High oil prices good?

I've been thinking for a while now that while I may not like the decisions politicians are making I may be looking at it the wrong way, and they may be actually doing what's best for their country.

We all know that the international markets are fairly deregulated, but can be manipulated by powerful governments. So when the US government consistently takes steps that bring insecurity to the market increasing the prices it makes me wonder whether they aren't doing it because it's actually better for the country (we already know it's better for oil companies).

Things that come to mind
- The strength of US is know how and technology. It's more energy efficient than most everybody
- Energy inefficient countries are becoming more competitive with US
- If the energy prices are to go up it will hurt more the energy inefficient manufacturing than the energy efficient one, making the second more competitive
- US has critical influence over one of the largest producers of crude oil and can manipulate the market in the opposite direction it needs to.

After all in a market economy the most valuable players to US are the ones on wall street, who have expertise in complicated financial schemes like nobody else, and are thus in the best position to take advantage of unstable market, and not the 'middle class' who is probably affected negatively 'at the pump' and the 'heating bills'.
Just how the free market works. I always thought the message was 'If the gas prices are too high for you, the best is to find a better job or else deal with it any way you like'.

America Energy efficient?

The same America where the least important feature of a car is fuel efficiency?
Where companies set the airco to 'Freeze' even in the middle of the desert, and then expect people to come to work in a full suit? I've been in buildings that were so cold that the empolyees opened windows and doors to let the oustside heat in to make it bearable. And STILL the airco was kept at full blast.
Where recycling and reuse seem to be unimportant, and being 'green' is almost equivalent to being a tree hugging leftist?
Where there are people saying 'you can take my 4 gallon flushing toilet from my cold dead hand'.

I am fairly confident that Most western european countries outperform the US in efficiency.

I'd have to agree with Bruno here.

But I'm wondering if you guys are talking about the same kind of efficiency.

In manufacturing!

And at the same time very wasteful in consuming. And I distinguish between both as an economy competes with others not in its consuming power, but in its producing.
If you choose gas guzzler and are paying for it because you think it provides you better quality of life, it is your own choice of spending the money you've earned. If you didn't have the money to afford it, it wouldn't be an issue at all.
And yes europe may be outperforming US in energy efficiency and may have better standard of living. Europe clearly seems more energy hungry than US, but that's probably because it is more nervous about its lack of control over its main sources.

This is, of course, a speculation and any arguments are welcome.

Don't know about that last Europe statement. I don't have any facts about the gathering of energy.

And I'm definately not trying to get into an europe/US argument here.

I read somewhere that if the rest of the world consumed as much resources as the US does, we would need 5 more planets to support our living... I don't know how true it is but it's certainly food for thought...

I'm not sure you can separate production and consumption when discussing energy efficiency. I'll trust someone with better knowledge than me when they say production methods for producing fuel-hungry 4x4s are extremely efficient, but I'm not sure you can argue that a nation-state's energy policy is efficient because of how they produce. I think you really need to look at what they produce as well.

Now I really don't know whether manufacturing and the service industries in the US are competitively fuel efficient or not. But my point is that production and consumption are two sides of the same coin -- production methods might be fairly efficient, but the outcome of that production (and how we use it) shouldn't be ignored. At the very least the latter cancels out the former, at the worst we think we're absolved from global concerns because our industry will take the heat. (And I use 'we' because I think it isn't just the US here.)

Wrong! Whatever effect you see on the world economy won't be a result of what industry is doing, but is a result of what the market is doing and wanting. Until we change our individual approach (to heating, cooling, travel, agriculture, industry and the supply chain, and consumption in general), then the market forces will always push industry to producing inefficient products, even if the manufacturing process itself is less inefficient.

Legislating to force industry to become more fuel efficient is the tail wagging the dog. And it undermines the principles of free market economies not only fundamentally, but between nations -- how tough will the US be with financial penalties on US businesses compared to, say, European states on European businesses, or even the Chinese government on Chinese businesses? Each nation is going to be reticent to penalise their own domestic economy in such fiercely competitive international markets! That's why agreements like Kyoto are so difficult to make multilaterally.

Either we invent clean energy or we change our behaviour to consumption. Production and manufacturing will then naturally follow.

What about offering (more) incentives for producers/consumers of energy-efficient equipment?

You see, I go writing an essay-length message to try and get across my thoughts, and Ilija sums it up in one line!

You're absolutely right, it should be carrot not stick!

Quote:

---

Originally Posted by FiReSTaRT

What about offering (more) incentives for producers/consumers of energy-efficient equipment?

---

Well, alternatively higher energy prices would cause the need for it w/o any incentives. If insulating your house costs you 2000USD, but saves you 3000USD over the cold winter months you will likely go ahead and pay for it, unless you prefer paying to heat the universe. Even taking out huge interest loan will save you money.

People in europe may like to drive 8cyl, 5l monsters, but it's expensive both in gas prices and in terms of space. In the US market every time the gasoline prices increase the demand for SUVs decreases and for sedans increases, just as you would expect. Investing in new technology is expensive, but the big businesses are not poor. As the supply for oil is limited eventually they will do it, when the returns on their investments are high enough. They are anything but dumb. I'm sure there are plenty of high-skilled PhD's that get paid way over the median salary to model these things, so that the management can make profitable decisions.

