Why $120 oil is good

[jayman]

Originally Posted by clett

How will the US economy cope, compared to a more efficient, less fossil-fuel dependent economy such as France (which has mainly nuclear power and a low fuel consumption vehicle fleet)?

I'm fairly convinced we will see a very severe recession, possibly a depression, in the US and Canada. A lot of Canadians smirk at the problems in the US, but they forget the vast majority of Canadian exports go to one country

Canada and the US have a lot in common: fairly dispersed urban areas, personal vehicle commute, fairly primative mass transit - compared to the EU

I frequently travel to the EU on business. A lot of Europeans are surprised that folks in North America think nothing of hopping into a full size SUV or 4 door pickup truck, and driving +2,000 km ONE WAY on a little vacation

[MikeSF]

Originally Posted by patsparks

Simple supply and demand for beginners.
Supplier (of petrol) sets a price.
If you don't like the price (of petrol) stop buying it.

As you can see the power is in the hands of the consumer.

Problem is the power of the supplier in that there are very few of them, they don't exactly compete with each other, and our entire infrastructure is based upon the product they sell largely in part to our government's collusion with said suppliers (I mean the oil execs meeting on energy policy? No one sees the conflict of public interest here?), and before you say vote in new blood... it seems government is itself a corrupting agent. Get rid of one monkey, in comes another.

So the power of the consumer is really reduced. Not many live close enough to bike or walk to work, those who don't probably can't afford to move near work.

This whole power to the consumer takes the broad sweeping example with everyday other goods where there are literally hundreds of suppliers (brands) and they do compete in price with others. Saying stop buying oil related products is kind of like saying, stop buying food to protest the high food prices.

[drash]

You are correct. Most of the suppliers act as one, OPEC. While the bidders, the consumer, usually represent multiple countries and corporations all bidding against each other. U.S. Corporations are bidding against corporations from China (they have several agent corporations that bid for China in general), India, European corporations as well as those from Africa and the numerous countries from South America.

Also there are companies and individuals who bid on oil to hold it and later sell it to trade for more dollars than they paid for it. But the numbers of these brave but foolish people are small and don't really affect the price of oil.

[burritos]

Originally Posted by viking31

Define "greedy". Is an 8% profit, a 9% profit, a 20% profit?? Is any company that makes a profit "greedy"?? Who, and I mean anyone, has the right to decide how much you should charge for a commodity or good you produce and make available on a free market? The government (are they less greedy ;-))? Your neighbor, your friend??? The only group that has a right to decide how much you charge or make is the general public buying your goods or services. And when it comes to fuel, their is no shortage of consumers willing to pay $3.50 and up US/gallon. So why should they (oil companies and such) charge less? That would be an incredibly stupid business model resulting in less profits and a fleeing of investors and shareholders which make nearly all large companies possible. They, as any other well run company, simply charge what the market will bear. And the market, despite the pre election media pundits, handily pays $3.50/gallon and up for fuel.

Burritos, I have read your posts and you are the epitome of preaching absolute government control in all aspects or our lives. You simply do not understand free market economics and constantly preach solutions and arguments which consistently subscribe to "having your cake and eating it too".

If you had the keys to Exxon for a day, please enlighten us on how you would reduce the price of fuel significantly and at the same time maintain cash liquidity by keeping you investors and shareholders aboard.

Rick
#4 2006

What the hell are you talking about. Where did I advocate government control? You are the epitome of the average american education and you simply do not understand English.

I'm glad the oil companies are greedy and maximize the profits for their shareholders. I've been buying exxon and BP throught their monthly DRIPs for the better part of 10 years. I bought UGA(United States Gasoline ETF) as soon as it went online. If I had the keys to the oil companies for a day, I'd use one of their standard MO excuses(war, pipeline rupture, hurricaine in florida, unfriendly oil dictator grumpy mood, lack of refineries, memorial day driving, labor day driving, winter heating use, summer vacation driving, basically anything) and raise the prices so high people would be begging for the low prices of today.

[nerfer]

Originally Posted by hill

The U.S. hasn't seen 'hard-times' for over 60 years, when during WWII we had rationing ... gas / sugar / coupons etc. We fear the unknown especially when we've had it so good (compared to most of the world's civil unrest). If $120 crude prices are good, is $200 / $400 / $800 even better? It mean we all have to change / get out of our comfort zone / bite the bullet / do things different.

.

No, we need to change by bending, not breaking. Oil above $200-$300 will cause a lot of hardship. I'm willing to improve my home's efficiency and buy an electric car in a couple years when they become available, but I can't do all that if I lose my job and there are no new ones to get.

But we do need to change. That much is clear.

[VaPrius]

I Nerfer and Hill both make valid points. We haven't seen hardship in the US for a very long time. The closest thing was the oil crisis in the 70's and that was minor. And even that was only truly experienced by people fifty or over. Most people today still view the price of gas simply as an expense, not as a hardship. People still feel the NEED big vehicles -- that there is something fundamentally wrong with using a smaller/smallish car. We have become too jaded. I even had someone ask me why I hated large cars the other day.

I think we are talking about the wrong numbers here. It's not the price of a gallon of gas or the prices of a barrel of oil. It's the price of the daily commute. I don't think that we will see people change their ways until the price of their daily commute is significant. When the daily commute starts to be greater than $10, I think we will see people paying a lot more attention. At $10 and a 30 mile commute with a 20MPG vehicle, the price of gas would be $6.67/gallon. For that, oil needs to be in the $250 range. Anything less then that will only scare the smarter ones.

