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ACCOUNTING FOR GAS FACES 2

by ren on May 16th, 2008

Tisa Silver, in her post “Who gets the Gas Face?” (Talk Stock Trading), observes “gas faces” when she loads up at the gas station. “We trade smiles through what I like to call ‘the gas face.’ It is a somewhat stressed look of displeasure induced by the pumping of expensive gas. I have seen a lot of gas faces and they are not pretty!” And, she asks who are responsible: oil companies, oil producing nations, gas station owners, the government, or consumers themselves with their gas guzzling SUVs.

In our previous post, we dug up statistics from the Energy Information Administration which showed that, based on each sector’s share in the retail price of gas, it is the crude oil which has caused most of the increase in price (from a 52% share in the retail price of gas in March 2007 to 70% in March 2008). The respective shares of the other sectors have actually gone down.

Contributing to the increased share of crude oil in the retail gas price is the depreciation in the value of the US dollar (i.e., you need more dollars to pay for the crude oil). The biggest source for the US of imported crude is Canada at 1.8 million barrels per day (Energy Information Administration). In March 2007, the exchange rate was US$ 0.8507 to one Canadian dollar; in March 2008, it took US$ 1.0135 to purchase one Canadian dollar (a 19% deterioration of the US dollar).

Who is to blame for this state of the US dollar and moregas faces?

exchange rate from http://www.x-rates.com / graphics by Ren Garcia / image from Microsoft Clipart

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POSTED IN: Accounting Concepts, Accounting for NonAccountants, Personal / Household Finance