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GM may have something big in store for its 100th anniversary in September

General Motors is treading in some dangerous waters these days. The company -- along with a number of other auto manufacturers with a truck-heavy product lineup -- is seeing a huge decline in sales as gas prices soar. GM’s stock price hit $9.92 last week -- a 54-year low. 

The company is in full crisis mode now and already announced plans to either idle or close some of its full-size truck production facilities. GM also halted plans for the next generation of its highly profitable full-size trucks and put its engineers to work on more fuel efficient car platforms.

GM is also considering slashing its sizeable brand portfolio. There are already talks in place to sell its Hummer brand, but other possible candidates include Pontiac, Saab, and Buick.

With all of the negative vibes surrounding GM these days, the company needs something to get public's mind off its problems. Thankfully for GM, it has the perfect cure-all in the form of the Chevrolet Volt.

According to sources familiar with the Volt program, GM is working overtime to ready a production version of the vehicle to celebrate its 100th anniversary on September 16. Although it’s highly possible that GM could pull off showing a production version of the Volt within the next few months, the vehicle still won't arrive at dealerships until 2010 at the earliest.

The production version of the Volt is expected to differ greatly visually from the concept vehicle that has been on display at numerous auto shows and technology expos. Significant changes have been made to improve the aerodynamics and make the vehicle meet all federal safety regulations.

The Chevy Volt houses a powerful lithium-ion battery pack and electric motors to propel the vehicle for 40 miles. A 1.0-liter turbocharged gasoline engine springs to life to recharge the battery pack once it reaches a predetermined level. Most, however, will likely plug their Volt into a standard household outlet to charge the battery pack overnight.

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This always amazes me...
By Bender 123 on 7/8/2008 9:35:23 AM , Rating: 5
Did the American car makers not see this coming? I laughed as my sister in law bought an H2 last year...she is not very bright, so I could understand that she would not understand world oil pricing...but the leadership of GM not figuring this out?




RE: This always amazes me...
By Brandon Hill (blog) on 7/8/2008 9:41:16 AM , Rating: 5
Granted, even Toyota "didn't see it coming".

Toyota built a brand new truck plant in Texas (IIRC) for its full-size Tundra. And it just recently introduced a full-size Sequoia based on the Tundra. And I believe they have more same-branded SUVs than anyone else:

RAV4
Highlander
Venza (coming soon)
4-Runner
FJ Cruiser
Sequoia
Land Cruiser

Toyota's trucks sales tanked last month as well.


RE: This always amazes me...
By jay401 on 7/8/08, Rating: 0
RE: This always amazes me...
By creathir on 7/8/2008 1:09:25 PM , Rating: 5
Wow... this is totally untrue.

The plant was not closed at all, production was just slowed. The plant is located in San Antonio, but it has not closed.

- Creathir


RE: This always amazes me...
By erikejw on 7/8/08, Rating: -1
RE: This always amazes me...
By masher2 (blog) on 7/8/2008 4:14:55 PM , Rating: 4
> "Toyota sells 90% small-medium sized cars"

Passing off fabricated statistics is difficult on this board. As of last year, 43% of Toyota's sales came from pickups and SUVs. And even of the remaining 57% from cars, well over 10% came from its full-sized Avalon and Lexus models:

http://www.gminsidenews.com/forums/f78/us-septembe...


RE: This always amazes me...
By erikejw on 7/8/2008 6:43:02 PM , Rating: 1
Well, for most of us the world is not USA.
Using figures that suit your purpose that you pulls from your arse won’t do anyone any good.
This board will not tolerate it anyway.

I guess you've never been outside the US. In Japan they barely use them at all and in Europe they are scarce.

Toyota sold 9.08 million cars fiscal year 2007.
http://www.toyota.co.jp/en/ir/library/annual/pdf/2...

A pickup is a light truck and not a car.
I don’t see families driving pickups but lots of small companies.

Wikipedia:In North America, the word pickup generally refers to a small or medium sized truck. This light commercial vehicle features:
and rear load area or compartment (separate cargo bed).

Avalon is not sold outside USA, 50k in USA.

Lexus sold 490k world wide and about 350k in the US.
Not all Lexuses are “large” cars.

SUV sells with an even larger ratio USA/World wide.
But use the same ratio as in the Lexus case, hell most of the SUVs doesn’t sell at all outside the US.

353k SUV makes 494k worldwide and another 3 months gives 659k.

(50+490+659)/9080 = 13.2%

Add the sales declines for SUV and large cars this year the figure might be 12% for 2008.

Add a percent or two for some other large cars that don't go into those categories and remove the small Lexuses and we have the same percantage.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 11:36:14 PM , Rating: 3
> "Using figures that suit your purpose that you pulls from your arse won’t do anyone any good."

My figures were exact data. Yours were fabricated from thin air.

> "a pickup is a light truck and not a car."

Yes, which means it can't possibly be a "small/medium car", now can it?

> "I guess you've never been outside the US. "

You're close -- I've been to a bit less than 50 countries, actually.

In any case, if you include world sales, your figures are just as far off. You forget GM owns such brands as Opel (many small cars), Saab (several small cars), and the small Matiz/Spark and Aveo models. In Asia, more than half of all GM cars sold are from its Daewoo acquisition; nearly all these are small cars.


RE: This always amazes me...
By erikejw on 7/9/2008 12:37:45 PM , Rating: 1
So you are arguing that 43% is closer to 10% than 12%. That is hilarious.

