Record Gasoline Prices Still Rising with California Over $6 per Gallon and No Relief In Sight

We are seeing record gasoline prices with Californians paying over $6 a gallon on average for regular gasoline. The San Jose Mercury News said there is "no relief in sight" either while others say prices could reach $10 this year!

Link to Full Story

Some stations in Southern California are charging over $7 per gallon!

Link to Twitter Post

Some think gasoline prices could double again!

“Some gas stations across the country are already bracing for the Next Big Thing involving surging fuel prices, namely the price per gallon potentially exceeding $10."  Senator Melissa Melendez, May 18, 2022

Link

Despite President Biden's best efforts to lower energy prices, crude oil prices remain very high.

Energy Secretary Jennifer Granholm stated during the hearing that the Biden administration was doing everything possible to increase oil production and supply in the United States. Senator Sullivan quotes the actions of the Biden administration in the last three weeks which are exactly the opposite of the energy secretary claims. WATCH:

Questions:

1. Have gasoline prices peaked? 
2. Have high gasoline prices caused to to change behavior? 
3. What would you do to get more supply? 
4. Can President Biden do anything more to lower energy prices NOW?
5. Will high energy prices change how you vote in the next election?

Discuss those questions on my "Investing for the Long Term" Facebook group.

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Gasoline Price Breakdown

The price of gasoline is up considerably in California in the past decade. The state and federal excise taxes have remained the same at 18¢ per gallon. The sales tax in California is higher on a percentage basis since sales taxes went up from about 8.5% in my county to 9.25%. Even if the rate stayed flat, the total collected per gallon is higher since the price taxed is higher.

The biggest change is the cost of crude oil went up 242% from $0.59 to $2.02 per gallon.

January 2010 Gasoline Price Breakdown

Branded
	Jan 4, 2010
Distribution Costs, Marketing Costs and Profits	$0.14
Crude Oil Cost	$2.02
Refinery Cost and Profits	$0.20
State Underground Storage Tank Fee	$0.01
State and Local Sales Tax	$0.25
State Excise Tax	$0.18
Federal Excise Tax	$0.18
Retail prices	$2.99
Unbranded
	Jan 4, 2010
Distribution Costs, Marketing Costs and Profits	$0.07
Crude Oil Cost	$2.02
Refinery Cost and Profits	$0.27
State Underground Storage Tank Fee	$0.01
State and Local Sales Tax	$0.25
State Excise Tax	$0.18
Federal Excise Tax	$0.18
Retail prices	$2.99

BRANDED 12/27/99

• Dealers Cost and Profit Margin (1) $0.10
• Crude Oil Cost $0.59
• Refinery Cost and Profit Margin (2) $0.21
• State and Local Sales Tax $0.10
• State Excise Tax $0.18
• Federal Excise Tax $0.18
• Retail Price $1.36

UNBRANDED 12/27/99

• Dealers Cost and Profit Margin (1) $0.11
• Crude Oil Cost $0.59
• Refinery Cost and Profit Margin (2) $0.20
• State and Local Sales Tax $0.10
• State Excise Tax $0.18
• Federal Excise Tax $0.18
• Retail Price $1.36

Data from Estimated 2010 Gasoline Price Breakdown & Margins Details

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Inflation Adjusted Gasoline Prices at Record Levels; China Raises Energy Prices

Gasoline prices have nearly doubled in less than a year. That is only half the story. This chart, courtesy of StockCharts.com, shows oil and gasoline prices have more than tripled since January 2005!
This chart shows that the share prices for the major oil companies have risen right along with the price of energy.

Our pain at the pump has been their gain, which may explain the bad feelings towards the oil industry.

One reason oil prices have continued to go up despite higher prices that are supposed to lower demand is some countries like China set prices that force their refiners to sell gasoline at a loss. It works out as a government mandated subsidy for consumers and industry. Yesterday China raised fuel prices to curb demand.

• June 20 (Bloomberg) -- China, the world's second-biggest oil-consuming nation, unexpectedly raised gasoline and diesel prices by at least 17 percent and increased power tariffs to rein in energy use, potentially driving up inflation.

  The record price increase, the first since November, may ease refining losses at China Petroleum & Chemical Corp. and PetroChina Co., who have been forced to sell fuels below cost. The companies' shares rose in Hong Kong trading.

