Gasoline and Natural Gas Prices: What’s Up? <ul><li>Jerry Ellig </li></ul><ul><li>Senior Research Fellow </li></ul>
’70s cultural commentary… <ul><li>If they don’t lower the gas, we’re gonna lower the boom </li></ul><ul><li>Stop shippin’ ...
Natural gas chronology <ul><li>1954  Phillips  decision - wellhead price controls on interstate gas </li></ul><ul><li>1960...
Is gas expensive?
Is gas affordable?
 
Oil chronology <ul><li>1971:  Nixon wage and price controls </li></ul><ul><li>1973: Oil and gasoline price controls </li><...
Is gasoline expensive?
A historical perspective
Is gasoline affordable?
 
Why? <ul><li>Crude oil prices? </li></ul><ul><li>U.S. monetary policy? </li></ul><ul><li>Cost of reformulated gasoline? </...
Gasoline tracks crude prices
Gasoline and crude since 2001
How high are world oil prices?
 
Consequences <ul><li>Recession? </li></ul><ul><li>Inflation? </li></ul><ul><li>Economic dependence? </li></ul><ul><li>Poli...
How big are imports?
 
 
Free with your fill-up… <ul><li>Flexible energy prices convey information about underlying scarcity and demand </li></ul><...
For more information… <ul><li>Energy Information Administration </li></ul><ul><li>www.eia.doe.gov </li></ul><ul><li>Recent...
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Ellig Gasoline And Natural Gas January 2005

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Ellig Gasoline And Natural Gas January 2005

  1. 1. Gasoline and Natural Gas Prices: What’s Up? <ul><li>Jerry Ellig </li></ul><ul><li>Senior Research Fellow </li></ul>
  2. 2. ’70s cultural commentary… <ul><li>If they don’t lower the gas, we’re gonna lower the boom </li></ul><ul><li>Stop shippin’ all that wheat and corn, forget the Golden Rule </li></ul><ul><li>And if they still wanna play rough, we’re show ‘em that we’re tough: </li></ul><ul><li>Cheaper crude, or no more food! </li></ul><ul><li>-- Brent Burns, 1979 </li></ul><ul><li>Are we rollin' downhill like a snowball headed for hell? With no kind of chance for the flag or the liberty bell? I wish a Ford or a Chevy would still last ten years like they should. </li></ul><ul><li>Is the best of the free life behind us now and are the good times really over for good? </li></ul><ul><li>-- Merle Haggard, 1981 </li></ul>
  3. 3. Natural gas chronology <ul><li>1954 Phillips decision - wellhead price controls on interstate gas </li></ul><ul><li>1960s: Interstate reserves shrink </li></ul><ul><li>1970s: Widespread shortages in consuming states </li></ul><ul><li>1978: Natural Gas Policy Act allows phased decontrol of “new” gas, completed in 1985 </li></ul><ul><li>1980s: FERC reforms interstate transportation </li></ul><ul><li>1992: Old gas prices decontrolled </li></ul>
  4. 4. Is gas expensive?
  5. 5. Is gas affordable?
  6. 7. Oil chronology <ul><li>1971: Nixon wage and price controls </li></ul><ul><li>1973: Oil and gasoline price controls </li></ul><ul><li>1970s: Shortages and gas lines </li></ul><ul><li>1981: Executive Order decontrols oil and gas prices </li></ul>
  7. 8. Is gasoline expensive?
  8. 9. A historical perspective
  9. 10. Is gasoline affordable?
  10. 12. Why? <ul><li>Crude oil prices? </li></ul><ul><li>U.S. monetary policy? </li></ul><ul><li>Cost of reformulated gasoline? </li></ul><ul><li>Diminished competition? </li></ul>
  11. 13. Gasoline tracks crude prices
  12. 14. Gasoline and crude since 2001
  13. 15. How high are world oil prices?
  14. 17. Consequences <ul><li>Recession? </li></ul><ul><li>Inflation? </li></ul><ul><li>Economic dependence? </li></ul><ul><li>Political vulnerability? </li></ul>
  15. 18. How big are imports?
  16. 21. Free with your fill-up… <ul><li>Flexible energy prices convey information about underlying scarcity and demand </li></ul><ul><li>Deregulated prices create winners and losers but minimize disruptions </li></ul><ul><li>Recent price increases are much less severe when adjusted for inflation </li></ul><ul><li>Principal factors explaining price increases are increased crude oil and wellhead gas prices </li></ul><ul><li>Crude oil is an international market </li></ul><ul><li>Energy prices unlikely to cause economywide calamity </li></ul>
  17. 22. For more information… <ul><li>Energy Information Administration </li></ul><ul><li>www.eia.doe.gov </li></ul><ul><li>Recent hearing testimony </li></ul><ul><li>http://reform.house.gov/EPNRRA/Hearings/EventSingle.aspx?EventID=1161 </li></ul><ul><li>GAO/FTC on competition </li></ul><ul><li>GAO: http://www.gao.gov/new.items/d04951t.pdf </li></ul><ul><li>FTC: http://www.ftc.gov/opa/2004/05/gaostatement.htm </li></ul>

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