by Joe Shea
August 15, 2015
FREEDOM TO DRIVE
BRADENTON, Fla. -- As I awaken each day and listen to the news on CNN and Fox, I mouth a prayer: "Please, God," I say, "keep driving the price of oil down."
The result of lower West Texas Intermediate (WTI) crude oil, of course, is lower gasoline prices; The esteemed Lundberg Survey just revealed that nationally, gasoline prices have fallen $0.17 in recent weeks. Now that WTI is priced below $44 a barrel, we can again expect that gasoline prices will follow suit, sooner or later.
That's not necessarily the case, though. Many of us have noticed that when the first WTI downturn occurred back in January, gasoline prices quickly dropped to as low as $1.69, which is what I paid at a 7-Eleven on State Road 64 in Bradenton. That was surely as low as it ever got, because even as that price was available at one pump, it was over $2 in the rest of our community.
This time around, though, the relationship between lower WTI and gas prices has diverged. I asked my brother's son, Dr. Patrick Shea of Oviedo, Fla., an electrical engineer, to calculate the relationship between oil prices and gasoline prices over the course of the downturn earlier this year. That information has never been openly available.
It's not such bad news for drivers. "It's very likely we will see a decline of similar magnitude," Trilby Lundberg said Sunday in a telephone interview with Bloomberg Business.
"The highest price for gasoline in the lower 48 states among the markets surveyed was in Los Angeles, at $3.80 a gallon," Lundberg said. "The lowest was in Charleston, South Carolina, where customers paid an average of $2.19 a gallon. Regular gasoline averaged $2.78 a gallon on Long Island, New York," Bloomberg reported.
What Dr. Shea's numbers revealed was that the math and the data are very tricky to establish for both commodities. But while the correlation was consistent in early days of the oil price downturn, he learned, as the downturn persisted a clear divergence arose and gasoline prices dropped much more slowly than oil prices.
This time, however, gasoline's price drop has occurred even more slowly. Even with the $0.17 drop that my friend Trilby Lundberg reported, she said the average price of gasoline in California was $2.71. During the first downturn, when WTI was at $44 or so, gasoline prices were close to $2 - about $0.70 a gallon cheaper.
So what happened this time? I believe there was just a lot of resistance from gas stations to the correlation of WTI prices and gasoline, slowing the price decrease of the latter. But I hope something else has not changed.
As an American who grew up with the slogan "See the USA in a Chevrolet" singing in my brain, when gasoline hit $3 a gallon I couldn't afford more than a few gallons at a time. When I was a kid (we owned a '55 Dodge Belvedere I eventually wrapped around a tree) gasoline on Hwy. 77 in Norman, Okla., was $0.14.9 - fourteen cents a gallon!
At age 15, I ran off the road when I fell asleep at the wheel after I took the car without permission at 5am to go to a rattlesnake hunt in Waurika, Okla. At the time I fell asleep, I was going 110 mph, and woke up as I went bumping along the side of the road toward a telephone pole. I twisted the wheel and the car miraculously reversed itself, and I backed more slowly toward the pole - in time to stop.
As a kid, I couldn't have gotten to the Norman city line at $3 a gallon, so maybe there is a perspective that can say fewer teenagers will die in crashes if the price of gasoline falls dramatically. That may even be true, but at the same time, more miracles may save more teens than normal. One is eschatologically challenged when one tries to do the calculus of miracles.
The fact is that expensive gasoline has profoundly impacted our freedom to drive. The very idea of seeing the USA in a Chevrolet is almost unimaginable for millions of middle-class drivers. We have lost a precious freedom without a single word of legislation. Oil and gasoline prices have combined to make our right to travel freely one we cannot afford to enjoy in a car.
So that's the reason I begin my day with a prayer, asking God to drive the oil prices even further down. So far, it's working. I was delighted when analysts at Citicorp said the brief rise to $60 of WTI crude this Spring was a "head fake," and predicted that oil could soon fall to $20 a barrel.
An analysis I read today on Bloomberg.com suggested that economics, aided by an Iran deal - if there is one - and continuing increased production in the U.S. would cause further drops in oil prices.
I can only pray it keeps falling and one day lets me see Montana's Missouri River Country and Glacier Lake.
Joe Shea is Editor-in-Chief of The American Reporter.