Of course I did not include the pickup sales in the world overall sales.

Your sales were US sales which is about as worthless it can be to compare small, medium and large cars sold in a company persepctive.

The world is larger than USA.

Why not mention that large cars in Japan is 4% of Toyotas sales.


RE: This always amazes me...
By griffynz on 7/8/2008 11:53:48 PM , Rating: 2
http://www.toyota.co.nz/AboutUs/Press+Releases/200...

Avalon is not sold outside USA, 50k in USA.

who are you? get your facts right or go home...


RE: This always amazes me...
By paydirt on 7/9/2008 9:58:45 AM , Rating: 2
In the early 1980s, oil prices spiked, every one bought Yugo's and Vega's, businesses became more energy efficient, and demand/usage crashed. Over the next 20 years, the price of oil fell 90% when you include inflation.

Then everyone traded in their fuel efficient cars for SUVs because it seemed gas/oil would "always" be low. Now oil has spiked again and everyone is trading in SUVs for fuel-efficient cars and oil will likely decline in price.


RE: This always amazes me...
By erikejw on 7/9/2008 12:33:06 PM , Rating: 2
I any major market that is. No EU or Japan.

Add those 50 Avalons that is sold in New Zealand then and be happy about it


RE: This always amazes me...
By creathir on 7/8/2008 10:16:01 AM , Rating: 5
I would say the "slump" is just a minor issue here.

GM and Ford's major issue at hand is the fact that they are slaves to the unions. While they had cash reserves, they should have closed down legacy plants, and oppened new ones in non-union states. Their costs would be much lower, meaning they could charge much less, meaning more cars would be sold, meaning their stock would be much higher.

- Creathir


RE: This always amazes me...
By FITCamaro on 7/8/2008 11:51:48 AM , Rating: 4
Definitely agree. Close the old plants where the unions are entrenched like a tick. Reopen in new areas offering pay competitive with the competition. Hell they could pay higher and still be spending far less.


RE: This always amazes me...
By rudy on 7/8/2008 5:27:41 PM , Rating: 2
yeah but they cant shake the legacy costs of all the employees on retirement which will not go away the major cost in their business. The reality is that the big 3 are in a rut they cannot get out of. For years they covered it up by making cheaper cars and cutting costs which resulted in lower customer satisfaction but they sold the junk because it was "American" Then they started shifting jobs to Canada and Mexico. And now they have lost all credibility. Americans are jaded because the big 3 are not really supporting them with jobs and were selling them junk and so they have decided to try foreign cars. The Unions are not willing to help. The only way I see out is to crash the company take all the talent and start new car companies. The japanese auto makers have mostly seen this mistake and have made moves to make sure that in the long run legacy employees will not drag the company to the ground. Make sure in your future if you have employees and retirement you write into their contracts that their retirement check is directly proportional to your companies performance. That should keep them buying your cars and keep them working on the job instead of the terrible inefficiency the unions have created in the US auto market. Also its really difficult for the big 3 to open plants and not see them become unionized. And the foreign car makers are for some reason not being effected by this, most likely because right now pay and profits are good.


RE: This always amazes me...
By theapparition on 7/8/2008 12:09:32 PM , Rating: 5
It's far more difficult than that. States have no jurisdiction over the Union's established contracts with GM/Ford, et al.
You can't just close a factory (BTW, states fight it since they don't want the unemployment burden on their economy) and open another one. That violates the contracts that were signed.

While I agree with you in intent, it's just not going to happen that way. Instead, the big 3 have taken the next step, to seriously undermine the power that unions have. Remember GM's last hold out when negotiating and forcing the union to pay pensions? Trust me, in twenty-thirty years, unions in the auto industry will be long gone. Change takes time.

While the intent of unions was noble when formed decades ago, thier time has long since passed.


RE: This always amazes me...
By theapparition on 7/8/2008 12:16:54 PM , Rating: 4
Just to give you an example, GM is prohibited from making a Firebird, Formula or TransAm model, since the right to build that car still resides with a Union.

If GM wants to make a Chevy Camero, no problem. But if they want to make a Pontiac Firebird......that vehicle must be made by union labor in St. Therese, Quebec. They can't make it in the US, Austrailia, or anywhere else for that matter.
(FYI, to everyone who doesn't know Chevy Camaro and Pontiac Firebird were basically the same models with different badges).

I don't know why such contracts exist (a concession for something more important I'm guessing), but contracts exist and can be enforced.


RE: This always amazes me...
By jamdunc on 7/8/2008 1:10:56 PM , Rating: 5
So let's give the Unions a choice, no Pontiac Firebirds being made so no job's and so the worker's becoming unemployed...

OR

..the Pontiac Firebird being employed at GM's demands.

I know if I was in business the decision for me wouldn't be hard. There's no point giving in to the Union's if it's only going to cause financial trouble for the company.

And I can guarantee the Union member's wouldn't then be happy with their leaders. Sometimes they just push too far!


RE: This always amazes me...
By MarcLeFou on 7/8/2008 3:16:15 PM , Rating: 3
They closed the plant in Ste-Thérèse about 3 years ago since it was tooled exclusively for Camaro's and firebird's and these were not selling well at the time according to GM. So unless GM finds a way to break its contract, you'll never see a Firebird again.

