Another reason for Cascadia! (makes good economic sense!)


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High gas prices here to stay, experts say
Updated: Monday, April 11, 2005 5:10 PM PDT

YREKA - High gas prices are so obvious and affect so many people that reporting on them is like digging up old news, or worse yet, reminding people of something they wish would go away.

Experts say that the high prices are here to stay and will likely climb to over $3 a gallon by summer. The questions that remain unanswered, however, are why the prices are going up and how high will they go?

"Sticker shock" at the gas pump is so common today that many people are now numb or resolved to the high costs as a fact of life. According to the latest consumer reports, the higher prices have yet to curtail the driving habits of Americans. Large gas guzzling SUV vehicles are still the most popular sellers and the demand for fuel has not changed due to the higher prices.

Those who live in Siskiyou County do not have to be reminded that the cost of gasoline in California is from 30 to 50 cents higher than the reported national average, with gas prices in this county almost always at the high end in the state. Nor do county residents need to be reminded that the average income levels here are at the lower end of the state's average.

What these facts mean is the possibility that higher transportation costs hurt lower income people more. While Americans as a whole have not changed driving habits due to higher costs, those most affected by the costs have already done so or are considering it.

Adjusted for inflation, high gas prices today at $2.76 in Yreka, are not a record high. The Department of Energy reports that gas averaged $3 a gallon in 2005 dollars when the Iran-Iraq war began in Sept. 1980. Assuming that everyone's income has increased appropriately with the cost of living, the cost of fuel is about the same as it has already been, so the experts and politicians rationalize.

In current dollars, for example, gasoline prices peaked in March 1981 at $3.12 a gallon, the government said. At that time, gasoline accounted for about 5 percent of overall consumer spending; today the figure is less than 3 percent.

"We just don't see oil prices as being the critical issue in the economy at this point in time," said Christopher Thornberg, senior economist with the UCLA Anderson Forecast.

One Siskiyou County family reported that they gauge the cost of gasoline by comparing their daily commute cost to work in relationship to how long they have to work to pay for it.

"Twenty years ago I had to work for an hour to pay for the gas to get to work and home again," a family member said. "Yes I am making a lot more money now, but with the higher cost of gas I have now returned to working for one hour each day to pay for my commute to work."

One Yreka resident said his sticker shock event came on Friday when it cost him $96 to fill up his diesel pickup truck. He is definitely considering cutting back on his travel activities.

Most experts say prices will have to go a lot higher, and stay that way, before Americans trade their traditional SUVs for super fuel-efficient hybrids.

"People simply haven't felt the pain adequately to change their behavior," says John Tobin, director of the Energy Literacy Project in Evergreen, Colo.

It will take a crystal ball to determine just where that threshold is. Many experts are now saying that it will take much more that $3 a gallon before Americans will change their habits.

A survey done in March 2004 by CNW Marketing Research Inc. in Brandon, Ore. found that at $1.75 a gallon, the high a year ago, no one planned to get a more efficient car, now or in the future. But if prices went up significantly more, attitudes did start to change.

The survey reported that at $2.75 a gallon, 16.5 percent of the 3,981 people surveyed would eventually purchase a more fuel efficient vehicle and 8.9 percent would drive less. If gas prices reached $3.75 a gallon, 36.4 percent would consider a more fuel efficient vehicle and 27.7 percent would drive less.

It appears that many consumers calculate transportation costs by considering it as a percentage of household expenses rather than actual cost.

Because overall incomes rose steadily during the 1990s and gas prices remained relatively stable, the percentage of income consumed at the pump remains relatively low. In 2002, the average U.S. household spent 2.9 percent of its income on gas. With high prices this year, gas is expected to consume 3.4 percent of the household budget.

The cost of gas is 5 percent of a low-income consumer's budget, but food is 20 percent. After adjusting for the normal seasonal move up in prices this year, gas would still cost about the same as it did a year ago.

What's more, U.S. gas consumption has actually picked up over the last month and some oil analysts are predicting that this spring and summer will produce higher demands for gas than ever before. So if the U.S. consumer is planning to cut back, there's little proof of it yet.

Due to our capitalistic method of business, the cost of products are often in relationship with what consumers are willing to pay. It appears that Americans do a lot of complaining about the cost of gasoline but are still buying it.


Gas prices in Wash. & Ore. reach record highs

10:06 AM PDT on Thursday, April 7, 2005

By and AP Staff

Gas prices have reached record highs in Oregon and Washington and the cost could surpass $3 a gallon by this summer, industry officials and monitoring groups say.

The statewide average for self-serve regular unleaded in Wash. reached $2.319 a gallon Wednesday, a penny higher than the record set last year, AAA Washington reported.

"If history repeats itself, we'll be at $2.75 by the time school lets out," said Tim Hamilton, executive director of a statewide independent gasoline dealers' association. "If there's a small refinery disruption, we could go over $3."

The statewide average in Oregon was $2.33 Wednesday, compared to the previous high of $2.32, which was set on May 26, 2004, said AAA spokesman Elliott Eki.

The highest overall price in Oregon was reported in the Medford-Ashland area, at $2.476 a gallon.