[danatt]

Originally Posted by nerfer

We're not going to run out of oil anytime soon, but it will continue to increase in price like this. We're nearing the peak of oil production, when the demand line and the production line separate, and soon oil production will irreversibly decline. Electric vehicles are coming to market, but only because of pain. If the government had been proactive, much pain (most of it still to come) could have been prevented.

Originally Posted by DaveinOlyWA

and we have not really seen real increases in gas prices yet. wait till this summer...

Originally Posted by DaveinOlyWA

but higher prices will speed up the introduction of better mass transit options, EV's, etc... change has always been a constant, but has been painfully slow in the transportation field. only a few pioneers with small steps like the Prius is all we have had for decades. i think the changes in the next 3 years will outnumber the changes in the past 100 years...

I agree with both posters above. Unfortunately the increases in the price of oil are what is necessary to get alternative transportation technologies moving and into the mainstream.

You didn't need a crystal ball to see this coming. It was spelled out nicely in a June 2004 National Geographic feature article "The End of Cheap Oil". http://ngm.nationalgeographic.com/ngm/0406/feature5/

Some like to argue that government involvement is not the answer. But when it comes to things like energy and transportation infrastructure the private sector really can't affect the big picture to the extent required on its own. The private sector will respond to incentives. Economic incentives are forming out of the current situation. But these solutions will be reactive rather than proactive. And, like I said, we didn't need a crystal ball to see this coming. As a result, we will have more pain and damage to the economy.

It sure would have been nice to have national leadership with just a little vision and insight to put the incentives in the right places. We focus on the economic pain and damage. The flip side is that there could be tremendous economic opportunities for new technologies and industries. Historically, this is what has made the U.S. economy so successfull. We could be fostering new economic opportunities in moving the transportation infrastructure away from petroleum. Petroleum will still play an important role - air travel, agriculture, miitary, etc. But 60% of our petroleum is used to power our vehicles. Moving the transportation infrastructure off petroleum would strengthen the economy. The country would have a chance of being able to elliminate our dependence on foreign oil. And, new technologies and industries would be created in the process further stimulating economic growth. By lacking vision and insight, the federal government has missed this opportunity. Instead we have the current economic situation, with the current so called "stimulus" packages.

Think about a U.S. not dependent on foreign oil. Think about how that could impact our foreign policy... about the Middle East. And, again how that would impact the economy.

We can put rovers on Mars. You think we can't put EV's on our highways? (Actually, we have. But then we took them off.)

[DaveinOlyWA]

we had that leadership that saw the writing on the wall unfortunately, his opposition had a brother in Florida who basically decided the election. his brother didnt do a great job of it... (first two counts had Gore winning) but with a lot of help from oil interests, he still got the job done.

what happened next in just over a year, bush eliminated the strides made toward alternative vehicles; namely hybrids and BEV's, then put all the money and support behind a technology that NO ONE THOUGHT WAS VIABLE in hydrogen... and coincidently, just as his administration is coming to an end, nearly all support has been pulled from the idea. no small wonder since without him, no one in their right minds would bank on hydrogen going mainstream for at least another 20 years and we simply dont have that much time.

[Fibb222]

Originally Posted by DaveinOlyWA

we had that leadership that saw the writing on the wall unfortunately, his opposition had a brother in Florida who basically decided the election. his brother didnt do a great job of it... (first two counts had Gore winning) but with a lot of help from oil interests, he still got the job done.

what happened next in just over a year, bush eliminated the strides made toward alternative vehicles; namely hybrids and BEV's, then put all the money and support behind a technology that NO ONE THOUGHT WAS VIABLE in hydrogen... and coincidently, just as his administration is coming to an end, nearly all support has been pulled from the idea. no small wonder since without him, no one in their right minds would bank on hydrogen going mainstream for at least another 20 years and we simply dont have that much time.

It just pains me to still see hydrogen being mentioned in the articles where a car company like Ford or Honda is still pretending that they will have a viable product in a few years. I hope that oil prices continue to rise to shock people and governments out of there complacency. The price of oil has gone up dramatically in the last while and if the vested interests could I'm sure they would like to stop its rise, to prevent alternative energy from getting more of a foothold. If they can't increase production enough, and so far they haven't, then we must be getting past the peak.

The millions of people that purchased gas-guzzlers in the last few years clearly didn't see the writing on the wall and unfortunately are going to have to suffer. But I can't say I feel too sorry for them.

I am really encouraged by the gaining momentum toward electrification of transportation. Utilities and municipalities and car companies are really getting behind PHEVs. It really seems inevitable now.

[nerfer]

Originally Posted by VaPrius

I think we are talking about the wrong numbers here. It's not the price of a gallon of gas or the prices of a barrel of oil. It's the price of the daily commute. I don't think that we will see people change their ways until the price of their daily commute is significant. When the daily commute starts to be greater than $10, I think we will see people paying a lot more attention. At $10 and a 30 mile commute with a 20MPG vehicle, the price of gas would be $6.67/gallon. For that, oil needs to be in the $250 range. Anything less then that will only scare the smarter ones.

I agree. Now that it's summer, most days I ride my bike to work. Which means my wife has a choice for her 20+ mile commute (it varies from day to day) of either "her" Honda Accord or "my" Prius. 28 mpg vs 52 mpg. Unless I pressure her, she takes the Honda every time. Gas is $3.80/gallon here so that could be $4/day she spends on the drive, and apparently it's not enough for her to change her habits even though it would be easy to do so.