I also don't see the point in showcasing a tricked out Camaro that cost them millions and millions of dollars in Transformers only to still be unable to buy one two years after the fact. While I believe GM is on the right track, that's just downright bad management.

As for the Firebird, they could just rebadge the Camaro as a Saturn. That seems to be the brand they want to move forward with anyway.


By theapparition on 7/8/2008 5:35:23 PM , Rating: 2
You are correct,
If GM wanted to use the Firebird badge again (for the next x years), they must re-open the St. Therese plant. That is, unless some concession is given.

As for why you can't buy a Camaro right now, it's being finalized along with the rear drive Zeta platform in Austrailia. It will be released next year, and trust me, you still won't be able to get one. It's one of the hottest upcoming cars, and predicted a hit for GM. I'd call that pretty good management.


RE: This always amazes me...
By FITCamaro on 7/8/2008 4:54:32 PM , Rating: 2
Contracts expire. When they do, you close the plant and move elsewhere unless the union leaves. Simple as that.

The only thing stopping GM is that the UAW would destroy GM in the media.

And 20-30 years is too long. That's 20-30 more years that GM and Ford are paying a far higher cost of labor than other automakers.


RE: This always amazes me...
By theapparition on 7/8/2008 5:25:44 PM , Rating: 4
If it was that simple, it would have been done.

What happens when union "brothers" at all your other plants suddenly walk out in protest?

Guess what, no products at all.

The unions aren't stupid you know, they know how to play the game too.


RE: This always amazes me...
By jamdunc on 7/8/2008 9:09:57 PM , Rating: 2
But no products means no future income (only income from already built stock) and so the company could go into dire straits and lay off most of it's staff.

So because they were all standing side by side during the strikes, they can now all stand side by side at the dole/employment office.

Well done Unions :)


RE: This always amazes me...
By FastLaneTX on 7/9/2008 12:59:20 PM , Rating: 3
quote:
That's 20-30 more years that GM and Ford are paying a far higher cost of labor than other automakers.

That depends how you measure. Per hour, the highest-paid autoworkers in the US are non-union guys at Toyota and Mercedes plants (in RTW states). However, their productivity is so much higher than it more than makes up for the higher wages -- and they're making cars that sell for much, much more than GM/Ford crap.


RE: This always amazes me...
By wallijonn on 7/8/2008 1:07:22 PM , Rating: 1
quote:
GM and Ford's major issue at hand is the fact that they are slaves to the unions. While they had cash reserves, they should have closed down legacy plants, and oppened new ones in non-union states.


Oh, please don't pull out the "Union card" as the "major" issue when in fact the auto makers have have been using second and third world countries to make many of their parts, thereby making record profits for their investors.

The automakers have been making money hand over fist for years and instead of making more fuel efficient engines they decided to sell trucks. They had very poor fore sight. They lobbied to overturn EPA standards, future EPA gas mileage mandates, air quality standards, etc., all the while manufacturing heavier and heavier trucks and cars with more and more horse power.

The plain fact is that years ago there were cars which were getting 40mpg. It is those cars which need to be bought back, like the Suzuki Swift with it's air cooled 10,000 rpm 3 cylinder engine, the Honda 600, the clean air Honda Civic, etc.

Don't blame the Unions, blame the suits. They're the one's who tell the engineers what to build. They sold the people on what they should buy. If you can afford a $50,000 SUV you can afford the $5 a gallon gas. The same goes for your sedan that has 400 horses under the hood.

Some of us still remember the '70s, when you couldn't give away those 8mpg "boats," the Caddies, the Buick Electras, etc. Now you can't give away SUVs. Maybe you shouldn't have invested $3000 on those over-sized 22" wheels with the rotating covers. I doubt people will pay extra for a truck that looks great but gets 12mpg.

The chickens have come home to roost.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 1:30:01 PM , Rating: 5
> "when in fact the auto makers have have been using second and third world countries to make many of their parts, thereby making record profits for their investors"

Domestic automakers making record profits? What planet are you checking in from? GM LOST $38,000,000,000 in 2007 alone, and a few billion in 2005 as well.

n 2006, they made $2B on revenues of over $200B...a margin of under 1%, not exactly stellar. In fact, from 2000-2004, they ran dismal margins of 0.7% to a 1.5% margin. Go back to the 1990s, and you find them losing billions again. In fact, GM's largest loss ever on a percentage basis came in 1992...and it was due to their cost adjustments for retiring workers.


RE: This always amazes me...
By FITCamaro on 7/8/2008 4:58:18 PM , Rating: 3
quote:
The chickens have come home to roost.


Nice to see you here Reverend Wright.

And the "suits" tell the engineers to build what the people want to buy. The people wanted trucks and SUVs, so they built them. That's changing now and as such, they're focusing on small cars.

It's called a free market economy.


RE: This always amazes me...
By qdemn7 on 7/8/08, Rating: 0
RE: This always amazes me...
By masher2 (blog) on 7/8/2008 1:31:09 PM , Rating: 3
As others here have pointed out, GM made small, fuel-efficient cars all the way back to the 1980s. Problem is, no one bought them.


RE: This always amazes me...
By qdemn7 on 7/8/2008 1:44:47 PM , Rating: 2
Funny how all these Japanese companies making small fuel efficient cars, sold THEIRS just fine, eh?

Once again, it's blame the Unions, blame the Consumer, blame the Oil Companies, blame the Arabs, blame EVERYONE, but the people actually running GM (into the ground).

