Carpe Diem

Christmas card from the U.S. oil market: gas prices have fallen to the lowest level since last December

Thanks in part to a huge 17% increase in U.S. oil production so far this year, gasoline prices are now at their lowest level since last December.

56 thoughts on “Christmas card from the U.S. oil market: gas prices have fallen to the lowest level since last December

  1. Locally in the St. Louis, Mo area it had been heading down and bottomed out @ $2.83/gal on Monday…

    Yesterday, bang! $2.99/gal…

    Did a refinery go off line or something?

  2. Typically, it’s not a good sign to see falling prices in gasoline heading right into the teeth o driving season — it means that demand is soft, and that suggests economic slowing . . . Scrooge signing off now.

    • it means that demand is soft, and that suggests economic slowing

      Not necessarily. Although in this case, yes. But we also have large stockpiles (due to Sandy) which we are working our way through now.

  3. also:

    gasoline prices are highly seasonal.

    if we compare this week with the corresponding week (using FRED data)

    we get:

    2012: 3.3
    2011: 3.2
    2010: 3.0
    2009: 2.6
    2008: 1.7

    it was higher previously during economic good times, (it was 3.0 in 2007) but this is the highest gasoline price for the 3rd week of december in 5 years.

    • Something tells me come late tomorrow/early Saturday we’ll see a jump, just as the family crams in the Family Roadster to head over to Cousine Eddy’s.

  4. Big local route fleet operators are announcing NatGas vehicle purchases. Many of these purchases claim 13 month to 2 year payback v. gas/diesel. I would expect to see many more with this attractive payback period.

    Local fleets[ie garbage/mass transit/utilities/Twinkies;-(]are said to account for about 25% of transportation petroleum usage. We might see this NatGas conversion impact oil markets with a significance similar to fracking.

    Is anyone aware of any available tracking tools for the substitution rate/usage rate in CNG/LNG for gas/diesel?

    • jay-

      there are a number of Public companies in this space whose financials are readily available and you can use them as a bit of proxy for adoption.

      to date, it’s very modest.

      the 800 pound gorilla is WPRT, which has as much revenue as the rest of the space combined.

      they also hemorrhage money and lose around $100mm a year.

      smaller guys like omtk (all gas focused on delivery fleets) have essentially zero revs as do guys like apgi who do a diesel/ng hybrid.

      a few taxi and bus fleets use the tech.

      but it’s still an extremely small portion of the market. i’d be surprised if it was 1%.

  5. Morganovich says: “federal deficits never turned into surpluses. it’s a persistent myth, but a myth nonetheless.”

    If you collect $200, your wife collects $100, you borrow $100 from your wife, and you both spend $200, you have a $100 surplus, although your debt went up $100.

    • peak-

      um, no.

      that is, in fact, completely wrong.

      you are using weird semantic sleight of hand and some definition of “surplus” that no one else uses.

      if two of you take in $300 and spend $400, you have a $100 deficit, not a surplus.

      that deficit is bridged by borrowing (or from previous savings)

      any time spending exceeds income, you have a deficit.

      you cannot have a surplus that runs up debt.

      if you were taking in more than you paid out, debt would go down, not up.

      the “surpluses” of the late 90′s and 2000 are just accounting fiction.

      they look at only one part of debt as opposed to all debt and thus come up with the wrong answer.

      deficits funded by previous savings as still deficits.

      if you take money saves by social security and give them an IOU, that is debt just like selling a treasury to you would be.

      you cannot exclude that from the balance or you get the wrong answer on deficits.

      to go back to your example, imagine you and your wife take in $300 and spend $400. you cover the gap by borrowing $150 from your wife’s savings. this leaves you extra money and you use it to pay down your mortgage.

      if we look just at your external debt, this looks like a surplus. it looks like debt went down. this is the claim you are making about the 90′s.

      but such a claim is patently false. your internal debt went up by $150 vs a $50 decrease in external. you have more debt, not less. that is because you ran a deficit and spent more than you took in.

      even if you ran up no internal debt (which was not the case with our government) it would still be a deficit.

      it is quite possible to run deficits and pay off debt at the same time IF you have savings.

      if you take in $300, and spend $400 by taking $100 out of your $500 savings, no debt was created, but you still ran a deficit.

      i think you need to look up what these terms mean.

      the comment you made does not make any sense.

      the $100 surplus you describe is actually a $100 deficit.

