EVER!
http://www.boston.com/business/articles/…
As the price of crude oil approaches $100 a barrel, New Englanders are bracing for their most expensive winter ever.
May I suggest that the average family expended more hours of labor to procure their firewood in 1650, and more hours of labor to procure their coal in 1750, and more hours to procure their gas in 1850 than they are spending, today, to heat their (much larger, much better furnished) homes today?
I swear, whenever a journalist says the word “ever” I hear “since I was in high school, or since 1990, whichever was more recent…and I was drunk at the time, so I honestly can’t tell you which one that was”.
November 2nd, 2007 at 8:14 am
I think your semantic quibbling serves to obfuscate what really is an issue – specifically the cost of heating a home and driving to work will consume a greater proportion of the average family income than say an average family 20 or 30 years ago.
To point out that poor American families today are better off than the (for example) pilgrim-fathers only serves to indicate just how far behind America has fallen behind the nations it used to lead.
The article is indeed accurate in that US-Dollar oil prices are at a record high, so in absolute terms this is the most expensive winter those new-England families will ever have faced. Furthermore, as the price of the dollar plummets, the price of imported goods will have risen meaning that families who are above the poverty line will have less discretionary income unless of course their family income rises in compensation of the US Dollar’s losses.
November 2nd, 2007 at 8:55 am
[quote comment="96753"]I think your semantic quibbling serves to obfuscate what really is an issue – specifically the cost of heating a home and driving to work will consume a greater proportion of the average family income than say an average family 20 or 30 years ago.[/quote]
Using a spreadsheet from the Dept of Energy, I’m seeing higher real prices for crude oil in 1981 than I am today.
Also, re-read what I wrote: “that the average family expended more hours of labor … “. I chose those words carefully because the CPI is a politically manipulated number, used to constantly boost benefits to the powerful voting retired block.
Take a look at wage inflation, and then return to the raw data from the DOE. While $1 from 1981 is worth $2.22 2006 dollars by the CPI, if you look at the growth in per-capital GDP, the figure is $3.24.
Thus, if one barrel of oil cost $73.98 nominal in 1981, and it took one day for an average person to earn that much money, today one barrel of oil costs $95, and it takes 3 hours of labor to earn that much money.
Q.E.D.: my original point above (that it takes less hours of labor to heat a house today than before).
[quote]
To point out that poor American families today are better off than the (for example) pilgrim-fathers only serves to indicate just how far behind America has fallen behind the nations it used to lead.[/quote]
Huh?
(a) it does not point out at all how America stacks up to other countries today
(b) it DOES do something other than what you specify – it shows how far the standard of living has climbed over time.
[quote]
The article is indeed accurate in that US-Dollar oil prices are at a record high, so in absolute terms this is the most expensive winter those new-England families will ever have faced.
[/quote]
I am unable to comprehend why you think that nominal prices are relevant, let alone interesting.
[quote]
Furthermore, as the price of the dollar plummets, the price of imported goods will have risen meaning that families who are above the poverty line will have less discretionary income[/quote]
Agreed.
Again, I spit on the environmentalists who pushed us away from fission power in the 1970s, and thus encouraged Islamofascism, energy dependence, and the whole “carbon thing” that they themselves seem to regard as a big deal.
November 2nd, 2007 at 11:32 am
I’m not quite sure what the link is between the price of oil and the price of heating is… unless you’ve got a oil heater. The price of kerosene and/ or fuel oil may (or may not) correlate with the price of “oil”, depending on the expense of refining facilities and the supply demand “thingie” (remember how they explained that gasoline prices were going up even though oil prices were going down?). But I would imagine that most homes are heated with natural gas (not correlated with oil) or electricity (correlated with the electric generator burning oil, gasoline, coal, tires, hippies etc).
The cost of “driving to work” likely has more to do with where work is, what kind of conditions exist on the drive to work, and what kind of car you have. I have a 13 mi round trip commute, which in my overengined car I have about 18-20 MPG. If gas was more expensive and my budget were tighter, there are a number of vehicles that would get me better milage. For example, if gasoline cost 5 pounds (about 10$) a gallon here like it does in london, I might buy one of them thar “SmartCars”. I might buy a hybrid if my commute has a lot of stop and go traffic. Or I might decide to continue paying for the luxury of a v5 210 hp turbo since even if the price of gas tripled I’d still be paying more for books…
I would also argue that the buying of the oversized homes that are more expensive to heat is also a consumer decision.
November 2nd, 2007 at 1:14 pm
Using a spreadsheet from the Dept of Energy, I’m seeing higher real prices for crude oil in 1981 than I am today.
Why did you pick 1981 – possibly because it was the last time when America had to deal with very high oil prices. Things are not so bad compared to last time things were really bad.