That is nothing but typical American corporate BS-speak excuses. When an American company does great, it ALWAYS only due to the brilliance of Management. When an American company does terrible, it's the fault of everyone BUT management.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 1:58:31 PM , Rating: 5
> "Funny how all these Japanese companies making small fuel efficient cars, sold THEIRS just fine, eh"

Because those cars were cheaper and put together better...both of which are certainly at least partially the fault of the union structure at Ford and GM.

Certainly management bears a lot of the blame as well. But denying the unions are an albatross around the neck of domestic automakers is denying reality.


RE: This always amazes me...
By blaster5k on 7/8/2008 3:16:56 PM , Rating: 2
+1

The union dealings added some huge overhead costs to every vehicle made. They had to build their cars -- especially the smaller ones -- on the cheap as a result. In most cases, they couldn't turn a profit still. This is also plays a role in why they went after the truck and SUV markets. Those were the only vehicles they could make decent margins on with the extra baggage.


RE: This always amazes me...
By kmmatney on 7/9/2008 12:06:00 AM , Rating: 2
Agreed. I'm not sure if I can by American for my next car, knowing that a huge percentage is to pay off ridiculous retirement funds to the unions.

What really got me was when one plant wanted to reduce their overhead - by paying people $140K to retire early or leave the company. $140K! Then some of the workers regretted it, since they had a hard time finding a job in the outside world - the same world the rest of us work in!
I read about that in our local paper - can't find a link, though.


By mmcdonalataocdotgov on 7/8/2008 2:55:57 PM , Rating: 2
Like what, the Vega? No one bought them cause they were cr*p. If people wanted fuel efficient cars back then, they bought Japanese, just like they are doing now.


RE: This always amazes me...
By Hiawa23 on 7/8/2008 2:13:32 PM , Rating: 1
Wow, the Volt isn't coming anytime soon, so I really don't see merely talking about it changing anyone's bottomline. Did the American companies not see this coming? Someone said Toyota did not see it coming either, but I bet Toyota is nowhere near in trouble as GM


RE: This always amazes me...
By Pneumothorax on 7/8/2008 11:10:08 AM , Rating: 3
The major difference between Toyota and Ford/GM/Chrysler is that while they have a lot of truck models, they also have a strong car lineup. Can't say that about most of Ford/GM's lineup.


RE: This always amazes me...
By deeznuts on 7/8/2008 1:46:46 PM , Rating: 2
quote:
Granted, even Toyota "didn't see it coming".


Toyota depends on their SUV sales a lot less than the other manufacturers in question. They saw it coming, shit the prius is so ubiquitous it's almost synonymous with hybrid.

Offering different alternatives doesn't mean they didn't see it coming. I mean, no matter how much sales do slump, some people just flat out need trucks. Was toyota 100% on target? I don't freaking know, I'm not a automobile analyst. But they're in the best position for what was an annoying "green movement" but now a very pragmatic efficiency movement.


RE: This always amazes me...
By Noya on 7/9/2008 5:54:15 AM , Rating: 3
quote:
some people just flat out need trucks


Just looking around my neck of the woods (NW), the only non-business use for full size trucks are people with boats/trailers/etc. Not the hicks that commute in them just because they're rednecks and think trucks are cool (and go "muddin" in them once a month)...and OMG are there tons of them in the NW.


RE: This always amazes me...
By erikejw on 7/8/2008 3:53:13 PM , Rating: 2
LOL.
Toyota sells 90% small-medium sized cars but of course they still have some large ones.

GM is 75% large cars with a huge fuel consumtion.

According to the United States Environmental Protection Agency, the 2008 Toyota Prius is the most fuel efficient car sold in the U.S.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 4:16:06 PM , Rating: 1
Did you need to post this twice? See above: your facts are incorrect.


RE: This always amazes me...
By iviythos on 7/8/2008 9:36:40 PM , Rating: 3
Unfortunately, your facts are skewed
Is it your life's joy to make an ass of yourself on these boards and lessen the enjoyment of readers of the conversation here? Nobody likes a selrighteous p***, especially one who thinks he knows so much more than others that it is his duty to ferret out every possible misstatement. State your opinion/facts and have done with it, for the love of all that is holy.


RE: This always amazes me...
By masher2 (blog) on 7/8/08, Rating: 0
RE: This always amazes me...
By jamdunc on 7/8/2008 9:15:54 PM , Rating: 2
Well I don't know about the EPA, but every motoring magazine in the UK has categorically stated that the Prius is not that fuel efficient. If you want fuel effiency, you buy a small diesel engined car. Something like a VW Polo Bluemotion or Seat Ibiza Ecomotive.

You can even watch Top Gear. I think it was series 11, episode 1 where they had a BMW M3 getting a better fuel consumption than a Prius.

Youtube link - http://uk.youtube.com/watch?v=PP6fe6i1vaY


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 11:42:48 PM , Rating: 2
In highway cruising, sure. A hybrid shines at stop-and-go city traffic however. Whereas most vehicles get substantially less mileage in city traffic, a hybrid usually bests its highway MPG.