"You want to feel what a buck's worth of gas feels like?" said White City resident Frank Marshall, after purchasing gas for his lawnmower at the Astro station in Medford. "It won't even start the car ... It'll start the lawnmower and only do half my lawn."

The national average Wednesday was $2.228, a further increase after breaking an all-time record last month.

Within Wash. state, average prices ranged from $2.431, in the Bellingham area to $2.20 around Bremerton.

"This is pretty early in the year to have reached the peak," said Janet Ray, AAA Washington spokeswoman for in Bellevue. "It's very probably going to keep increasing until — sometime. I wish I could say when."

AAA Oregon also reported a statewide record average price, $2.33 a gallon, a penny higher than the record set in May last year. Adjusted for inflation, however, prices have been higher.

Back in Oregon, Medford resident Barbara Bransford estimated she was paying almost twice as much for a tank of gas as she paid a year ago.

"I think it stings," Bransford said.

Oregon's gas prices are the fourth highest in the nation. California has the most expensive gas at $2.48 a gallon.

After the Arab oil embargo that began in 1980, the national average price of a gallon of unleaded regular reached a high of $1.35 in 1981 — $2.89 in today's dollars, according to the Federal Reserve Bank of Minneapolis' inflation calculator.

Steve O'Toole, executive director of Oregon Petroleum Association, said crude oil prices were hovering between $56 and $58 a barrel Tuesday.

Southern Oregon had some of the highest prices in the state because it is the farthest from the gas pipeline, which ends in Eugene, he said.

Oregon doesn't have refineries, which makes it a more expensive market in general, he said. The closest refineries are in Washington.

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Oregon economy couldn't maintain January gains
4/7/2005, 1:05 a.m. PT
The Associated Press

EUGENE, Ore. (AP) — Oregon's economic recovery has lost a bit of steam, according to the latest University of Oregon Index of Economic Indicators.

he index, which tracks eight different measures to provide a monthly snapshot of the Oregon economy, fell 0.3 percent in February to 106.4.

The base year for the index is 1996 when the indicators equaled 100.

Timothy Duy, the UO economist who authors the index, said Oregon's economy remains healthy even though five of the eight indicators declined in February.

"The decline is not troubling or completely unexpected," Duy said. "It would be unusual to maintain the strong momentum of January."

Indicators that lost ground were: Oregon initial unemployment claims, help wanted ads in the Oregonian newspaper, Oregon weight distance tax revenues, U.S. consumer confidence and real new orders for manufactured goods.

Two indicators were unchanged from January: Oregon residential building permits and the interest rate spread between 10-year Treasury Bonds and the Federal Funds Rate.

The final indicator, total nonfarm payrolls, showed strength in February, with Oregon employers adding 10,100 workers the largest monthly gain since April 2004.

Duy expects the state economy to perform well in the spring and summer, despite rising interest rates and oil prices.

So far, Duy said, neither of those factors has substantially weakened consumer demand or economic activity

The index is a service of the Oregon Economic Forum, a series of initiatives launched by the university last year to highlight research by UO economists and encourage dialogue between business leaders and policy-makers.

The UO index uses the same methodology as The Conference Board, an independent, nonprofit research organization that compiles the U.S. Leading Indicators.

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Mahathir: US dollar collapsing
B.K. SIDHU, MUGUNTAN VANAR and RUBEN SARIO at the International CEO conference in Kota Kinabalu

THE US dollar is facing an imminent collapse, Tun Dr Mahathir Mohamad warned yesterday.

The former prime minister told a conference of some 650 chief executives from 30 countries in Kota Kinabalu that a standard gold currency was the best alternative for international trade.

The dollar was only retaining some value because of fears of a global economic catastrophe if it was rejected as a currency of trade, he said in his keynote address, Leadership in the Age of Uncertainties, The Effect of Global Events in Business.

"But the catastrophe will come one day, because even the most powerful country in the world cannot repay loans amounting to US$7 trillion," Dr Mahathir said at the closing of the three-day international CEO conference.

"The uncertainty is with the timing, not whether it will collapse"

Noting that the dollar had devalued by as much as 50% against the yen, he said it was doubtful if the greenback could recover to its old strength. Instead, it would continue to slide, as the present American administration under President George W. Bush did not consider deficits worth reducing.

Dr Mahathir said, due to America's huge deficit, the US currency had no backing, but continued to be in use because some people still accepted payments in dollars.

"But there will come a time when we will switch away from the dollar, and we have suggested the use of gold for international trade," he said.

He added that if companies did not want to be "short changed", they should insist on payments in alternative currencies such as the euro, or be paid in US dollars but in euro-equivalent in value.

Dr Mahathir later told reporters that he was giving his personal views after having studied the current depreciation of the dollar.

"Unless they (Americans) change their president and have a more responsible president who will try to reduce the deficit, they will have serious trouble with the US currency," he said.

On whether Malaysia should reject the use of the greenback for trade, he said it was up to the Government to decide.

"But it has to be seen if the US will be responsible enough, and start to reduce its deficit," he added.

Dr Mahathir said he believed central banks worldwide were reducing their US dollar reserves, and he suspected that Bank Negara was also switching to other currencies.

He also said that local companies going abroad should form an association open to credible members who can deliver the job.