Re: hyper inflation in the USA?
If you want to discuss US military hegemony please start another thread.
hyper inflation in the USA?
- Thread starter Christian Tepfer
- Start date
Re: Who's pulling who's wheight?
Indeed, it seems almost unfathomable that greater progress has not taken place to control oil costs.
Consider times when crude oil dropped to substantial lows, such as 1998 when it got as low as $10/barrel. Gas prices certainly went down, but nowhere near the amount they should have based on crude costs.
There have been regulations regarding other industries, like the electrical providers (at least in Canada) and some others where they have been mandated to establish a maximum rate for a pre-defined timeframe.
If those industries can be controlled, why can't oil? Yes, the industry probably has incredibly tight ties into many areas of political influence etc, but seriously? Why do attempts to rectify this abuse never gain traction, despite lawsuits and many other efforts?
When we consider the significant impact of oil cost on EVERY industry, you quickly realize that it's not just the gas pump that's thinning your wallet, it's every trip to the grocery store, the shopping mall, your postage costs, etc, etc.
There is a tremendous effect on most markets which has impact on us far beyond our personal gas consumption. As obvious as this point may seem to some folks, many overlook it.
Indeed, it seems almost unfathomable that greater progress has not taken place to control oil costs.
Consider times when crude oil dropped to substantial lows, such as 1998 when it got as low as $10/barrel. Gas prices certainly went down, but nowhere near the amount they should have based on crude costs.
There have been regulations regarding other industries, like the electrical providers (at least in Canada) and some others where they have been mandated to establish a maximum rate for a pre-defined timeframe.
If those industries can be controlled, why can't oil? Yes, the industry probably has incredibly tight ties into many areas of political influence etc, but seriously? Why do attempts to rectify this abuse never gain traction, despite lawsuits and many other efforts?
When we consider the significant impact of oil cost on EVERY industry, you quickly realize that it's not just the gas pump that's thinning your wallet, it's every trip to the grocery store, the shopping mall, your postage costs, etc, etc.
There is a tremendous effect on most markets which has impact on us far beyond our personal gas consumption. As obvious as this point may seem to some folks, many overlook it.
Re: Who's pulling who's wheight?
Trying to mandate the price of a commodity by caveat simply does not work. Perhaps in Canada if you have enough domestic supply to meet domestic needs you could legislate local price controls and immediately enjoy some low cost energy benefit for a while, but all the international oil companies investing in Canada today would head for the exits and instead invest at developing energy resources elsewhere where they can get market prices for them.
In cases where you don't have adequate supply that you can force to sell cheaply, legislating a lower than market price will not attract world supplies that are fungible and can be sold in other markets for a higher price. Those of us who were driving back in the '70s remember the gas lines and rationing that resulted with price controls. Low price sure, but insufficient supplies.
I agree that what the OPEC cartel is doing to keep prices higher than they should be, is wrong and considered illegal by most national standards of business behavior, but internationally they are allowed to play that way.
The current high oil prices are not just OPEC playing supply withholding games but increasing demand from the developing world, and the elephant in the room right now is supply uncertainty from the middle east due to political upheaval. People like to blame speculation as some malicious force increasing prices, but this speculation is not lottery ticket gambling, but buying oil today for future delivery betting it will be worth more. If they guess wrong, they lose real money since they bought oil for more than it is worth. Speculators piling in based on price momentum can amplify the price moves, but this works in both directions, when all that dumb money is caught long holding oil they can't sell for what they paid.
If you want something to really be concerned about, we have high prices now, and demand is somewhat weak because of a relatively soft world economy for the last few years. Imagine the oil demand if we had the west firing on all cylinders?
The solution in my mind is to control the marginal supply.. This requires an all of the above approach. Reduce energy waste, drill some more of the oil already discovered, exploit alternate energy sources that make sense (like natural gas), develop a clean coal technology (while this is harder than it sounds), and yes even nuclear power. Right now we are wasting untold dollars of energy subsidies that IMO are counter productive (like corn ethanol). The free market will try to meet the market demand for energy at an economic cost if allowed to operate freely. The only way to beat the cartel, is break their control over supply, with more supply, or less demand. I don't see significantly less consumption being a very attractive option to developing markets, or us.
For some more current events, the situation in japan is likely to increase their fossil fuel imports for the immediate future. One more hole in the bottom of the boat.
JR
Note: electricity generation has long been regulated since it is considered to be in the public interest. These regulators must negotiate profit margins and ways to cover and recoup infrastructure investment. A similar arrangement could be developed to exploit fossil fuels, if there is adequate local supply but this only looks attractive when world prices are relatively high compared to the economic cost to extract. There have been exercises in deregulating electrical power, but the results are mixed on this. Enron manipulated supply and abused some energy markets.
Trying to mandate the price of a commodity by caveat simply does not work. Perhaps in Canada if you have enough domestic supply to meet domestic needs you could legislate local price controls and immediately enjoy some low cost energy benefit for a while, but all the international oil companies investing in Canada today would head for the exits and instead invest at developing energy resources elsewhere where they can get market prices for them.
In cases where you don't have adequate supply that you can force to sell cheaply, legislating a lower than market price will not attract world supplies that are fungible and can be sold in other markets for a higher price. Those of us who were driving back in the '70s remember the gas lines and rationing that resulted with price controls. Low price sure, but insufficient supplies.
I agree that what the OPEC cartel is doing to keep prices higher than they should be, is wrong and considered illegal by most national standards of business behavior, but internationally they are allowed to play that way.
The current high oil prices are not just OPEC playing supply withholding games but increasing demand from the developing world, and the elephant in the room right now is supply uncertainty from the middle east due to political upheaval. People like to blame speculation as some malicious force increasing prices, but this speculation is not lottery ticket gambling, but buying oil today for future delivery betting it will be worth more. If they guess wrong, they lose real money since they bought oil for more than it is worth. Speculators piling in based on price momentum can amplify the price moves, but this works in both directions, when all that dumb money is caught long holding oil they can't sell for what they paid.
If you want something to really be concerned about, we have high prices now, and demand is somewhat weak because of a relatively soft world economy for the last few years. Imagine the oil demand if we had the west firing on all cylinders?
The solution in my mind is to control the marginal supply.. This requires an all of the above approach. Reduce energy waste, drill some more of the oil already discovered, exploit alternate energy sources that make sense (like natural gas), develop a clean coal technology (while this is harder than it sounds), and yes even nuclear power. Right now we are wasting untold dollars of energy subsidies that IMO are counter productive (like corn ethanol). The free market will try to meet the market demand for energy at an economic cost if allowed to operate freely. The only way to beat the cartel, is break their control over supply, with more supply, or less demand. I don't see significantly less consumption being a very attractive option to developing markets, or us.
For some more current events, the situation in japan is likely to increase their fossil fuel imports for the immediate future. One more hole in the bottom of the boat.
JR
Note: electricity generation has long been regulated since it is considered to be in the public interest. These regulators must negotiate profit margins and ways to cover and recoup infrastructure investment. A similar arrangement could be developed to exploit fossil fuels, if there is adequate local supply but this only looks attractive when world prices are relatively high compared to the economic cost to extract. There have been exercises in deregulating electrical power, but the results are mixed on this. Enron manipulated supply and abused some energy markets.