RE: This always amazes me...
By mdogs444 on 7/8/2008 9:43:00 AM , Rating: 2
Most people buying a $60k H2, or any $60k car for that matter, are not typically worried about the difference of $3 and $4 gasoline.

quote:
she is not very bright, so I could understand that she would not understand world oil pricing

Well neither is the democratically controlled congress, as well as Nancy Pelosi (didnt she say that she'd take care of gas prices when she took speaker of the house?). Their solution is to windfall tax the oil companies, which will only drive up retail consumer gas prices. Then force wind & solar power on the public, when both are junk sources and not reliable for at least another 20 years.

quote:
but the leadership of GM not figuring this out

Sure they are, the hard way. GM has no control over oil or gasoline prices, and in fact, they'd much rather see gasoline go back down to $1/gallon. I dont see how people honestly think the oil companies and gas companies are in this together. Seeing as how GM, Ford, Chrysler, etc were all making fantastic profits off of SUV sales, and minimal profits off small car sales, they didnt want things to change.


RE: This always amazes me...
By retrospooty on 7/8/08, Rating: 0
RE: This always amazes me...
By mdogs444 on 7/8/2008 10:04:36 AM , Rating: 3
False - the dollar is weak because of the slowing economy (housing & credit markets), and the Clinton-passed Enron loophole to fuel speculation. Has nothing to do with the national debt, and balancing budgets.

Oil prices are fueled by speculation concerning the value of the dollar, supply/demand, wars, economic matters, etc.

But that's a way to be a good little liberal and ignore the real reasons for sake of a Bush bashing.


RE: This always amazes me...
By retrospooty on 7/8/2008 10:13:29 AM , Rating: 1
Well, your half right... The dollar is weak because of the slowing economy and the debt, its all related, and its NOT Clinton from 8 freegin years ago. Get out of denial and admit your boy has screwed up royally.


RE: This always amazes me...
By Doormat on 7/8/2008 11:40:03 AM , Rating: 1
"and the Clinton-passed Enron loophole "

Thats, "and the Sen. Phil Gramm (R-TX) sponsored, Clinton-passed Enron loophole..."

They're both responsible. But don't let facts get in the way of partisan bashing.


RE: This always amazes me...
By BansheeX on 7/8/2008 11:58:47 AM , Rating: 5
quote:
the dollar is weak because of the slowing economy (housing & credit markets), and the Clinton-passed Enron loophole to fuel speculation. Has nothing to do with the national debt, and balancing budgets.


Dollar strength is at odds with this, not alongside it. That's why the Fed is in a box right now. They have two options. They can act like Volcker and prop up the dollar by raising interest rates, which would purge the economy of years of excesses in these markets (this is called a recession, which would hurt, but is necessary). Or the Fed can keep interest rates low and hyperinflate to continue propping up the artificial environment it created at the expense of the dollar, causing prices of everything relative to dollars such as commodities to keep skyrocketing. So far they are taking option #2. No references to CPI please unless you want me to laugh.


RE: This always amazes me...
By Ringold on 7/8/2008 4:56:43 PM , Rating: 2
quote:
No references to CPI please unless you want me to laugh.


Hostility to the fact that core inflation hasn't gone out of control won't get you anywhere. No one denies that if you mix in food and energy, the numbers become ugly. Add in the underlying complaint with the CPI, that it corrects for people shifting the basket of goods (for example, if the citrus crop fails and prices are high, they buy more apples, thus dulling the impact), and then sure it becomes even more ugly -- but not necessarily more accurate.

I've come around to a gold standard possibly not being a bad idea, but implying that the current situation is hyperinflationary is silly, as the data doesn't seem to prove it.


RE: This always amazes me...
By Reclaimer77 on 7/8/2008 10:08:54 AM , Rating: 1
quote:
You do realize that Oil is expensive because the dollar is so weak,


WRONG !

Its expensive because the supply is barely meeting demand.


RE: This always amazes me...
By retrospooty on 7/8/08, Rating: 0
RE: This always amazes me...
By Reclaimer77 on 7/8/2008 10:19:20 AM , Rating: 4
Thats assanine and I can't believe anybody would buy into that.

We need more supply with a strong boost in DOMESTIC drilling and refining. A stronger dollar is not going to fix this problem.

Our dollar was plenty strong before the first quarter of '08 brought us this so called " economic crisis " and gas prices were already significantly higher then previous years. How do you explain that ?

If our supply is so good, how come 1/3 of our country faced gas shortages just three days after Katrina knocked just ONE oil refinery and pipeline off line ?

This is a supply and demand issue. Purely.


RE: This always amazes me...
By retrospooty on 7/8/2008 10:23:55 AM , Rating: 2
uh... that was not an oil supply issue it was a refined gas issue.

Increasing supply will not resolve anything, unless the US drilled oil can be purchased at a much lower price... Lets see the Oil companies go for that one.


RE: This always amazes me...
By Reclaimer77 on 7/8/2008 10:32:23 AM , Rating: 2
quote:
uh... that was not an oil supply issue it was a refined gas issue.


Until oil drilling AND refining is dramatically increased, we will NOT see lower prices at the pump.

Do you not understand that was a symptom of a supply and demand problem ?

quote:
Lets see the Oil companies go for that one.


You mean the ones trying to lobby for more domestic drilling ? Yeah, I think they are " going for it ". But they can't get anywhere because the Democrats insist on treating them like evil corrupt gouging energy barons.

Where did you learn economics anyway ? CNN or a Cracker Jack box ?


