Fuel price fall good as pay rise

A few weeks ago when I filled my car it cost nearly $120. I filled it last week for less than $100 and the price of fuel has fallen since then, and is predicted to fall more.

. . . Brent crude oil, the oil imported to New Zealand for petrol, was down US91c to US$56.42 a barrel on Friday on the back of continued concerns about a global supply glut.

Earlier in the day it had fallen to a post-2009 low of US$55.48, only half its average price of about US$110 a barrel between 2011 and 2013. . .

That reduction is as good as a pay rise or tax cut.

The benefit isn’t just the direct one of needing to spend less on fuel. There’s also the indirect benefit from a reduction in the cost of transporting goods.

Fuel is a significant cost on most farms and in many other businesses which will welcome the savings.

The government will get less in GST from fuel, but at least some of that will be offset by people spending money they would have spent on fuel on other things.

What does this mean for the theory of peak oil?

The price is a function of supply and demand and the lower price reflects a higher supply.

2 Responses to Fuel price fall good as pay rise

  1. Bulaman says:

    US Mid West $2.15 per US gallon (not the lowest in the US by a long way!) ,
    Conversion 3.78541 litres is approx. US $0.57 per litre. Convert to NZD at $0.75 (buy rate) approx. $0.76 per litre.

    NZ pump prices $1.80+

    The rest??

    Tax more tax and the ET bloody S

  2. Bulaman says:

    Some more background

    Why is the price of crude oil so damn low?

    By Hallmark Abstract Service | January 6, 2015

    0 Comment

    The price of crude oil is currently one of the big news stories that both financial market AND geopolitical analysts are paying close attention to!

    Where is the bottom in the price of crude oil, when will it arrive, what message is the sharp and steep decline telling us and what if any impact will it have on the stability of some of the major countries who depend on high prices to make their societies tick without a risk of revolution (i.e. Russia and Saudi Arabia)?

    Of course nobody actually knows the answer to these questions and, in reality, the best anyone can do is make an educated guess based on a variety of anecdotal inputs.

    Top 5 factors impacting the price of oil!

    OilPrice.com, a resource that I regularly follow for clear and concise analysis of the goings on in this sector of the financial markets, provides these 5 factors that they feel will most directly impact the price of oil in 2015!

    1. China’s Economy. China is the second largest consumer of oil in the world and surpassed the United States as the largest importer of liquid fuels in late 2013. More importantly for oil prices is how much China’s consumption will increase in the coming years. According to the EIA, China is expected burn through 3 million more barrels per day in 2020 compared to 2012, accounting for about one-quarter of global demand growth over that timeframe. Although there is much uncertainty, China just wrapped up a disappointing fourth quarter, capping off its slowest annual growth in over a quarter century. It is not at all obvious that China will be able to halt its sliding growth rate, but the trajectory of China’s economy will significantly impact oil prices in 2015.

    2. American shale. By the end of 2014, the U.S. was producing more than 9 million barrels of oil per day, an 80 percent increase from 2007. That output went a long way to creating a glut of oil, which helped send oil prices to the dumps in 2014. Having collectively shot themselves in the foot, the big question is how affected U.S. drillers will be by sub-$60 WTI. Rig counts continue to fall, spending is being slashed, but output has so far been stable. Whether the industry can maintain output given today’s prices or production begins to fall will have an enormous impact on international supplies, and as a result, prices.

    3. Elasticity of Demand. The cure for low prices is low prices. That cliché can be applied to both the supply and demand side of the equation. Will oil selling at fire sale prices spur renewed demand? In some countries where oil is more regulated, low prices may not trickle down to the retail level. Countries like Indonesia are scrapping subsidies, which will be a boon to state coffers but will diminish the benefits to consumers. However, in the U.S., gasoline prices are now below $2.40 per gallon, more than 35 percent down from mid-2014. That has led to an uptick in gasoline consumption. In the waning days of 2014, the U.S. consumed gasoline at the highest daily rate since 2007. Low prices could spark higher demand, which in turn could send oil prices back up.Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist.

    4. OPEC’s Next Move. OPEC deserves a lot of credit (or blame) for the remarkable downturn in oil prices last year. While many pundits have declared OPEC irrelevant after their decision to leave output unchanged, the mere fact that oil prices crashed after the cartel’s November meeting demonstrates just how influential they are over price swings. For now OPEC – or, more accurately, Saudi Arabia – has stood firm in its insistence not to cut production quotas. Whether that remains true through 2015 is up in the air.

    5. Geopolitical flashpoints. In the not too distant past, a small supply disruption would send oil prices skyward. In early 2014, for example, violence in Libya blocked oil exports, contributing to a rise in oil prices. In Iraq, ISIS overran parts of the country and oil prices shot up on fears of supply outages. But since then, geopolitical flashpoints have had much less of an effect on the price of crude. During the last few weeks of 2014, violence flared up again in Libya. But after a brief increase in prices, the markets shrugged off the event. Nevertheless, history has demonstrated time and again that geopolitical crises are some of the most powerful short-term movers of oil prices.

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