The price of gas is a big question mark in the monthly budget of millions of Americans. Will it go up? Will it go down? If it spikes, will I be able to afford to get around and get to work?
The good news is that the outlook on gas prices is fairly stable over the rest of the year. The bad news is that long-term, we shouldn't expect any significant price drops.
You might notice that the price of gas plunged considerably in early 2009 and has spent the last three years slowly rising back to close to its previous highs. And that actually brings us to the most important factor in gas prices...
Crude oil is, of course, what gasoline is refined from. So the price of the most crucial part of the process pretty much dictates the price of gas. In fact, the huge highs followed by the crashing lows you see in that chart was caused not by outside economic factors, but by commodities speculators.
Crude oil, like many products, is bought on commodities markets; and like any market, it's prone to speculation. That's what happened in 2008, as a nasty spiral was triggered by commodities speculators.
At the start of the year, crude oil was sitting at $100 a barrel and gas prices were steadily rising. Speculators saw the chance for major profit as gas prices were rising, yet there was still strong demand. They began bidding up the cost of crude oil, and the gas price debacle of 2008 was on. People remember the days of $4 gas all too well.
The whole incident was a spiraling mess that was only derailed by a larger economic crisis. Suddenly, all the demand for gasoline dried up at once and one of the most basic laws of the universe kicked in: what goes up must come down. Oil companies tried desperately to reduce the supply to meet the lower demand as the cost of a barrel of crude dropped to under $40, from highs of $140.
The cost of crude oil has risen ever since as oil producers and refiners have narrowed in on a good amount of supply for the amount of demand available. The good news is that the government expects the price of oil to average $106 a barrel through 2012 and to drop slightly over the course of 2013 to an average of $98 a barrel, meaning that gas prices in your area should stay largely stable.
Which brings us to the next factor...
Supply and Demand
This actually has two scales we need to consider: the micro scale and the macro.
Oil refining and gasoline are a tricky industry in many ways. Oil has to be imported, refined into gasoline, and shipped to gas stations. All of that takes time, and during that time the value of the product can vary wildly. Similarly, the overall supply of crude oil is limited, and it's not just America that's thirsty for it: China needs oil so much that it will happily import from anybody, even Iran.
The micro scale comes into play in the competition between your local gas stations. Sure, there's a floor established by the cost of gas and other expenses, such as marketing and taxes, but they're still competing for customers. They're trying to raise their prices as high as possible while avoiding losing any business.
Fortunately, there's a limit to that competition, so don't expect it to drive up prices more than a couple of cents. Gasoline is a volume business, after all, and one penny per gallon adds up fast when you sell thousands of gallons of gasoline a day. But part of the cost is what goes into your gas, and that's where the states come in.
Gasoline varies from state to state. That's because of regulations. For example, California has some of the most expensive gas in the nation because its efforts to reduce air pollution have led to very specific regulations in how that gasoline is formulated.
Each state has different rules about these formulas and what can and cannot go into your gas. These laws, however, are unlikely to change much: state legislatures have more pressing issues to deal with than the chemistry of your gasoline.
Another government issue unlikely to change is...
We all know that state and local governments collect a tax on gas. It's factored directly into your price. Unfortunately, prices aren't really high enough and state budgets are squeezed enough that it's unlikely gas prices will be moved one way or the other based on tax changes.
Finally, there's the wild card in any oil market...
If you pay attention to the news, this is not a surprise. Oil tends to be located in places that aren't exactly politically stable. While plenty of oil comes from the United States and Canada, lots of it also comes from countries like Iran, Iraq, and Nigeria. And whenever some violence breaks out in one of these areas, it affects the price of oil.
For example, when Iraq was being investigated for having weapons of mass destruction back in 2002, it drove up the price of crude oil internationally.
It doesn't necessarily have to be any sort of accident in an oil producing country. The Japanese tsunami and earthquake of 2011 drove down oil prices as it reduced demand by a considerable degree. Even relatively mild events like Hurricane Irene can drive up oil prices, especially if they shut down oil refiners or cause other problems in the oil supply.
And this is the real problem with the oil market. We can't be sure that some sort of disaster won't happen. Geopolitical unrest and natural disasters are the big question mark in any financial market, but especially oil. It's so heavily dependent on supply and demand that the slightest tweak in the market can shake prices.
So, as far as we know, things will be mostly stable for the rest of 2012. But be ready for instability; just like life, really.
If you need car insurance, check out SafeAuto.com.
Most people love to purchase a new car, but many dislike having to do it at an auto dealership. Sitting around in a dreary showroom/cube farm and waiting for your sale to go through can sap all of the excitement out of the car-buying experience.
Thankfully, more and more dealers are learning that comfortable customers are happy customers. So dealerships are adding creature comforts and amenities that make people forget that they are there to drop tens of thousands of dollars for a vehicle. Here are eight of the most uniquely "tricked-out" dealers on the continent:
1. Fowler Honda - Norman, OK
Forget about a dull waiting area with stale coffee. Café Del Sol inside this Honda dealership not only offers good coffee, but also salads, sandwiches, steaks, burgers, and desserts. After all, it's always better to shop for a car on a full stomach.
