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Concern about gas prices appears to be back

I spent three great days last week visiting the Cleveland show. Each day I talked with dozens of fellow boaters from organizations I was active in for many years – groups like, Lake County Yacht Club, U.S. Power Squadrons, Lake Erie Safe Boating Council, Greater Cleveland Boating Association, Sea Grant and more.

What made it so pleasant was, regardless of who I was talking with, all were upbeat and convinced the recession is behind us. “Awesome,” I thought, until . . . deja vu! “What’s going to happen to gas prices this summer?” many asked. In fact, I was really caught off guard by the number of times the subject came up.

“We’ve been through this before – it shouldn’t be a problem,” I responded. “After all, we know from prior studies boaters’ major concern is not price but availability, and there’s no shortage of gas on the horizon,” I assured them. But that said, I do have concern that gas prices could, indeed, become a drag to our industry’s recovery this summer. Here’s why:

First, world oil demand is rising again. OPEC, the largest entity impacting world oil supplies, is now forecasting a growth in demand of 1.23 million barrels per day this year to 87.3 million barrels per day. The International Energy Agency is predicting an even higher rise to 89.1 million barrels per day. More supply would stabilize prices, of course, but OPEC says it’s not going to pump any more. None of the 12 countries in OPEC, which produce 40 percent of the world’s oil, reportedly see $100-$130 per barrel as “unreasonable.” When OPEC wants to boost prices, it simply reduces production. 

Second, we use 20 million barrels per day of which 13 million barrels per day are imported, according to the Department of Energy. Our stockpiles, while good now, are dropping. Gas sales are up 2 percent in the latest reports and prices now range from $2.85/gal. in Wyoming to $3.36 in California. Surprisingly, the U.S. is the world’s third largest oil producer. But, our biggest production comes from the Gulf of Mexico region, including federal offshore waters. Since the BP spill last spring, we know production there will not increase in the foreseeable future. “There’s no escape from $4 /gal. gasoline the next year or two,” contends Joseph Romm, senior fellow at the Center for American Progress in Washington, “unless there’s another global recession.”

Contrasting Romm’s conclusion, at least for the short term, is the fact that oil prices have shown some recent signs of falling. The closing price yesterday was $87.55/bbl, down about 4 percent in recent days. More importantly, the oil minister of Saudi Arabia, the world’s largest producer, recently made remarks implying oil may be getting too expensive and could threaten global economic recovery. OPEC, led by the Saudis, could easily increase production to bring down prices and that would be good news for this summer, at least. Moreover, it isn’t likely that the oil-producing nations will allow the crude price to exceed the $100/bbl mark (much less approach the record $147.27/bbl of July 2008) because of the fragile world economic recovery. So, price volatility might not happen. 

Still, as evidenced by the discussions on the floor of the Cleveland show, gas prices are, once again, becoming top-of-mind with our customers and prospects as they anticipate the coming boating season. Recognizing that now signals the need for our sales personnel to review those gas-saving product features and put them back in their sales presentation, something we haven’t needed to do in two years. In addition, it’s time to dig out those gas-saving tips sheets and brochures we’ve used in the past to educate our customers and prospects how little fuel it really takes to experience great boating outings.

Comments

9 comments on “Concern about gas prices appears to be back

  1. dave

    we have had 40 years (gas crisis of the 70′s) to “do something” about gas – and the best we could do is the money losing ethanol debacle…and to avoid the subject altogether.

    Do you really think this stuff will last another 40 years, even at $4-5 per gallon. Many places around the world are already paying the equivalent of $6-7 per gallon and they still boat/RV/race/motorcycle

    It is time for our nation to ask the best and brightest technical college kids ( I said kids,it will do nothing to pay the profs/schools/corp) to come up with a true alternative. Sadly, many enviros who want to plug in their “electric” cars fail to understand that fossil fuels generate that electricity somewhere along the line…something that is conveniently forgotten when this topic comes up. Batteries are not the solution.

    I am sure that some of the kids at GA Tech or Stevens Institute could come up with something..