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

Quote:

---

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 :D

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

Quote:

---

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. :shrug:

James.

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

Quote:

---

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.

Quote:

---

Originally Posted by JMS

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

---

:shrug::shrug::shrug:

I have no idea how you read what you read in my posts. I don't care really whether the current US government is trying to increase the prices or not. What I care is what's the net effect of increased oil prices on the US economy. How it's distributed within the economy is a slightly different issue.
As far as the link I read it and didn't find anything particularly interesting as the 'myths' that are being dismantled to me seem very shallow at least the way they are stated and most of the arguments equally shallow. The idea of the article seems to be that we're good the way we are now and there's no reason to look into anything else. I really don't believe in arguments by politicians or political appointees when all they rely on is sentiment instead of backing them up with numbers.

Is this not your post?

Quote:

---

Originally Posted by gugi

I've been thinking for a while now that while I may not like the decisions politicians are making I may be looking at it the wrong way, and they may be actually doing what's best for their country.

We all know that the international markets are fairly deregulated, but can be manipulated by powerful governments. So when the US government consistently takes steps that bring insecurity to the market increasing the prices it makes me wonder whether they aren't doing it because it's actually better for the country (we already know it's better for oil companies).

Things that come to mind
- The strength of US is know how and technology. It's more energy efficient than most everybody
- Energy inefficient countries are becoming more competitive with US
- If the energy prices are to go up it will hurt more the energy inefficient manufacturing than the energy efficient one, making the second more competitive
- US has critical influence over one of the largest producers of crude oil and can manipulate the market in the opposite direction it needs to.

After all in a market economy the most valuable players to US are the ones on wall street, who have expertise in complicated financial schemes like nobody else, and are thus in the best position to take advantage of unstable market, and not the 'middle class' who is probably affected negatively 'at the pump' and the 'heating bills'.
Just how the free market works. I always thought the message was 'If the gas prices are too high for you, the best is to find a better job or else deal with it any way you like'.

---

And how exactly my red colored statements above are to be read:

Quote:

---

Originally Posted by JMS

Read, baaad America. poooor innocent rest of the world.

---

I usually try to avoid using the labels 'good', 'bad', 'evil' as they are fairly simplistic and inapplicable to most common day activities.

And as far as the red emphasis... uhm, are you suggesting that the decision to label Iran's Revolutionary Guard as a terrorist organization has nothing to do with the oil price increase it correlated in time with? Or other 'saber rattling' declarations/reports... which bring consistency? The standard way to interpret these is that "we do it because it's the right thing to do, even if it costs us". I'm merely wondering about the 'costs us' clause. Why I do it - it's professional deformation, if you will - I get paid to analyze things and look at them in many different ways.

And yes, I agree that any hypothesis can be called ludicrous until there are facts that prove that it is or it that is not. What you call something doesn't affect whether it is correct or incorrect.

I think the red words are the ones that Jesus said.

(I couldn't help myself)

Quote:

---

Originally Posted by Nickelking

I think the red words are the ones that Jesus said.

(I couldn't help myself)

---

:roflmao:roflmao Someone had to say it!

oh man... here you go then

thus spaketh I in the day of the great dillusion
woe to uhmm.. you uhmm, i mean thee... who turn a simple man into a prophet... because you have made him sin, but you will be judged for his sins...

here you have it.
how come no serious faces... ah i found a good one
:cool:

To my understanding there are countries that have gas subsidies to keep it's citizens mobile and (hopefully) move the economy. These subsidies keep the gas prices extremely low, so the citizens most likely don't feel the strain. With less of a strain the citizens would use more gas and travel more freely. Wouldn't this raise demand also?

Quote:

---

Originally Posted by custommartini

To my understanding there are countries that have gas subsidies to keep it's citizens mobile and (hopefully) move the economy. These subsidies keep the gas prices extremely low, so the citizens most likely don't feel the strain. With less of a strain the citizens would use more gas and travel more freely. Wouldn't this raise demand also?

---

And of course these countries who do this need to sell their gas and oil at a much higher rate to the rest of the world to make up for the shortfall that their subsidies created!
Good point brother Brendon, I hadn't considered that!

Hmm maybe, since they U.S produces so much of the worlds food supplies in the form of grains maybe we should show the world and those arab countries and triple or increase by 10 fold the price of a bushel of wheat and corn. Afterall they would have to pay our prices. they have to eat don't they?

You know there is this rumor that many years ago some mad scientist came up with an engine for a car that would run on water and the automakers bought it and in turn sold it to the oil companies who locked it away somewhere.

That's a good idea- at least then we could get our farmers off the subsidies and stick the bill to the people who stick us with high prices.

Here's a link to youtube about a fellow claiming to have been an executive in the boardroom where they openly talked about manipulating the price of oil and claims there is enough oil in alaska to power the US for over 200 years. His claim about how the World Bank and IMF are profitting the most with there blantant manipulation is pretty intriguing and could explain alot if true.

http://www.youtube.com/watch?v=NbakN7SLdbk