economy will continue its growth in the future and that the American people should see the rate hike in a positive light.

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Friday, December 11, 2015

Faraday Future to Break Ground on Billion Dollar Nevada Plant in 2016

Like its competitor, Tesla Motors, electric car start-up Faraday Future has decided to open up shop in Nevada. Faraday Future, a new, relatively small rival to the other electric car producers, was debating among California, Nevada, Louisiana, and Georgia for their billion dollar production facility, but eventually made their decision and will start construction in the beginning of 2016. a main factor influencing Faraday's decision was an offered package of over $300 million in tax incentives by Nevada legislators, According to company executives, this wasn't the only reason, though, and a more detailed analysis of the choice is made in Chris Kirkham's and Ivan Penn's L.A. Times article.

Faraday Future, which is branded as an electric car company, has not yet produced an electric car. One of the company's founders and primary backers is Chinese media mogul, Jia Yueting, who has a net worth of several billion dollars and is ranked as China's 17th-richest person. Many of Faraday Future's top executives previously worked for Tesla and luxury car companies like BMW and Porsche. As such, they have quite a bit of experience with electric vehicles and the selling points behind them. The market for electric vehicles, while it is still undetermined based on Tesla's sales over the past decade, has the potential to grow larger, especially as people become more environmentally conscious and try to find ways to be more energy efficient.

Nevada legislature offered similar perks to Tesla Motors a year ago. With the help of $1.3 billion in tax abatements, Tesla began work on a $5 billion factory outside of Reno. While Faraday only received a $335 million deal, that is still nothing to scoff at, and will go a long way toward creating more jobs in Nevada and producing vehicles that rely more on renewable energy sources rather than fossil fuels. These deals, which might look to some like a waste of money on the part of legislators, can actually be quite beneficial to the state as a whole due to the production of jobs and the increase in goods for export to other states and other countries. The money in tax incentives that Nevada is providing to these companies can be earned back many times over by increased productivity over the long-term future.

Faraday's business model must be pretty sound for the state to take a risk and invest in them and in the hope of domestic growth in the future. Faraday doesn't just get the $335 million immediately; they have to prove that their company is moving forward. According to legislators, Faraday will not receive all of the tax abatements and other promised perks until it has invested at least $1 billion toward construction of the plant. Even without help from the tax incentives, Faraday's investment could pay off very well in the long run. As gas prices stay low, more individuals are going back to larger SUVs, since they can better afford to fill up the tanks of such automobiles. However, if and when gas prices rise again, people will be more interested in the fuel efficiency of electric vehicles and hybrids. So, as companies like Faraday and Tesla start getting ready now, they may be able to have their production running smoothly by the time demand for electric vehicles increases again.

While the tax incentives helped Faraday to make their final decision of Nevada, there were aspects of the other potential states that could have made them better choices. California, Louisiana, and Georgia all have direct ocean access, which means that they have ports and, therefore, make shipping and receiving of products and parts much simpler. Between California and Nevada, the latter has more wide-open spaces in which to build large factories. All in all, Nevada, which lacked direct access to seaports, still provided close enough access to make shipping of parts not too much of a nightmare in transportation. Highway 15 provides Nevada an almost direct route to the West Coast's ports, which, when combined with the tax incentives, made Nevada a better choice for Faraday's base of production. While we don't know whether California's legislature offered similar tax incentives to convince Faraday to choose the Golden State, in the end, Faraday made its choice, taking the best deal for itself while also benefiting the state of Nevada.

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Tuesday, May 19, 2015

Maintenance Issues at California's Refineries Lead to Gasoline Price Increase

5/1/15 - Drivers throughout California have been noticing gas prices climbing swiftly over the past few weeks, and they don't like it. In the last week by itself, prices have gone up by almost 34 cents, 6 cents of which happened over the course of a single day. Is this due to the state of the economy, or to supply-and-demand, or due to something much harder to control? Samantha Masunaga and Andrew Khouri, in their L.A. Times article, conclude that the increasing prices are mainly due to mechanical issues in gasoline refineries around the state.

California's refineries produce most of the gasoline used within the state, since production and delivery of California's “cleaner-burning blend” can be too expensive for out-of-state refineries to consider it economically viable. Furthermore, since the refineries produce as much gasoline as possible, any break in the production chain can cause massive issues throughout the system. Even if one factory would have to close down for repairs, the amount of gasoline in California would fall, making the available gasoline that much more expensive. The system leaves very little room for delays.