  6. http://www.investopedia.com/terms/b/budget-deficit.asp#axzz2FckghVUw

    Definition of ‘Budget Deficit’

    A financial situation that occurs when an entity has more money going out than coming in. The term “budget deficit” is most commonly used to refer to government spending rather than business or individual spending. When it refers to federal government spending, a budget deficit is also known as the “national debt.” The opposite of a budget deficit is a budget surplus, and when inflows are equal to outflows, the budget is said to be balanced.
    Investopedia Says
    Investopedia explains ‘Budget Deficit’

    Government budget deficits can be cured by cutting spending, raising taxes or a combination of the two. Deficits must be financed by borrowing money. Interest must be paid on borrowed funds, which worsens the deficit.

    by any definition of budget deficit in common use, the situation you described as a surplus is actually a deficit.

    The primary deficit is defined as the difference between current government spending on goods and services and total current revenue from all types of taxes net of transfer payments. The total deficit (which is often called the fiscal deficit or just the ‘deficit’) is the primary deficit plus interest payments on the debt.[3]

    Therefore, if t is a timeframe, G_t is government spending and T_t is tax revenue for the respective timeframe, then the primary deficit is

    G_t – T_t \,

    If D_{t-1} is last year’s debt, and r is the interest rate, then the total deficit is

    r D_{t-1} + G_t – T_t \,

    Finally, this year’s debt can be calculated from last year’s debt and this year’s total deficit, as follows:

    {D_t} = (1+r)D_{t-1} + G_t – T_t \,

    http://en.wikipedia.org/wiki/Government_budget_deficit

  7. Morganovich, if you don’t believe me, maybe you’ll believe the article you posted above:

    “The Social Security Administration is legally required to take all its surpluses and buy U.S. Government securities, and the U.S. Government readily sells those securities–which automatically and immediately becomes intragovernmental holdings. The economy was doing well due to the dot-com bubble and people were earning a lot of money and paying a lot into Social Security. Since Social Security had more money coming in than it had to pay in benefits to retired persons, all that extra money was immediately used to buy U.S. Government securities.”

      • Peak,

        It is creative accounting. Period. TOTAL debt went up every year during that period. Borrowing to spend does not create a surplus.

        By the way, everyone except Larry is familiar with Social Security accounting.

  8. peak-

    it’s obvious you still do not understand this issue.

    read through the math i linked.

    a mandate to buy government securities with a surplus in one silo of money has ZERO to do with being in deficit or surplus overall.

    that’s not an answer.

    that means there was a deficit.

    th

  9. think about it this way:

    if the government takes in $100 extra for SS and so SS buys government securities, if those securities came from the open market, THAT would be deficit neutral and a sign that spending (debt repurchase) balanced income (ss surplus)

    the fact that overall debt went up is a sign that there was a deficit.

    you are forgetting one side of an accounting entry.

    when SS buys treasuries that IS spending. you keep leaving that out and as a result are getting the wrong answer.

    when the treasury buys GM shares, that is spending, right? that added to the deficit.

    so why would SS buying government debt not be spending?

    on the other hand, selling debt is not income for the calculation of deficits. last year we sold a lot of debt. (much to the fed) it did not reduce the deficit.

    when you run it this way, you will see that there were no clinton surpluses. they are just an attempt top use an accounting practice that the government uses nowhere else and either count debt issuance as revenue or the ignore the purchase of debt as an expense, contrary to the way that TARP etc were handled.

    overall government debt went up every year clinton was in office.

      • cit b-

        if you read the math i linked, you can see how this flows and what the actual numbers were.

        in every year of claimed “surplus” overall government debt went up.

        the amount of “public debt” went down. this is what is used to claim a surplus. the amount of intragovernmental debt went up and by more that public debt went down.

        what’s important to realize here is that intragovernmental debt is a net number.

        so let’s follow some money through the system

        let’s say FICA takes in $100 more than it needs.

        that $100 is tax revenue.

        SS uses it to buy treasuries per the legal requirement.

        they give $100 to the treasury.

        the treasury gives them $100 in bonds.

        these are offsetting transactions in terms of amount of net intragovernmental debt. it’s like taking $100 out of one packet and putting it in the other in exchange for an iou. it’s the same net value.

        the treasury then spends $100.

        this would, in effect, be a balanced system (at least on a 1 period cash accounting basis. use NPV as a corporation would have to and you accumulate net debt, but the government does not use gaap.)

