Thread: High oil prices good?

High oil prices good? It all depends on your definition of good. I see oil the same way I see diamonds. It's an entirely regulated product with its price artificially high. OPEC and our energy companies are only profiting big time off this while americans are struggling to put gas in their vehicles. Meanwhile everyone blames the prices on President Bush- because he has so much to do with it.

I think slightly higher prices are good, but only because it will eventually force the car companies to introduce more efficient vehicles. Do I think it should be artificially high? Hell no. I feel like you're saying that OPEC is trying to teach us a lesson.

But back to Americans. How do the higher prices help the people that use it most? Higher prices mean that people lose more of their paychecks to gas, more of it to car payments for expensive "efficient" vehicles, etc. Honestly, many SUV's have 4-6 cylinders, which is just like many smaller cars. Nevermind the behemoth vehicles from the 70's-90's that are way more inefficient. Many people drive SUV's because they need the space or the capacity. I fail to see how it's any different than someone driving a similar powered car or truck.

What some europeans tend to forget is that the SUV driving population tends to live in the suburbs or the rural areas. They have distances to travel, need to be able to pack things into their vehicles, and usually don't have the greatest of road systems. When it snows out here, you bet I want to be in an SUV instead of a honda civic.

Anywho, that's the take from someone here experiencing it.

Maybe someone can explain to me who actually controls the price of gas?

Jusitn

Originally Posted by jaegerhund

Maybe someone can explain to me who actually controls the price of gas?

Jusitn

My wife! Although she's got it back to front in our house - the more gas produced, the higher the price I pay for it

Seriously, I have no idea but in Australia petrol prices are driven by oil prices out of Singapore I think. Then the various state governments put their taxes on it and we end up with the price at the bowser. In Queensland we're lucky, as our state taxes are lower than in some other states, but at the moment I'm paying about 1.4AUD per litre. This changes on a daily basis though.

James.

But in terms of whether high oil prices are a good thing, it probably depends on who you are and what your perspective is. For me, at the moment, it's a bad thing - there's no public transport where I live and we need to drive. And if you believe peak oil has been reached, it'll get worse before it gets better.

For Australia at the moment it's a bad thing - big, spread out country with a huge reliance on vehicle-based goods shipping between major centres. Our inflation figures are sensitive to petrol prices, and our inflation figures are what our Central Bank uses to determine its official interest rate strategy. Over the past 2 years we've had something in the order of 5 or so interest rate increases I think. People with mortgages are starting to feel the pinch.

On the other hand, I think increasing oil prices are a good incentive to develop other energy sources, which has to be a good thing for those countries that have started down that road already. I mean, let's face it: even if you don't believe we've reached peak oil, at some point in the future we're going to run out of it, or it's going to become prohibitively expensive to extract. Places that are prepared for that will benefit more than those that aren't.

James.

I'm surprised gas doesn't cost more than it does considering the enormous overhead --- just the amount of money spent and risked in exploration is amazing. What does a gallon of high quality water cost or milk?

Justin

Originally Posted by jaegerhund

I'm surprised gas doesn't cost more than it does considering the enormous overhead --- just the amount of money spent and risked in exploration is amazing. What does a gallon of high quality water cost or milk?

Justin

Good point. I think petrol is still cheaper than Coke here.

James.

Petrol costs 2.6$ per liter, which is 7.8 dollar per gallon.

Originally Posted by Bruno

Petrol costs 2.6$ per liter, which is 7.8 dollar per gallon.

How much of this is actual government revenue and how much is actual production cost?
If I recollect clearly, after taxes and production costs the actual profits are something in the neighbor hood of 33 per gal cents ( someone correct me if I am wrong )! The price for a gallon of regular was 3.19 a gallon last I filled up which was down considerably from a month ago!

I don't know if this will help in understanding the ludicrous notion Gugi sets forth That The U.S. government is purposely affecting fuel prices to be higher and purposely destabilising the world economy! Read, baaad America. poooor innocent rest of the world. but I thought someone might get something useful out of this:
http://www.concordmonitor.com/apps/p...1028/OPINION02

QuickOrange,

I am trying to look at it not from the perspective of the person who is affected negatively (to them is bad by definition), but the overall effect on the national economy, both long term and short term. Yes, it may be bad for you, but it is good for the CEO of Exxon-Mobil. Why? Because he is smart and knows how to hedge his bets in an unstable market and has big financial (and I bet political) power. You have no control whatsoever over it, but choosing what vehicle to purchase. I don't care if you drive SUV or Truck, audi, ferrari, or prius - you choose your car based on what you can afford and what you 'need'. Yes if you have a family with 4 kids that you need to haul back and forth with their full equipment of toys, a small sedan is unadequate. Yet it's your choice where to live in the first place. And yes I do live in a state where it snows more than in yours and know plenty of people who have absolutely no need for engine and size of car they need (single, live in town), and few with a family of 4 living in the boonies with a civic hybrid. They both do fine, but as I said it's not that I care.

As far as whether the oil prices are inflated - I am not sure. Most of the oil in the world is produced by Saudi Arabia, Russia, and USA followed by Iran, China, Mexico, Canada, UAE.... Each from the top three produces roughly 3-4x the amount each of the second group produces.
And since some countries produce more than the consume, while others do the opposite, there's an international market to trade this. So the prices are set by simple supply and demand on the market, but since it's an important commodity large part of the price is due to the perceived risk. Does President Bush has anything to do with the prices? Absolutely. Starting a war in the region increases the risk and respectively the prices. Threatening another war with a major oil exporter, also increases the risk that sometime soon the supply may decrease. Using the US military to be propping the government of the top producer certainly gives a lot of leverage on the output of this producer. US makes political decisions by taking into account how they will affect the US. And in an economy so dependent on import of oil, the projected changes in oil prices and their effects are near the top of the arguments.

As far as the prices of oil and diamonds being inflated - I don't see it that way. Why should the countries who export oil sell it at lower prices? US's main export is 'technology' (say computers). Intel can surely reduce all salaries by half and pass the savings on to the buyers. Or diamonds? If you are convinced that you ought to spend X USD on a diamond ring for your fiancee it's you have as much to do with the price as De Beers. If anything diamond engagement ring if anything is detrimental to your marriage as it leaves you with less financial resources to say buy a house. (So is spending 20k on a wedding, but these things have become part of the culture.)

So, to get back on topic I am not trying to be controversial or make a veiled political argument of some sort. As I said I'm just trying to see if on average higher oil prices are better for US economy in the short term (by affecting the competition more negatively than it affects US) and in the long term (by forcing US to develop better technology, while it still has the technological edge). Or may be they are necessary to start the next bubble about biofuel and solar energy so that the negative effect of popping the housing bubble is padded (yeah for me everything is on the table).

Or may be high oil prices are just plain bad for the US economy.