RE: This always amazes me...
By rudolphna on 7/8/2008 12:48:06 PM , Rating: 1
Its not even just that. After Katrina, and the oil companies saw that they could get away with raising oil prices to that incredible high... They said, "Hey! I have a great Idea! lets raise it higher and higher (all while making record profits) While saying its because there is not enough supply) We were fine before Katrina, did demand really skyrocket that much since then? Uh.. No. Unless the population jumped by a couple million people with big SUVs. While there may be a supply issue, with a weak dollar... The fault rests primarily on oil companies who are making RECORD profits.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 12:56:22 PM , Rating: 5
> "They said, "Hey! I have a great Idea! lets raise it higher and higher "

How many times do we have to tell people that oil companies don't set oil prices?

> "We were fine before Katrina, did demand really skyrocket that much since then? "

Yes. Petroleum consumption demand data is all public information. Why not look at it sometime? US demand didn't change much since 2005, but consumption from places like China and India has skyrocketed.


RE: This always amazes me...
By Reclaimer77 on 7/8/2008 2:14:49 PM , Rating: 2
quote:
The fault rests primarily on oil companies who are making RECORD profits.


They are always GOING to be making record profits because more and more people NEED what they are selling.

The AP reported world wide energy demand is GOING ( fact ) to increase %50 over the next 20 years. How can you conserve your way out of that ? And how could you possibly blame the ones making " record profits " ??

Oil and energy mean prosperity. Not just for the suppliers of it. But for NATIONS.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 10:31:57 AM , Rating: 4
> "There is plenty of supply right now - Even the Saudi's say that..."

The Saudis...you mean the people making trillions from high oil prices?

Increased supply reduces prices. There's nothing simpler than that.


RE: This always amazes me...
By eetnoyer on 7/8/2008 10:54:25 AM , Rating: 2
As simple....

Increased prices reduce demand. Considering the doubling of oil prices over the last year, the total demand hasn't really changed all that much. In reality, the oil demand is very much inelastic.

The last few years have seen the supply chain figure this out and start experimenting with how far they can stretch prices before a breaking point is reached. Once the push past the breaking point, the world economy will collapse and prices will go down. Of course we'll be in a world-wide depression by then and won't even be able to afford cheap oil.

I don't really think we'll ever get to that point. I believe that we're on the verge of going in another direction.

One thing that I think looks promising is using aluminum alloys to generate hydrogen from water on-demand for vehicular use. The alloy packs can then be sent for centralized recycling co-located with power generation facilities (I vote to rapidly expand nuclear capacity).

The infrastructure build cost (for any new direction) would be high, but the current state of affairs is going to prove untennable.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 11:06:16 AM , Rating: 4
> "In reality, the oil demand is very much inelastic."

That's just the point. While this means a small increase in demand dramatically escalates prices, it also means the reverse -- a small increase in supply can as dramatically reduce them.

> "I vote to rapidly expand nuclear capacity"

Hear hear! Unfortunately, it won't happen. We'll continue to build electric cars without expanding our electric capacity, right up to the point that we're experiencing brownouts and blackouts on a regular basis.


RE: This always amazes me...
By retrospooty on 7/8/2008 11:44:19 AM , Rating: 4
I am with you both on Nuclear... We should expand it massively to help us get by until new tech is decided upon and generating economically viable power.


RE: This always amazes me...
By BansheeX on 7/8/2008 11:48:05 AM , Rating: 2
I disagree with the idea that speculators are the driving force of prices, since it would take physical accumulation with the intent for later resale for that to sustainably occur. But I agree that the price is not infinite and we will see price pullbacks as a result of high prices reducing demand. The reason you people have been caught so completely off guard here is a result of the lag effect of years of inflationary policy that started in the 90s, and a total misunderstanding of relative wealth. As the dollar declines, that by definition causes foreign currencies and demand to rise against it. It's a giant bidding contest for a finite resource, always has been. That's what sets the price, and we in America are starting to get outbid by foreigners as a result of our insane inflation and taxation. That's what's stretching the price, we're seeing foreign buying power in China where there was none before. There's no good excuse for this, it's akin to having an 17-0 lead in a baseball game and completely blowing it.


RE: This always amazes me...
By MarcLeFou on 7/8/2008 3:35:02 PM , Rating: 1
Actually, speculation is actually mostly contrated on contract for future deliveries according to an article I read on the local paper (I even recall they were saying the delivery dates were decades off). So long term contracts are what are driving the prices up currently.

That's also what the US congress (or senate can't remember which) is currently trying to litigate so that speculation can stop. Speculation is also said to be one of the major causes of food price hikes (corn, wheat, etc.) because union retirement funds are currently massively investing in the base goods of the economy.

Also, another important cause of the price of gas at the pump are taxes (duh!) and (for the northeast anyway) the fact that there has not been enough refining capacity to have actual competition. In the last 8 years, the average refining margin per liter of gas has actually gone up 400% (from 4 cents a liter to 12 cents a liter) because of the lack of capacity for refining. Katrina also shut down most of southern refineries 2 years ago for over half a year which only contributed to the problem.

Lastly, for the person saying the US dollar has only started plummeting in Q1 2008, have you actually looked at the US dollar compared to the Euro and CDN dollar in the last two years ? The canadian dollar reached parity with the US in Q3 07. That had not happened since the 70's. Just a few years prior, it was 65 cents CDN to a US dollar. And the canadian dollar didn't gain on the euro at all while it was eating alive the US dollar.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 3:49:20 PM , Rating: 4
> "Speculation is also said to be one of the major causes of food price hikes "

It's only said by those who don't understand the commodities market. Speculation cannot exert anything but a very short-term effect on prices. Speculators make money by estimating what price will match supply to demand -- if they guess right, they make money. Guess wrong, and they lose their shirts. In either case, though, they do us consumers a service.