        $100 came in, $100 went out. in the middle $100 in debt was traded for $100 in cash. those transactions offset.

        such a system would be in balance. there is no deficit and no surplus. income = expenditure.

        but this is not what we saw in any of the clinton years.

        overall debt went up every year due to increases in intergovernmental debt going up more that public debt went down.

        as intergovernmental debt is a net number and accumulated cash somewhere in the system would reduce it, the only possible explanation for this increase is deficit spending.

        eg if the treasury did not spend the $100 in the example above but rather held onto it, net intragovernmental debt would drop by $100 and $100 income would go to debt reduction.

        there is no other way such a thing could happen.

        both clinton and the gingrich congress were anxious to claim surplus and to do so used some very strange accounting in which they ignored the rise in intergovernmental debt by pretending that the purchase of such debt by SS was not a negative cash flow line item and thereby overstated the cash flow of the system by the amount that intragovernmental debt went up by selectively applying the logic that “it’s not debt we owe it to ourselves” to the debit side of the transaction (trading $100 for $100 in debt from the treasury) while ignoring it on the credit side.

        so when you ask: was SS buying treasuries included, the answer is yes and no.

        the cash the went from ss to treasury WAS counted as income, but the debit accumulated by selling treasuries to them was not counted as an expense. this is why they got the wrong answer. it’s an easy trick to blow by people who do not do a lot of double entry accounting.

      • Cit B.

        Blue man group? I thought maybe you were having a blue Christmas.

        FYI that table F-1 of your reference is the universal go-to used as proof by people who wish to claim a Clinton surplus. Id doesn’t show off-budget debt, nor total debt, so as morganovich wrote (in quite some detail), there was no surplus. Close to a balanced budget, but no surplus.

  10. Morganovich cites: “…a budget deficit is also known as the “national debt.”

    When you figure out the difference between deficit and debt, let me know.

    • And, as you can see, federal revenue increased faster than federal spending:

      Federal Budgets

      Year – Revenue – Spending – Deficit or Surplus

      1992 – $1.64 trillion – $2.08 trillion – $437 billion Deficit
      1996 – $2.02 trillion – $2.16 trillion – $149 billion Deficit
      2000 – $2.63 trillion – $2.33 trillion – $307 billion Surplus

      • no peak.

        those “federal budgets” are based upon a lie that is not used anywhere else in government or private accounting.

        the purchase of securities from the treasury by SS is left out as a debit. this is accounting 101 stuff.

        that is NOT how a cash flow statement works.

        when you learn basic accounting, let us know.

        for the guy who said this:

        “If you collect $200, your wife collects $100, you borrow $100 from your wife, and you both spend $200, you have a $100 surplus, although your debt went up $100.”

        to claim that i do not understand what a deficit is is hilarious.

        you describe a deficit but call it a surplus.

        $300 comes in, $400 goes out, peak proclaims a surplus!

        if you think that is a surplus, it is small wonder the rest of this is beyond you.

        you clearly do not understand double entry accounting nor cash flow statements and have fallen for a smoke and mirrors lie about a surplus that exists only as accounting fraud.

        stop and think peak.

        how can net intragovernmental debt be rising unless more is being spent that is coming in? if the cash piled up somewhere, debt would drop.

        try to imagine a state of the world where that is possible.

        net intraovernmental debt went up enough that net governmental debt overall went up every year,.

        how is that possible if you are not deficit spending?

        borrowing is NOT revenue. you do know that, right?

        (though based on the utterly incorrect example you used, perhaps you don’t)

        read through the cash flow i laid out above until you understand it.

        then try and come up with any possible case in which overall government debt can be driven up by a rise in net intragovernmental debt every signle year while running a surplus.

        seriously, you tell us: how is that possible? you will rapidly realize that it is not and that you have been suckered by an accounting fraud.

        i learned equity markets from a pretty notorious short seller. i know accounting frauds backwards and forwards. this is a clear cut case.

        the numbers don’t lie, just the politicians.

        the budgets they claim are not consistent with what happened to the debt levels.

        it’s very simple, straightforward stuff if you have even an elementary knowledge of accounting and finance.

          • And for him and other damaged Orwell “influences”, budget deficits or surpluses have very little to do with actual total debt.

            You have written ‘total debt” but linked to a FRED graph of “total public debt” which doesn’t include off-budget debt or inter-government debt, thus giving a false indication of a budget surplus in 2000.

            Perhaps this graph showing gross federal debt is the one you wanted. It looks similar except that in the years 1997-2002 gross federal debt increased every year, indicating that the so called “budget surplus” is an accounting gimmick.

  11. For a long time, I also believed that the U.S. government had not run a surplus since the late 1950s. That’s because the federal government published a statistic called “total public debt”, which had increased every year since 1958 (or maybe 1959).

