1$/gal. gasoline? Maybe, but what does it mean really?

[NoTrespassing]

I posted the below on 5/20/08 on gassavers.org about a month before Rick Wagoner addressed shareholders claiming “These prices are changing consumer behavior and changing it rapidly,” Mr. Wagoner said before G.M.’s annual meeting in Wilmington, Del. “We don’t believe it’s a spike or a temporary shift. We believe it is permanent.”

My quote was;

"Personally I don't think the world economy can sustain oil prices at this level indefinitely. IMHO the rise has happened to quickly and there's a bubble formed. I predict we see gasoline below the $3 mark again before the summer of 2009. India, Indonesia, and China have been subsidizing oil prices. Other countries have frozen the price of gasoline. They can't afford to continue to do that forever. When they stop, and gasoline goes through the roof in those countries, their economies will suffer significantly and demand for oil and gas will drop as it already is in the US and Canada. Thats when prices will come back down. I believe they will drop after the summer olympics when China cuts back on their subsidies but I'm not sure how much. It just depends on how long these governments can keep the price low in their countries."

By January of 2009 prices were under $2.

Kevin

 

[MinnesotaEric]

Wagoner had some bad points, but he wasn't the only one to miss that signal. If there was one. Every auto firm in the world was planning electrical projects when gas was $4 - $5. Ford, the Japs, the Euros, all had electric programs. One thing about modern society is that things change much quicker than they did a generation ago. You look at some of the old cars, they went decades without major changes. One example is the Chevy 350 V8. It was built in the same plant in Flint, from 1954 to 1998? 54 years. By 1998, we were building the Gen 2 engines, then the Gen 3, and by 2007, the Gen 4. All V8's, but the technology moves very fast now, and product cycles are much shorter. There are mistakes that will be made. Nobody is gonna hit 1000!

Wagoner, Inho, should have paid more attention to finance. Locking in credit lines would have been cheap in 2005 or 06. By 2008, it was game on....

And the "consultants" are a joke. One problem with the big companies, is that the same folks are running things forever. It is very common for execs to have a "good back ground", be a "car guy". That frequently means that daddy was a exec, and got junior a job. And the consultants usually don't have any idea what they are talking about. You could get better analysis sitting on a bar stool in Detroit.

To his credit, Bill Ford realized he wasn't the guy to to turn Ford around and so Bill brought in Alan Mulally. Allen sold the family jewels before the financial downturn, simplified the product, ordered Ford to design everything to run 150,000 miles, and since Allen drove Japanese cars, ordered the Ford engineers to get rid of the rattles. Allen's plan to turn around Ford is now taught at Harvard Business School as a case study. During that period of time I had been short but while on Skype with other traders, it dawned on us that one of the big three had to be backstopped in order to be able to retain the skill set required for building our national defense. I started going long on F at $2.00 and bought with both hands when it was $1.00. I kicked myself for not buying the bonds which were trading at a 60% discount, but wanted to avoid a concentrated risk and Allen wound up retiring those bonds just a few years later anyway.

I did make a video about the big three around the time the bailouts where getting floated around while I was still shorting.

 

[dmccarty]

The guys I see around here are multi generational operations. A lot of them have investments in a lot of things other than ag. They could run zero margins for years, and not be hurt. Of course, their government buddies would find a way to subsidize them way before that.

I scanned an article on farm income in the last day or so. Farm income is down quite a bit from the peak prices. They mentioned $4 a bushel vs $8. Sounds bad.... But expenses had dropped greatly as well. The larger numbers they showed, drop in prices vs drop in expenses, showed a larger drop in expenses so the profit margin, at least at the big picture level, is still in place. Farm subsidies were also UP to cover the loss in revenue.

Later,
Dan

 

[NoTrespassing]

To his credit, Bill Ford realized he wasn't the guy to to turn Ford around and so Bill brought in Alan Mulally. Allen sold the family jewels before the financial downturn, simplified the product, ordered Ford to design everything to run 150,000 miles, and since Allen drove Japanese cars, ordered the Ford engineers to get rid of the rattles. Allen's plan to turn around Ford is now taught at Harvard Business School as a case study. During that period of time I had been short but while on Skype with other traders, it dawned on us that one of the big three had to be backstopped in order to be able to retain the skill set required for building our national defense. I started going long on F at $2.00 and bought with both hands when it was $1.00. I kicked myself for not buying the bonds which were trading at a 60% discount, but wanted to avoid a concentrated risk and Allen wound up retiring those bonds just a few years later anyway.

QUOTE]

I still kick myself for not buying Ford @$1 and $2. My dad and I talked about it several times but could never pull the trigger. Kudos to you for having the intestinal fortitude to jump in during that tumultuous time.

Kevin

 

[kcflhrc]

My wife filled up our 2014 Silverado today for $25. I can live with that. As opposed to $50 to $60 a year ago. More money to buy groceries now and gas for the motorcycle. Woo hoo.

 

[davesl708]

My wife filled up our 2014 Silverado today for $25. I can live with that. As opposed to $50 to $60 a year ago. More money to buy groceries now and gas for the motorcycle. Woo hoo.

Agreed. Used to cost me $90 to fill the Suburban.
Gives a lot of people more disposable income for other things.

 

[Walt 2002]

" Of course, their government buddies would find a way to subsidize them way before that."

"Farm subsidies were also UP to cover the loss in revenue."


These 2 quotes only serve to show the ignorance of those making them. IF you know so much about farming and it is such a scam, why in the world aren't you taking advantage of it? Because you have neither the knowledge nor nerve to that is why.

Walt Conner

 

[oldpilgrim]

OPEC just announced they will cut production.

 

[PILOON]

I chuckle hearing you guys talk of $1.00 per gal.
In Canada we dream of $1.00 a liter (well I did fill at $0.92 today)

What I fear next is that the gov't will add some new tax as that cash cow is not producing to their expectations!

 

[houstonscott]

What you are witnessing is deflation, world wide deflation, companies will next start lowering prices in race to bottom, next comes inflation, followed by hyper inflation, and ultimately collapse of an economy. It's what happens when you borrow to spend, spend more than ever could be repaid, print money, then borrow the money you print (monetize) and continue to spend. Hang on to your hat, it's well understood. HS