As for government legislation to "stop the speculation", I don't think I've heard a sillier idea yet. Commodities traders fulfull a vital market function. They insure producers against price swings, add liquidity to the market, and help cushion consumers by telegraphing demand and supply changes well in advance, so the market can better react to them.

In the days before commodity markets, the slightest bad news could result in prices quadrupling overnight, wiping out scores of businesses and opening the market to extreme manipulation.

The strength of the US (and before that, the British) economy is largely based on its stable, efficient market system. That relies on commodities traders, and their resultant speculatoin.


RE: This always amazes me...
By MarcLeFou on 7/8/2008 4:12:15 PM , Rating: 2
Define short term ? Weeks, months or years ? The rising food prices have only really started about 2 years ago with corn.

While the argument for increased demand for the rise would be the sensible one, I was actually reading an article yesteday that in the last 7 years, demand in China for cereals has actually gone down 17% with meats and fruits getting the biggest increase.

While you could say meats actually use lots of cereals, it is most often byproducts used and not likely to affect the demande by such a wide margin.

The only other argument I've heard that would be left would than be the ethanol subsidy program by the US which then had a ripple effect on other cereals as farmers switched from wheat and other cereals to corn. While I agree that the ethanol subsidy for corn is most likely one of the stupidest ideas ever I really doubt its responsible for the 50%+ raise we've seen in the cereral pricing over the last year (nearly a 100% in two years for wheat).

I have also not heard of any major disaster which would have destroyed huge amount of crops and affected offer in a significant way except for the normal annual events in different regions of the world.

So, what's left I wonder ?


RE: This always amazes me...
By Ringold on 7/8/2008 5:05:00 PM , Rating: 2
quote:
ever I really doubt its responsible for the 50%+ raise we've seen in the cereral pricing over the last year (nearly a 100% in two years for wheat).


How can a third of the US corn crop being diverted to create fuel not have a large impact?

As for failed crops, if I'm not mistaken Australia has had a drought.


RE: This always amazes me...
By Jaybus on 7/8/2008 4:59:08 PM , Rating: 2
Yes. Speculators winning or losing is not to blame. But let the losers lose. Wasting hundreds of billions bailing out the losers is counterproductive. Its akin to giving your dog a treat whenever it bites someone. And where, exactly, does the money for the bailouts come from? Increased taxes and/or printing up some more dollars. Of course, they don't have to actually print them any longer.


RE: This always amazes me...
By MarcLeFou on 7/9/2008 11:34:12 AM , Rating: 2
According the the USDA in 2005, in 2004/2005 the % of corn in the US used for Ethanol was 12% and it was expected to be around 23% in 2014/2015. That's an increase in 11% - or diminution on 11% of available corn. If we take the worst case scenario and take into account that that increase of 11% that was forecast in 7-8 years has already happened today and apply that percentage of production to US overall metric ton production and compare it to worldwide metric ton production, that's an offer difference of 5,4% on the worldwide market. And that's ignoring the fact that a raise in corn prices would stimulate farmers to switch from other cereals to corn which would increase overall offer and lower that percentage even further (which has been happening).

Now I don't know the elasticity of corn, but I would HIGHLY doubt that a 5% change in the worldwide offer would cause the price of corn to skyrocket to 50%+ increase levels especially if demand in the biggest worldwide consumer base has gone down 17% in the last 7 years.

My original question then was, what factor would be at play here ?


RE: This always amazes me...
By Pneumothorax on 7/8/2008 11:14:58 AM , Rating: 3
It makes me want to slap the lawmakers around who keep saying "It won't affect short term pricing" or "It won't make a difference in 10 years" That's the same crap we heard 10 years ago. If they actually start showing the world's markets we will be agressive expanding oil production it will start to lower prices much faster than congress just sitting on their "behinds" Which all they're pretty much good for.


RE: This always amazes me...
By FITCamaro on 7/8/2008 11:54:55 AM , Rating: 2
Exactly. Prices were still reasonable 6 months ago. In January, oil was between $70-80 a barrel. There has been no major world event in the past 6 months, nor has the value of the dollar fallen THAT far in that 6 months.


RE: This always amazes me...
By wallijonn on 7/8/2008 1:19:52 PM , Rating: 1
quote:
If our supply is so good, how come 1/3 of our country faced gas shortages just three days after Katrina knocked just ONE oil refinery and pipeline off line ?


Because the supply is tightly controlled to maximize profit. If too much product is produced then prices go down. Therefore keep the supply taut, just a little under actual needs and the profit margin is stabilized to where it will last longer. Unfortunately any disruption will send ripples down the supply chain.

How much oil was actually being produced by those off shore wells? Very little, I hear. But the speculators pounced on the bad news, which caused many to hoard, which shot up the price. It's all orchestrated, much in the same way that factories keep as little inventory as possible, thereby maximizing profits vs. inventory space occupied. Inventory now has to change direction on a whim. It's called "efficiency."


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 2:03:28 PM , Rating: 2
> "How much oil was actually being produced by those off shore wells? Very little, I hear. But the speculators pounced on the bad news"

You're totally off base here. First of all, the Katrina price runup had nothing whatsoever to do with oil shortages. It was due to a loss of refining capacity for gasoline. We temporarily lost some 23% of the nation's refining capacity. That's the largest historical drop ever...and some areas in the Southeast were in danger of losing 100%.