Unfortunately, refineries have been forced to stop or lessen production in order to perform maintenance work, whether planned or otherwise. After a February explosion at Exxon Mobil Corp.'s refinery in Torrance as well as some other, minor, issues elsewhere, the supply of gasoline is running low, thus forcing up the prices. Although the oil-refining companies are producing less, they still have contracts that obligate them to provide a certain amount of gasoline to customers, such as gas stations. In order to do this, they are forced to pad their supplies with purchases of gasoline from other refineries.

Many are upset about the price increases mainly due to the shock of it. When the price of a tank of gas increases by $20 to $30 in a month, it is hard to see it coming. To make matters worse, companies that purchase gasoline from other refineries during a time of low production try to keep such transactions secret, so as to not case a “pop” in the market. On the other side of the argument are the average Californians, who use gasoline and want some way to be able to predict when prices will go up. When a company has to purchase gasoline from another refinery, it is pretty obvious that they are having some issue with production.

The average person has had to cut down on certain “unnecessary” expenditures in order to put more money toward filling up the tank. Some have been forced to cut items when grocery shopping, and others have stopped eating out at restaurants. While gasoline prices are still, on average, below what they were this time last year, some areas are feeling far worse effects. A big cause of this, as Khouri and Masunaga point out, is that the market full of secrecy. If people know when companies are planning to purchase large amounts of gasoline from other sources, they will be able to more easily predict fluctuations and therefore plan out their gasoline purchases in a more beneficial manner. Gasoline has almost become like stocks, constantly changing and difficult to predict successfully. That could all change if refineries develop some transparency and give customers a fighting chance.

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Plunging Gas Prices May Not Last Long

1/30/15 - Drivers throughout the state and the country have noticed the recent decline in gasoline prices and are hoping that this trend continues for as long as possible. While gasoline was over $3 in most areas a year ago, the cost of gasoline is now at $2 or even less, a nice change for everyone filling up at the pump. Unfortunately, says Don Lee, in his article in the Los Angeles Times, these low prices are unlikely to last long. In fact, he predicts that they will begin to climb within the next few months.

Lee first addresses the main question: why did the oil prices fall in the first place? One of the main answers involves development and usage of new technologies. A somewhat new process called hydraulic fracturing, also known as “fracking,” has become increasingly prevalent in the industry for use in forcing extra oil out of otherwise dry wells. Furthermore, the development of shale oil techniques, which allow for the conversion of organic matter within rocks into synthetic fuels, helps to increase supply.

Following the laws of supply and demand, the increased supply will likely lead to increased demand. This increased demand can give producers of gasoline a reason to increase their prices, which is why Lee expects the price of crude oil to be back on the rise before the year is half-over. Lee does admit, however, that it is possible for prices to stay low, if oil production continues to increase. Otherwise, waning supplies would force prices higher, just as they have done in previous years.

Reduced gasoline prices could have dramatic effects on economies around the world. Countries that produce and export oil, like Iran, Russia, Venezuela, and Nigeria, are likely to suffer because reduced prices mean less income. On the other hand, countries that don't rely on the export of crude oil, like the United States, Japan, South Korea, and China, are predicted to benefit because they pay less for the crude oil they import. Also, their citizens will pay less for gasoline, and will have more money to contribute to the economy in other ways.

Some states in the U.S. Will benefit more than others. Similarly to the situation in the global setting, oil-producing states like North Dakota and Texas will be harmed by low prices, while other states, and the companies within those states, will be unhurt. In fact, the low prices could even lead to an boost in job growth. Even with increases in employment, lowered gas prices could be disastrous in the long run. A lowered price of gas could lower prices for all commodities, which could force the Federal Reserve to increase interest rates. Inflation is a huge risk when dealing with drastic price decreases.

Lee concludes that the huge quantities of oil being produced in Saudi Arabia, which is another factor in the price decrease, may be an attempt by the Organization of Petroleum Exporting Countries (OPEC) to force the United States out of the picture. If Saudi oil prices stay low enough for long enough, it could become economically illogical for the United States to continue producing via shale and fracking. Whatever the true reason for the decline in prices, people are enjoying it for however long it may last.

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