Why $120 oil is good

Dream on! A couple significant problems with your logic arise:

1: The automotive fleet does not turn off that fast.
2: Automobiles account for only a percentage of the oil that we use. Add other transportation, industrial, residential
3: Even if the increase in world wide demand for cars is satisfied, the sheer number of cars coming on line in Asia would dwarf the reductions made here in N. America.

As I a have stated so many times before; the idea that we can drill our way out of this is crazy.

Icarus

 

?? I thought most of them came from overseas. ??

 

icarus, read this ... Finally, a powerful bear case for oil prices - BloggingStocks

Oil closed at $128 per barrel, down from the peak of $135. I'm watching what it does over the next week or two. Just maybe it will move back down to $99, which would further support that the recent run-up in crude oil prices was merely "irrational exuberance."

 

It is working!!! U.S. Govt. reported that April demand for gasoline fell 4.3% nationwide. Since this report was released, oil prices have been falling. Reduced demand is having an effect on prices! (note: prices at the pump follow one month later than oil futures). I maintain the prediction that high gas prices today are good because they will benefit us tomorrow. When all Americans are driving hybrids and national gasoline consumption is HALF of 2006 (SUVs) levels, gasoline prices will fall. A few years from now, the American economy will [eventually] be recovered and the dollar will be strong again; reducing gasoline prices. We will "triple benefit." (hybrid, reduced demand lower prices, stronger dollar)

"Oil prices dropped below $127 a barrel Wednesday in Asia, extending a decline of more than $3 in the previous session on a growing sense that soaring prices have cut demand for gasoline and other fuel. Late afternoon in Singapore, light, sweet crude for July delivery was down $2.15 at $126.70 a barrel in electronic trade on the New York Mercantile Exchange. July Brent crude fell $2.12 to $126.17 a barrel on the ICE Futures exchange in London. The front-month contract is now more than $8 off its all-time peak of $135.09 a barrel, hit last Thursday."
Oil prices drop below $127 a barrel: Financial News - Yahoo! Finance

 

Here is another way of viewing the "good news" if the gas price drops enough. Those sitting on the fence about buying a Prius, may get a short window to buy without extreme waiting or dealer overpricing......but the window will not last long.

 

Believe me, I too believe and have believed for a long time that the current (12 month+-) run up of oil prices is due is huge part due to speculators. The danger is that the floor could fall out from under oil prices over night and we could see prices drop 50% or more,,,,,in the short term.

What I am arguing about, oft times passionatly, is that while lower prices are could for the individual, they are terrible for society and the environment. Cheap(er) fuel only delays the needed course change away from fossil fuels. The longer we take to change course, the more damage is done, the harder it is to repair (if it can be repaired) and the more it will cost.

When I go to the gas station, do I wish the price was $.38 like it was when I was a kid,, just for the one day I buy gas? You bet! Do I wish it would climb with some sanity to the market to a price where alternative would become viable? You bet even more! I admit freely that I am a hypocrite about this, but I do try to walk the walk as much as I can.

I agree we will see lower prices going forward, and I bet we will go back to selling more SUVs,,,and (most) everyone will be happy,,,until the next crisis and the next rise of the inevitable when once again people will cry "Do something!" And we will invest in Bio fuels that starve the developing world, and try to drill in ANWR, and the coastal plains again, and make more investment in the tar sands,,,,, And yet we will be further behind the curve of technology, global climate change, and saving something for future generations.

Boy I'm tired of the way people act sometimes.

Icarus

 

One final point for now,,,

The unfortunate part of your statement that it is good for us, because we will all be driving hybrids. If the price of fuel drops more than a few cents much of the current the incentive to build and buy them dries up.

I thought in 1973 we would start addresing the problem. For built the Pinto, Chevy the Vega. Toyota the Corrona, Honda the Early Civic. What has happened since. Honda Civic Hybrids get poorer mileage than the Accords (Maybe that is the other way around, I'm tired) Toyota Pickups now get 15 mpg rather than 25, V-8 not in line 4's Ford Pickups with V10's.

Drop the price back and we go backwards.

Icarus

 

I've seen it reported that, while the speculator rationale is a popular notion, that it is not cause of the recent price spike. Speculators have to hold large quantities of the commodity to drive the price up and no one is seen to be hoarding oil right now.

 

Gas prices will go down for a while. Fortunately, the following things have been learned:
1) Far more people now know what "Peak Oil" means.
2) Far more people now know how painful high oil is if you do not expect it.
3) The huge downside of SUVs has been exposed.
4) The gas market is very volatile....and the US government has no actual control over the gas prices.

Nothing like a good whack in the wallet to help the memory. More whacks to come.

 

FL_Prius_Driver, I agree with you.

icarus, as with everything, there needs to be a balance. If gasoline prices (and diesel) went to $12/gallon TOMORROW, the commercial trucking industry would come to a standstill. Farming would come to a standstill. Shipping would come to a standstill. The stockmarket would plunge, taking the dollar down with it. There needs to be balance, and in my own opinion, $4.00/gallon is today's balance.

icarus, what are we going to do about the commercial trucking industry, and it's affects on the price of food and other goods?

 

With all due respect, this thread is about $120 oil NOT $12 gasoline. There is another thread for that. I am not advocating fuel at any given price, I agree that a balance is needed along with some predictabilty. What i am really saying is, if the price goes down, old behaviors come back quite quickly. We learn our lessons slowly.

Icarus

 

it is working... gas price goes up, consumption goes down... now we need to add a buck in taxes to fund alternative transportation, that way consumption will continue to drop...

these high prices have started a good thing, lets keep it going

 

Again about speculation re: price of oil.

from reportonbusiness.com: globeinvestor.com - TSX poised for new heights, Rubin forecast says

The lesson is, don't count on oil prices going down... they probably won't.

 

Correct, no doubt. Global Warming and decreasing carbon are helped greatly by high oil prices. Cheap oil would be a problem.