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Tuesday, March 6, 2012

New Data Point Regarding $5 Gasoline -- Data Collection, Perception, Movers and Shakers

Updates

August 13, 2012: why more states may see gasoline above $4.00/gallon -- CNBC. This article supports my view regarding what 75% of Americans actually pay for gasoline, or think they pay for gasoline.
"I think [the price of gasoline is] biased to the upside for the next three weeks, but it's biased to the downside after that," OPIS oil analyst Tom Kloza said. "I'm not talking about going back to the April highs of $3.93 (nationally). I'm talking about a few sore spots, like California, Chicago, and New York. It's not going to be the apocalyptic move many people fear...first of all, you have a very high price of gasoline which motivates refiners to produce as much as they can."
Like "California, Chicago, and New York."  That's a huge percent of the US population. Regular gasoline is now $4.93 in downtown Los Angeles. In my book, that's $5-gasoline. Does it really matter what the "average" price of gasoline is in North Dakota, South Dakota, or Wyoming when one city in California has a larger population than those three states combined.

Original Post
This is a very interesting article, providing insight to another data point regarding statistics. The current national average for gasoline is quoted by AAA to be $3.76.
A spike to $5 a gallon for the national average by the summer would mean that the rise in gas prices over the next few months would have to exceed the 8 percent climb we've seen over the past four weeks.

Is it possible? Perhaps. Inevitable? Not really.

"There's nothing inevitable about it," says IHS chief economist Nariman Behravesh, speaking on the sidelines of the CERAWeek Energy Conference in Houston. "To a large extent it depends on what happens in the Middle East." 

Prices are already at $4.25 a gallon or higher in some parts of the country. 

The statewide average price for a gallon of regular gasoline in Alaska, California and Hawaii has topped the $4 mark. Gas prices in Connecticut, New York and Washington, DC are almost there too. 

Some stations in the New York City area are charging nearly $5 a gallon for premium gas. Some Florida drivers are reportedly shelling out almost $6 a gallon. 

But at under $3.25 a gallon, gas prices in Colorado, Wyoming and other mid-continent states helping to reign in the national average. 

Plus, gasoline consumption continues to fall at a dramatic pace. Last week, the four-week average for U.S. retail gasoline demand posted a year-over-year decline for the 49th straight week, according to a report from MasterCard SpendingPulse, falling nearly 6 percent compared to the same period in 2011. 

Even former Shell CEO John Hofmeister, who has forecast gas prices will hit $5 by the end of the year, has qualified his assertion, saying there's only a "better than 50 percent chance" of gas prices hitting that mark.
Do you see the important data point that folks aren't talking about? The national "average" is based on all states, of course. The problem with this is that, unless I'm misinterpreting the method of data collection, the "national average" is not weighted based on population. 

The national average is held down by the states with the small populations: North Dakota, South Dakota, Montana, Wyoming, Oklahoma, and Colorado. But if the average was based on what the general population is paying, I suspect the average would be significantly higher than $3.67. 

And if collecting data based on populations/zip codes is too difficult, simply throw out the outliers at both ends, the $6 gasoline in Florida, and the "under $3.25 gasoline in the Midwest. 

For me, it's not what the national average is so much as what 75 percent of Americans are actually paying at the gas pump. 

And actually, it's worse than that, it's not what 75 percent of American are actually paying at the gas pump, it is their perception of what they are paying at the gas pump. For all practical purposes, I think 75% of the US population feels they are paying $4.00/gallon. 

Maybe even worse, from a policy point of view, the movers and shakers are in Washington, DC, and the price of gasoline there is among the highest in the nation.

And for diesel, it is even worse.


6 comments:

  1. For purposes of comparisons you need to stay consistent with the method used in the past.

    ReplyDelete
    Replies
    1. Agree 100%.

      I'm only saying that I always thought of "average price" as what the average consumer in the US was paying for gasoline. Not true. The average consumer right now is paying significantly more than the "advertised" national price, and the perception by the "average" consumer is that she/he is paying more than the national average.

      Delete
  2. $5 Oil? Damn that would be cheat

    ReplyDelete
    Replies
    1. Thank you for catching that. I need to get a proofreader. Smile.

      I've corrected it, but I bet I caught a lot of folks googling "cheap gasoline."

      Delete
  3. Another thing to remember is the reformulated gasoline lowers your MPG. I think I'm already paying the equivalent of $4.50/$5.00 a gallon

    ReplyDelete
    Replies
    1. Again; great observation. You confirm my feelings: folks feel they are paying more than the nationally advertised average.

      Delete

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