Archive for April, 2008

In my local area, regular unleaded gasoline rose to $3.69 per gallon yesterday. It is strange that the price we pay for gas in west michigan is always higher than the state and national average, despite having a fuel depot and extensive underground pipelines in my town.

While high gasoline prices are a nuisance, I don’t complain about it simply because in the whole scheme of things gasoline is an absolute bargain compared to many other products we use that are taken for granted.

Prices per gallon of commonly used products:

$75 – Extra Virgin Olive Oil

$48 – Pepto Bismol

$40 – Axe Body Wash

$35 – Starbucks coffee drinks

$30 – Spaghetti Sauce

$25 – Ketchup

$22 – Tide Laundry Detergent

$21 – Honey

$10 – Antifreeze

$8 – 20oz Bottled Water/Soda

$7 – Orange Juice

Now, of course people are going to whine and complain that this comparison is not accurate for one reason or another. Firstly, of course the price of gasoline impacts the transportation costs for all of the above products. The amount of each product consumed will also vary depending on a person’s rate of consumption.

But the bottom line here, is that when compared among commonly used products that we use without even thinking about price, gasoline is very inexpensive. Especially when you consider how gasoline is manufactured and the extensive and expensive processes to get it to market versus something like bottled water or olive oil.

There will also be those that complain of the record profits being reported by the world’s largest oil companies. Well, why aren’t you an investor in these companies? The fact is that the majority of the shareholders of our country’s oil companies are working class Americans who invest in mutual funds! One particular fund I have recommended is Fidelity Select Energy, which is packing on double digit gains recently amid the big increases in the price of oil. The other thing to remember about oil company profits is that as a percentage of sales, their profit margins are very slim… almost always less than 8%, whereas the profit margins of other large companies could be 10-20% and they operate without the fear of a potential “windfall profits tax.”

With the growing demand for oil from developing nations such as china, russia and india, the price of oil will only continue to rise. There is no increase in supply on the near term horizon and oil is most definitely a finite resource. So the “pain at the pump” is only just beginning. I believe we’ll see $4/gallon gasoline in May or shortly thereafter here in West Michigan.

I drive a small, fuel efficient vehicle and try to limit unnecessary driving. With the weather warming, I plan to begin biking the few miles to work to save on gas and improve my health at the same time.

Technorati Tags: gasoline, oil, crude, pepto bismol, soda, water, olive oil, prices, india, russia, china, shaun carter, exxon mobil