It Looks Like Israel Got A Pretty Good Deal On That Kurdish Oil; Pain At The Pump

It looks like Israel got a pretty good deal on that Kurdish oil. A reader sent me the link. I replied:

Very, very interesting. Sometime ago I started a page on my blog for "The Big Stories" to track some of these major changes in alliances due to energy. This is a pretty big story: one might be starting to see a Kurdish-Turkish-Israeli alliance. Some time ago Turkey and Israel got a bit close diplomatically but the fundamentalists in Turkey will create problems for Israel-Turkey. The story points out that Israel is growing more distrustful of the US as President Obama seems to be drawing closer to Iran in the past few months.

Those sanctions? Really?

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Meanwhile, $5 Gasoline

Yahoo!Finance is reporting:

There was a burst of media attention this week around the fact that today’s national average price of $3.69 per gallon for unleaded regular is the highest for this time of year since the grim economic days of 2008, as pump prices have edged higher with world oil prices amid violent unrest in Iraq. Yet better average gas mileage, higher wages and a dramatic decline in miles driven since 2008 means a further climb in gas prices probably wouldn’t pinch consumers noticeably unless it reached the new “pain point” of about $4.25 a gallon. 

[Of course, in many parts of the country prices already far exceed $4. This analysis is based on national average prices, which are the key to gauging broad economic effects.]

Jack Ablin, chief investment officer of BMO Private Bank in Chicago, attempts to integrate gas prices, fuel efficiency and prevailing wages to compare the impact of gasoline prices on households across the decades. To do so, he calculates how many miles of driving could be “bought” with the national median hourly wage. He estimates that, since the 1970s, gasoline prices have inflicted serious pain on consumers only when the average hourly wage can purchase fewer than 150 miles of driving. 

An hour’s work earned less than 150 miles on the road for much of 2007 and 2008, as the recession took hold amid record-high energy costs. From 1979 through 1982 – the classic “oil shock” years – things were considerably worse. At one point around 1980, an hour’s wages typically got you 100 miles (in a far thirstier vehicle) on the road. In the late ‘90s, the oil bust tax cut meant drivers “earned” up to 270 miles in an hour. 

As of this week, Ablin figures, “motorists can travel 168 miles” on the gross amount earned through an hour of work.  Assuming the median hourly wage today of $20.65 and typical light-vehicle gas mileage of 30 miles per gallon, that 150 mile threshold gas price sits at a national average price of $4.13 a gallon – or about 12% above current prices. This implies the U.S. economy still has a decent cushion against a substantial drag on consumer vitality – especially if recently emerging signs of wage growth carry forward.

The other thing to consider is the "delta" between $2.99 (okay, $3.00/gallon) and $4.00/gallon).

At 12,000 miles/year divided by 30 mpg = 400 gallons. At $3.00 / gallon, we have $1,200. At $4.00 / gallon, we have $1,600 over 12 months or an extra $33/month in gasoline expenses. If one drives more than 12,000 miles / year and gets less than 30 mpg, that's one's choice in most cases. There are many folks in the big urban cities on the east coast that do not even own a car, or very seldom drive their car. 

Folks working minimum wage jobs should live close enough to work to minimize their driving expenses.