The part you people always miss is *why* prices react the way they do. The whole point is to equalize supply and demand. If prices didn't rise after Katrina, people would have kept buying until the pumps ran dry. Prices escalated, to force down demand until supply could catch up.

The only other option is government price controls, which we tried in the 1970s. Do any of you REALLY want to return to government rationing, and only being able to buy gas on certain days of the week?


RE: This always amazes me...
By Reclaimer77 on 7/8/2008 2:11:22 PM , Rating: 3
quote:
Because the supply is tightly controlled to maximize profit. If too much product is produced then prices go down. Therefore keep the supply taut, just a little under actual needs and the profit margin is stabilized to where it will last longer. Unfortunately any disruption will send ripples down the supply chain.


So wrong.

They could not increase supply if their life depended on it. We have a handful of refineries running at max capacity nation wide when we should have DOZENS more. And where are we going to get more oil ? *cough* Drill *cough*.

Your scenario only works if use is kept at a constant. Which we know its not. If the price was less, people would buy more, thus keeping profit margin goal. Not to mention cars like the Volt and hybrids, which very well could hurt the oil business long term, wouldn't be nearly as in demand. Not NEARLY.

quote:
I hear. But the speculators pounced on the bad news


Oh here we go. I bet you didn't know what a speculator even was last month. Suddenly you turn on the news and your an armchair economist expert like all the other liberals ?


RE: This always amazes me...
By 67STANG on 7/8/2008 11:48:30 AM , Rating: 2
I agree for the most part. Oil's massive price increase is due to a lot of reasons:

1) Oil is bought world-wide with the U.S. Dollar. When the dollar loses x% of value, it buys x% less oil... To add insult to injury, people who see a flailing economy put money in safe bets, (ie-Gold, Bonds)-- unfortunately, you can add oil to that list of safe bets now-- which of course drives the price up even more.

2) Oil demand increases every year, especially due to China and India as of late. Oil exploration / production has not kept up with increases. There's plenty of oil in the ground (to last until ~2050), the problem is no one is pumping more of it.

I am hesitant to believe anything an OPEC member says about supply/demand/value of oil-- it is in their best interest to keep the price high, after all, they are making money hand over fist right now.

Saudi Arabia, supposedly our "friend" (I hear they have great pilots there...) acts generous enough by "boosting" oil production, but this is more to increase oil revenues-- rather than to help anyone else out.


RE: This always amazes me...
By JustTom on 7/8/2008 12:08:50 PM , Rating: 2
You do realize the Saudis have a vested interest in high oil prices?


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 10:10:11 AM , Rating: 3
> "You do realize that Oil is expensive because the dollar is so weak"

You've been listening to too much oil sheik propaganda. The dollar has declined only some 30% against the Euro...yet oil prices have rise from $50/bbl to almost 3 times that.

Oops...so much for that theory.


RE: This always amazes me...
By retrospooty on 7/8/2008 10:21:19 AM , Rating: 1
nice.... leave it to Masher to post a statistic and twist the facts... You are a master at that. You should really go to DC and get some gainful employment as a lobbyist - if that not already what you do.

Its not a 1 to 1 relationship mr econimics majotr... a 30% drop vs the euro does not equal a 30% increase in oil price. Oil has gone up somewhat , but far FAR worse for the US because of our weak dollar.


RE: This always amazes me...
By masher2 (blog) on 7/8/2008 10:37:15 AM , Rating: 3
> "Its not a 1 to 1 relationship mr econimics majotr"

I'm sorry, but it is. When one currency drops against another, the change in commodity prices between the two nations is indeed a linear relationship.

It's (slightly) more complex because world oil producers work in many different currencies, which mean we really need to track the dollars decline against a global currency basket, rather than the Euro itself. But that change is very close to the dollars fall against the Euro...and far, far, far smaller than the meteoric rise of petroleum prices.

This really isn't open to dispute. The dollar's slide is but a very small factor in oil's runup...which explains why every other nation on the planet is also paying stratospheric prices as well.


RE: This always amazes me...
By Reclaimer77 on 7/8/2008 10:41:47 AM , Rating: 3
Yeah isn't gas in the UK and most of Europe up to like 10 bucks a gallon now or something ?

How is that because of a " weak " US dollar ?


RE: This always amazes me...
By mdogs444 on 7/8/08, Rating: 0
RE: This always amazes me...
By retrospooty on 7/8/08, Rating: 0
RE: This always amazes me...
By mdogs444 on 7/8/2008 11:34:03 AM , Rating: 3
Oil has gone down the past 2 days, not week.

And everyone is suggesting that it will increase - not because of the weak dollar long term, but because of lack of democrat controlled congressional action in terms of drilling & refining, which is a direct problem because of the high demand and limited supply (or supply games, more correctly).

However, even oil tycoons are suggesting that it will drop back to $100 after some time. http://www.cnbc.com/id/25564736

You are quite blind to blame that the weak dollar is the factor in expensive oil. Not sure why you cannot get across your skull that the OPEC games with supply & demand increase the prices, thus forcing the dollar to weaken. When oil, transportation, food, everything costs more, but wages are stangant, the dollar has weakened. And that can be a direct result of an increase in demand for a product, without an increase in supply.