  2. John

    Dave,
    You are not actually correct about power generation. Though coal makes up about 48% of the national grid it is still cleaner to run an electric vehicle on coal than a gas vehicle. Additionally, the majority of the grid is not coal, but a mix of natural gas, nuclear, hydro, and other sources, meaning electric vehicles are even cleaner. Most importantly all fuel sources for electrical generation are produced domestically, that point cannot be ignored. Our best and brightest are already working on even more advanced battery technology. Batteries are not the solution for everything but the more oil we can replace with electrons the less dependent we are on foreign oil sources and price controls. Ski Nautique is obviously aware of this and seem to be taking the lead with their new electric ski boat. We need more innovation such as that.

  3. Phil

    Dave is exactly right. The Department of “Energy” was insttituted during the horrendous Carter administration AS A MEANS TO WEAN US FROM FOREIGN OIL!!! Classic case of Government boondoggle. I don’t know what the annual budget for this fiasco is, but WHATEVER it is, close it down, and dedicate the money to new exploration, and capitalizing on the resources we have RIGHT HERE in the United States.
    It is time to stop catering to a whining environmental movement. The business of the United States IS business, and that requires energy.
    The lies over and over about ANWAR, and the “sky is falling” response to the gulf oil spill, (which never became the apocalypse that was forecast) have all got to stop. It isn’t only OUR industry that will suffer, it is the US economy, if we fail to get off the dime, and begin to utilize our own resources, with a view to responsible operations regarding the economy. We CAN do it, and we MUST.

  4. Paul

    The Carter Admin made an attempt at conservation and also a change over to metric system – Both Things are something that America needs to do but has failed completely. No other President has done a serious attempt at weaning us from the oil from that time. ( We ned a bit more substance than a tax write off) . In fact many have done the opposite and the price will be paid long term. We are using the same battery technology from the 1800′s , the same combustion technology from the 1800′s and the Energy transmission Grid built from the 1930′s- Think there is a trend here?

    Norm Talks about Boat Fuel prices but fails to talk about the real marine price is at the fuel dock – add another buck or so to your street price . Marine Fuel cost will easily be $5 on the water this summer – lets not sugar coat it . Same thing happens when talking to owners of larger vessels – they express their consumption in gal per hour – as in 30 gal/ hr , Yes, but you are only making 8 kts. The dirty little secret is very few owners want to discuss the huge amount of money it takes to go a little distance. The real cost of boat ownership.
    Then there is the New Boat Reviews – It has little to do with the real world – How many people go on a trip with 1/2 tank of anything . I always leave on a trip with a full fuel , water and usually maxing out the person load as well. Unless you keep you boat on a lift or trailer take some more off fuel efficiency for slime or fouled bottom / running gear . People would actually buy what they would need if they were informed on the reality of what they are going to experience, and you will have a better client relationship.
    and about the Bikini Girls on the covers …. never mind

  5. Sunshine State

    A boat owner was impressed when the owner of a large marina facility happily attended to fueling well after hours.The boat owner thanked the marina owner for the service in an almost apologetic tone.The marina owner replied,”No problem! How else can I make five dollars a minute!

    In Florida marine fuel is not subject to the considerable highway fund add on yet marina fuels are consistently much higher than roadside.

    Can anyone give me a vaible reason for this??

  6. Larry Tague

    In a News Article Yesterday the discussion was about how the CURRENT administration has Openly made the raising of Gas prices there official Challange.
    There has been no public outcry about this ???? There is also the little known fact that under Wyoming, South & North Dakota is the largest known oil field around !! But we can’t or won’t
    use it to make us (US ) engery independent !!!!!
    In Spain where GREEN is the buzz word, for every job created they lose 2 in the real world !? Where is the press when you really need them. Boating is not the only part of the economy that will suffer when the gas prices go above $ 4.00 , When people talk about VAT ( Taxes ) this is a good example of how that game would play out !!! hitting lower income people first.

  7. C. Moore

    Sunshine It’s called low low low volume & higher overhead. Gas stations do not depend on make profit on fuels- they make it on edibles like ding dongs & yo-Hoo…I really doubt the claim a marina op said that to a boater……

  8. Sunshine State

    Thank you C.Moore for the one and only reply to my question.Curious but typical balnk stares for a response.
    Your answer is inadequate.For years i (along with many customers) have been curious about this.
    And yes- true story.

  9. C. Moore

    LOL Sunshine – obviously you are not a dealer or in a marine business, as you alude that you are a customer, but you are just a troll. See this is a Forum FOR Marine dealers.
    Trolls never accept the facts or the truth when presented so seeing my answer is inadequate for you, I will now join the others here as you call them “The non responsive blank stares” ….

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