:-)
it does not point out at all how America stacks up to other countries today
No, you mis-understand me. I was trying to criticize the original point which you were making which is that when you consider an absurdly long time frame (e.g. 200 years) of course the standard of quality of life and the cost of essentials has improved.
On the other hand, if you compare today’s economy with a more recent period (e.g. 2-5 years ago) then I think it’s a more reasonable comparison.
I am unable to comprehend why you think that nominal prices are relevant, let alone interesting.
They are relevant because those are the prices YOU pay at the pump. Your dollar is worth less at an unfortunate time when the barrel of oil is worth more. Were it not for that unfortunate fact all of this would be purely academic.
Again, I spit on the environmentalists who pushed us away from fission power in the 1970s, and thus encouraged Islamofascism, energy dependence, and the whole “carbon thing” that they themselves seem to regard as a big deal.
Me too – I’d much rather live near a nuclear power station than a coal or oil fired-station. The world will soon wake up to the fact that abandoning atomic power was one of the biggest environmental blunders ever.
Dependence on foreign oil imports has weakened America both financially and politically.
I’m not quite sure what the link is between the price of oil and the price of heating is… unless you’ve got a oil heater. The price of kerosene and/ or fuel oil may (or may not) correlate with the price of “oil”
Miriam, so much of the economy is driven by oil. Gasoline and kerosene are both made from crude oil.
The cost of “driving to work” likely has more to do with where work is, what kind of conditions exist on the drive to work,
If gasoline prices are very high it may not be cost-effective for those who earn a low wage to drive long-distances to work. Distance, road-conditions and gas-prices all determine the cost of driving to work.
But I would imagine that most homes are heated with natural gas (not correlated with oil) or electricity (correlated with the electric generator burning oil, gasoline, coal, tires, hippies etc).
Natural gas is STRONGLY correlated with the price of crude oil, fuel-oil, gasoline and pretty-much every other fossil fuel.
Electricity is an entirely different matter as modeling electricity markets are best left to mathematical geniuses with IQs far above mine. Suffice it to say that since most American power-stations run on gas and oil then high crude-oil prices will also raise the cost of electricity.
:-)
November 2nd, 2007 at 1:15 pm
What “ever” really means is “since some Democrat, conveniently cherry-picked to give me the conclusion I want, was in office.”
November 2nd, 2007 at 2:59 pm
No, you mis-understand me. I was trying to criticize the original point which you were making which is that when you consider an absurdly long time frame (e.g. 200 years) of course the standard of quality of life and the cost of essentials has improved.
On the other hand, if you compare today’s economy with a more recent period (e.g. 2-5 years ago) then I think it’s a more reasonable comparison.
Doesn’t the fact that the original article uses the phrase “most expensive winter ever” open up the comparison to any time period at all?
November 2nd, 2007 at 3:01 pm
[quote]No, you mis-understand me. I was trying to criticize the original point which you were making which is that when you consider an absurdly long time frame (e.g. 200 years) of course the standard of quality of life and the cost of essentials has improved.
On the other hand, if you compare today’s economy with a more recent period (e.g. 2-5 years ago) then I think it’s a more reasonable comparison. [/quote]
Doesn’t the fact that the original article uses the phrase “most expensive winter ever” open up the comparison to any time period at all?
November 2nd, 2007 at 4:45 pm
“Suffice it to say that since most American power-stations run on gas and oil then high crude-oil prices will also raise the cost of electricity.”
Ok, coal (10 s google search, YMMV) produces 54% of our electricity. So that would not be “most”.
I fail to see how crude oil correlates in any way, shape or form with natural gas prices…
http://www.econbrowser.com/archives/2006/05/natural_gas_and.html
I am well aware that both kerosene and gasoline are made from crude oil. My point was that since additional refining steps are necessary, that price of these items depend not just on oil availbility, but also the availibity and cost of refining facilities.
“If gasoline prices are very high it may not be cost-effective for those who earn a low wage to drive long-distances to work. Distance, road-conditions and gas-prices all determine the cost of driving to work.”
Again, missing the variable of MPG of the vehicle used. Which I discussed in my example. Countries in which gas prices are far higher than they are here tend to have vehicles with better gas milage. And I’d add that in general, it is an economic choice to live far from work; whether it is a good choice or not depends on your economic circumstances.
NB: using someone’s name in a post will cause them to take it personally.
November 2nd, 2007 at 5:10 pm
My bad. Coal (according to http://www.eia.doe.gov/fuelelectric.html) produces only 49% of electric power.
Then 20 is natural gas.
Then 19% is nuclear.
Then 7% is hydroelectric.
Then… 2.4% is other renewables.
Then 1.6% is petroleum.
I’m still trying to figure how natural gas and petroleum prices are linked, since most of the imported natural gas is from… canada.