2. Lexus Center of Escondido, CA
In keeping with the upscale image of Lexus, this California dealership features a "penthouse-level" restaurant with its own chef. You can enjoy beautiful views of the countryside while dining. But here's the question: if you buy a Lexus there, do you still have to tip the waiter?
3. Rick Case Honda - Davie, FL
That's right! You can get a trim from this dealer's in-house barbershop while you wait for your vehicle. But that's not all. In addition to an on-premises café, the dealer also houses an office for the Broward County Clerk of Courts which provides marriage license applications (among other things). Moral of the story: guys, don't take your girlfriends with you to this dealership.
4. Grimsby (Ontario) Chrysler-Dodge-Jeep - Canada
While the atmosphere at most dealerships is anything but relaxing, this Canadian dealer is home to the Crossfire Spa, where patrons can get manicures, pedicures, facials, and other spa services. It's perhaps the only place in North America where both you and your car can get waxed at the same time.
5. North Park Lexus - San Antonio, TX
Speaking of relaxing, this Lexus dealership in the Lone Star State features its own private massage room where customers can get a complimentary rubdown while waiting for their vehicle to be serviced. There's also a video game area complete with Xbox for patrons who find destroying zombies more therapeutic.
6. Island Lincoln Mercury Land Rover & Jaguar - Merritt Island, FL
Want perks? Just buy a vehicle from this Florida dealership, and you'll get access to an exclusive on-site "Island Club." Complimentary amenities include a health and fitness center, kids' play area, video gaming arcade, barbershop, Internet café, and food at the Tiki Grill Restaurant. You can also fill up your vehicle at an on-site gas station at wholesale prices. Yeah, these perks are about a million percent better than a free oil change.
7. Oliver C. Joseph Dodge-Chrysler - Belleville, IL
There's no planes, but this dealer does combine trains with automobiles. Several years ago, the dealer brought in a 1927 private railroad car complete with observation deck, vintage furniture, and kitchen. Tours are offered, and the car can be rented out for meetings, charity functions… and even training! (Get it? "Train"ing? Ha!)
8. Newport Lexus - Newport Beach, CA
Finally, there's a dealership that could easily be confused with a five-star hotel. The 300,000 square foot showroom features two picturesque fountains, a grand player-piano, shoe shine service, Tommy Bahama store, and putting green. But the best part for men comes when they answer nature's call; the restrooms are equipped with TVs and gleaming urinals. (Yes, guys are pretty easily amused.)
Didn’t get any of these great features with your new car? Take solace: we can get you an auto insurance rate that will bring just as big a smile to your face. Get started now with a price quote.
Tags: safauto, safe auto, auto dealership
When Americans buy a pre-owned vehicle, there are two major issues which they have to contend with. First, they have to decide whether the price being offered represents a wise investment of their purchasing dollars. And secondly, they have to determine whether the used vehicle is in as reliable of a condition as the dealer say it is.
Thankfully, used car buyers in California are now getting some help with that latter conundrum. At the start of July, a new law took effect in that state which aims to prevent consumers from purchasing used vehicles that have spotty histories.
About the New Law The measure is called Assembly Bill 1215, and it was signed into law by Governor Jerry Brown in September of 2011. The bill had three main provisions, all of which dealt with mandates for auto dealers. It’s the third one, though, that has the most impact for consumers.
What Kind of Reaction Is It Getting? AB 1215 passed the California legislature with widespread support -- not only from the major political parties, but also dealer trade groups, law enforcement agencies, and consumer advocacy organizations. It's being hailed as the first-of-its-kind law in the nation designed to help protect consumers from unknowingly buying a car that was previously damaged, junked, or totaled. Many of these "compromised" vehicles are bought by unscrupulous individuals and companies, and then sold to unsuspecting buyers in another state. Some officials believe that the bill will save the state between $4 billion and $11 billion in fraud-related costs.
But even though the law has already taken effect, there's a chance that it may be changed in the near future. That would happen if Senate Bill 990 is passed by California lawmakers. This measure would allow used car dealers to use any commercial automotive history database, not just NMVTIS, to check the backgrounds of their vehicles. The bill is currently stuck in committee in the state Senate.
SB 990 has not received the unanimous support that AB 1215 has. On one hand, many business organizations support the proposal, because it gives dealers a choice to either use NMVTIS or a privately-run database like Carfax. But some groups, like the Consumer Federation of California, feel that the measure would gut the protections provided by AB 1215, because other automotive databases may have lower standards of reporting information and are not regulated by the federal government.
Whatever happens with SB 990, it appears that California consumers will be better informed when they decide to buy a pre-owned vehicle. With AB 1215, customers' odds of accidentally buying a "lemon" at the used car lot should diminish substantially in the years to come.
Tags: safauto, safe auto, used cars, california
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