    I now believe that Clinton and Gingrich did actually have surpluses in the late 1990s.

    As I understand it, the total public debt figure includes the “special issue government securities” held in the filing cabinet somewhere in Washington which is known as the Social Security Trust Fund (and the other trust funds).

    In the public sector, we clearly dfferentiate between the words “debt” and “liabilities”. If a corporation issues bonds which are puchased by the public, the obligation for those bonds are considered “debt”, which is a part of total liabilities. But the accrued pension liabilities of the corporation are not considered debt.

    As I see it, the pension liabilities of the U.S. government now total many trillions – far more than the total amount of special issue government T-Bills designiated as the Social Security Trust Fund.

    For me, the only debt of the U.S. government is the debt held by the public.

    The total liabilities of the U.S. government include that public debt plus the many trillions of liabilities of SS and Medicare.

    The special issue T-Bills in the Social Security and Medicare Trust Funds are meaningless. I do not consider them to be debt. I do not consider them to be liabilities (they certainly do not represent the total liabilities of those programs)

    As I see it, the real debt of the U.S. government did go down in the late 1990s. But the liabilities of the U.S. government continued to increase.

    • Just so no one misunderstands the above:

      If the U.S. government had issued an income statement in 1999, that statement may have shown a loss. The revenues of that year would have been exceeded by the expenses – expenses which would have included the SS and Medicare liabilities to workers that year.

      If the U.S. government had issued a cash flow statement, I think the that statement would have shown an increase in cash. Adding back the non-cash liabilities and some depreciation on federal assets would have turned the loss into a positive number.

      • Sentence above should have been:

        “The revenues of that year would have been exceeded by the expenses – expenses which would have included the SS and Medicare liabilities ACCRUED FOR workers that year.”

    • John

      The special issue T-Bills in the Social Security and Medicare Trust Funds are meaningless. I do not consider them to be debt. I do not consider them to be liabilities (they certainly do not represent the total liabilities of those programs)

      I’m not sure you can say the special issue IOUs are meaningless. While they have no market value as they can’t be bought and sold, they are still promises by the Treasury to pay back money that was taken from the SS trust fund and spent on other things. That means taxpayer money or borrowing. Other than marketability, they are no different than any other treasuries, which ARE part of total national debt.

      Liabilities, on the other hand, are projections of amounts needed in the future to pay SS benefits. The unfunded portion is the future amount not covered by projected future income. While all debt is a liability, all liability isn’t necessarily debt.

      I say all that based on no actual formal training or education in accounting. you may refer to it as “pulled it from your ass”, if you wish.

  12. Morganovich, after you learn the difference between deficit and debt, you can learn the difference between a balance sheet and income statement.

    Let’s continue my original statement:

    “If you collect $200, your wife collects $100, you borrow $100 from your wife, and you both spend $200, you have a $100 surplus, although your debt went up $100.”

    Then, you use that $100 to pay a debt owed to a friend.

    So, revenue went up $100, spending is unchanged ($100 surplus), and debt is unchanged.

    • In that case. I wouild like to borrow $100 from PeakTrader Bamk. I will draw $50 now, and leave the other $50 with you.

      Now, since you still owe me $50 and and I owe you $50, we can call it even.

      It’s been nice doing business with you. You can bet your ass I’ll be back.

      • Ron, the way it works is my household collects $300 from you, we spend $150 on you, after $50 of expenses, and the remaining $100 shrinks as a percentage of my income.

    • In that case. I wouild like to borrow $100 from PeakTrader Bank. I will draw $50 now, and leave the other $50 with you.

      Now, since you still owe me $50 and and I owe you $50, why don’t we just call it even.

      It’s been nice doing business with you. You can bet your ass I’ll be back.

          • Oh Jeez. I had to stop reading. It’s just too depressing on our last day. You’re aware, of course, that today (12-21) is the winter solstice, and the last day in the Mayan calendar. If you’re reading this on the 22nd, you should cut your finger to make sure you’re alive, and not some kind of zombie.

            My grandson found a weather report for 12/22 that showed a high temperature of 12,340 degrees, & lots of fire.

            It’s been nice knowing you & everyone else here. :)

          • Juandos

            Hmm. I haven’t actually checked my pulse, but today seems a lot like most days when I was alive. In fact, so far, it’s better than some.

          • Hmm. I haven’t actually checked my pulse, but today seems a lot like most days when I was alive. In fact, so far, it’s better than some“…

            The 75 numbers delivered a bit of the old cardiopulmonary shock to the system, eh?…:-)

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