November 2nd, 2007 at 9:06 pm
One way that the prices of oil and natural gas are linked is that energy users shift between them based on prices. This isn’t instantaneous but if the price of oil is high then new furnace buyers tend to choose gas, and vice versa. Similarly for things such as small power plants and emergency generators.
November 3rd, 2007 at 1:51 pm
Yah, there was one econ site that mentioned that, but it (as you said) had a degree of inertia due to having to buy new equipment. One site said the correlation was decreasing, but seemed to imply that it couldn’t be “natural”.
I was trying to find a site that had accessible representation of homeowner heating sources, but I was a) drunk and b) drunk. The gov site above did have a breakdown of home energy use in terms of electricity vs natural gas vs oil vs wood (considerable chunk), but I didn’t have the patience to go through it (see above).
November 3rd, 2007 at 5:24 pm
Ok. This appears to be the bite-size chunk I was looking for, and even discusses how householders may rationalize the switch from oil to gas (I thought it would mostly be commercial users making the switch in response to changes in prices, but…shrug).
http://news.yahoo.com/s/ap/20071103/ap_on_bi_ge/oil_vs__gas;_ylt=Av2oiUHH.Spp_D0U6YADXTWs0NUE
“NEW YORK – With his furnace sputtering its final gasps, Charles Comito decided it was time to trade in his heating oil system for natural gas this year. The switch cost $4,400, a price he says will be worthwhile in the chilly months ahead.”
“Heating oil is currently used by 7 percent of American households, mainly in the Northeast, while about 58 percent use natural gas and 30 percent use electricity.”
I think the remainder really do use wood… or maybe there is an overlap. When my mom lived off the grid, we had an oil furnace (I think), a wood burning stove, and a few electric heaters we’d run depending how much power we had to bleed off from the hydroelectric generator (in winter, usually quite a bit since we’d have plenty of water in the ditches).
I’m pretty sure we didn’t have natural gas because that would have been a royal pain to store, and we sure as hell didn’t have a pipeline. I know we stored gasoline on site, so it isn’t much of a stretch that we stored heating oil too.
November 4th, 2007 at 12:47 pm
I fail to see how crude oil correlates in any way, shape or form with natural gas prices…
US has a great deal of redundancy in it’s power-generation. Power stations are seldom run at 100% capacity. At times when oil is expensive but gas is cheaper we might expect the gas stations to be run at higher capacity. Power generators will switch-over to gas until there is no longer a financial advantage in doing so. As a result you will see prices in oil very quickly affect prices for gas, and then electricity. Financial markets move fast and it’s all heavily inter-linked.
November 4th, 2007 at 5:56 pm
I’m still trying to figure how natural gas and petroleum prices are linked, since most of the imported natural gas is from… canada.
Canada trades oil & gas on an open market. If global oil or gas prices increase then naturally the Canadians will raise the price of their product to maximize their profitability for their optimum rate of production.
Much the same is true of US based oil-reserves (there’s not much of it left!) which are in private hands: If the price goes up then everybody sells the commodity at a higher price.
“Heating oil is currently used by 7 percent of American households, mainly in the Northeast, while about 58 percent use natural gas and 30 percent use electricity.”
Remember – most oil and gas is used not by homes but by industry and transportation. That’s one reason why on the whole it’s trends in industry that affects home users and not so much the other way round. There’s one big exception: The weather. When you get cold weather suddenly demand in an entire region goes up, and naturally so does the price.
Local fuel companies do not like to be seen to be price-gouging their customers, so rather than charge a premium during winter they average-out the cost over the whole year of being a customer.
Again, missing the variable of MPG of the vehicle used. Which I discussed in my example. Countries in which gas prices are far higher than they are here tend to have vehicles with better gas milage.
No, I’m not missing a variable – while you or I might be able to afford a newish Prius, the population as a whole turns-over cars to more economic models at a relativly slow rate.
Most cars last 5 to 15 years before they are scrapped. For any given population of motor-vehicles, the population can drive more for a fixed amount of money when gas is cheap. That’s a plain simple fact.
High gas prices hurt the population’s mobility because on average it’s the poorer people who cannot afford the latest eco-friendly cars and who also cannot necessarily afford accommodation close to where all the good jobs are. It affects rich people too – the price of flights might go up.
You might decide that because of the higher cost of flying a certain meeting is no longer cost-effective. The principle is the same for the guy who drives to work to clean offices.
Doesn’t the fact that the original article uses the phrase “most expensive winter ever” open up the comparison to any time period at all?
If I say “this is the most expensive winter I’ve ever experienced” then that might be correct. I’d have some sympathy for you if the original writer had written “this is going to be the most expensive winter in the whole of history, and the dawn of all time”.
I think your pedantry is serving to obscure a valid point, that this year the high-prices and weak dollar will bring real suffering to some.
Sal