This chart, courtesy of StockCharts.com, shows oil and S&P500 prices.
This chart, courtesy of Chart of the Day, shows gasoline prices adjusted for inflation.

Of Note on the chart:

1. After adjusting for inflation, gasoline prices are at record highs that are 18% above the old inflation-adjusted peak of 1981!
2. Gasoline prices are above a trend channel (see red line) that has been in existence since early 2000.
3. Large spikes in oil prices are often followed by recessions.

The days of cheap energy are probably gone but as major users of gasoline, such as China, allow prices consumers pay to go up, we should get some relief from the relentless price hikes for energy.

Stock Market Returns After Oil Prices Double in a Year or less

As of Friday's close, oil prices are up 103% in the last year. Investments that have done well with rising oil prices were correctly predicted in the book "The Oil Factor."

==> More Oil Price Charts <==

I was given the book, "The Oil Factor" back in Feb 2004 to review and perhaps add it to my recommended reading list. I liked the book so I had it on my recommended reading list for several years and I recommended it in my writing.

In "The Oil Factor," authors Stephen and Donna Leeb said if oil doubles in any 12 month period, then the best the markets have done 18 months later is a 4% gain and the worst is a 27% loss. Here are more 18 month S&P500 market returns over the next 18 months after the specified oil price changes:

Oil prices (red)& the S&P500 (1973-2003)
12 month price change: S&P500 18 months later
Oil up >100%: -27% to +4%
+50 to 100%: -11% to +17%
*25 to 50%: -7 to +25%
0 to +25%: -3 to +21%

The Leebs predicted higher oil prices and inflation were in our future, suggested the overall stock market could see trouble making large gains and suggested some investments they thought would do well with oil prices going higher and higher. They even suggested that gold could reach $1000 from its then price in the low $400s! (See Ch 12: "We even think it could reach $2,000)


"The Oil Factor: Protect Yourself AND PROFIT from the Coming Energy Crisis"
by Stephen and Donna Leeb
(Feb 2004)

Worth the price of the book for the historic data in a bar graph on pg 17, Ch2.

Their recommended assets included energy stocks, that included REITS for inflation and Warren Buffett's BRKA, have done quite well.

Obviously, the oil companies and gold have been great investements since their book was published in Feb. 2004.

I made good gains buying GeoGlobal Resources (GGR $3.27) in 2004 between $0.95 and $2.25. GeoGlobal is a Canadian natural gas driller operating in India. I took massive profits in 2005 selling most of my shares all the way up to the mid teens ($13.65) before GGR collapsed so I got my energy profits front-loaded (I took enough profits to buy a Prius or two) but the slow, steady gains in the energy stocks the Leebs recommended in their book have done great also.

Note: I have recently started to repurchase shares in GGR with the most recent newsletter and personal purchases on 4/2/08 at $2.65. (GeoGlobal discovered the largest natural gas field in deep water off the shores of India. The stock soard on the news. Delievery to customers was delayed significantly so the price collapsed back to prediscovery levels, where I hope it is an incredible bargain.)

I also own and have recommended REITS as a core position in "Kirk Lindstrom's Investment Newsletter" since early 2001. REITS have done very, very well as an inflation hedge. Vanguard shows $10,000 invested in their REIT index fund on 1/1/2001 is now worth about $30,000.

The above chart doesn't show the dividends reinvested. REITs currently pay an effective yield of 4.15%. For the last 5 years, VGSIX has averaged 18.17% a year through 4/30/08!

Now we should read:

The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel
by Stephen Leeb and Glen Strathy
(February 21, 2007)

Product Description: Stephen Leeb shows how hard times can be a boon for smart investors. As the world faces an energy crisis of unprecedented scope, renowed economist Stephen Leeb shows how surging oil prices will contribute to an economic collapse. With meticulous research and analysis, Leeb shows that due to strong competition from India and China, prices could soon double, a cost for which most countries and investors are ill-prepared. Now, in this groundbreaking book, Leeb not only shows how this crisis will affect consumers, but how savvy investing can turn these dire times into financial gain.

He was right, oil prices did double and the S&P500 has struggled.

Click to view the full sized chart showing the price of oil plotted against the S&P500 from 1990 through Friday May 23, 2008.

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