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The biggest reason gas is too dam' expensive...

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  • #46
    i thought this was the reason oil was going through the roof....??


    apologies in advance for my rather droll humour. some excellent posts here but i couldn't resist
    Illegitimi non carborundum

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    • #47
      Originally posted by JAD_333 View Post
      Full speed and hitting walls are methphors in your way of thinking. So, your presumption is wrong. What I was getting at is that we have in place today a standard of living and an economic system that depend a great deal on oil, and that a sudden spike in the price of oil threatens both. Money that people would be normally using to buy goods and services they now have to spend on fuel. That means factory slowdowns and loss of jobs. Industries themselves are affected and must pass the higher cost of fuel on to consumers. Soon enough we are in a downward economic spiral with depression staring us in the face. Personally, I'd just go and live in the hills and not worry about it. Ideally, people and industry would be able to turn a knob and go to an alternative fuel source, but we don't have one that can meet current demand for energy. Thus, the right approach is to lower the price of oil to keep things running reasonably well and, at the same time, get down to some serious effort to replace oil with another energy source. Shock therapy is not the answer for any prolonged period of time; it does, however, serve to scare the beejeesus out of people so they get serious about conservation and demand some real change.
      I know all that Jad, but the key is in time. Time needed to transform the economy to use different energy source. I agree on speculations but are they justified or not that is the question.

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      • #48
        [QUOTE=ned kelly;506026]i thought this was the reason oil was going through the roof....??


        That would be a strong contender in The Worlds Most Pointless Conveyance!
        Semper in excretum. Solum profunda variat.

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        • #49
          Originally posted by JAD_333 View Post
          A somewhat analogous example of the phenomenon I am talking about happened some years back when the Hunt brothers drove the price of silver up from below $10 to $50/oz. Demand for silver at the time was flat and there was plenty around. But the price said no, there is a shortage.
          In economic terms, no. High prices mean surplus, not shortage. Shortages exist when prices fall below the balance point.
          I enjoy being wrong too much to change my mind.

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          • #50
            Originally posted by Versus View Post
            I think that it is in speculations but speculations are based on a fact that oil supply is limited and that the demand for it is rising and it will continue to rise in the future.
            Oddly enough, I agree with you on this. It certainly seems plausible that a large part of the price increase is due to people looking ahead and seeing a decrease in the supply. Which is a very good thing, as it will increase incentives to increase energy supplies, thus preventing any sort of 'peak oil' crash.
            I enjoy being wrong too much to change my mind.

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            • #51
              Originally posted by ArmchairGeneral View Post
              Oddly enough, I agree with you on this. It certainly seems plausible that a large part of the price increase is due to people looking ahead and seeing a decrease in the supply. Which is a very good thing, as it will increase incentives to increase energy supplies, thus preventing any sort of 'peak oil' crash.
              Awwwww,that is a very brave act. I hope, though I am right on this one, otherwise we all will suffer a fate of kittens locked up in a room full of pit bulls. Hayekean economic has a cynical laugh on my hopes though....
              Last edited by Versus; 16 Jun 08,, 17:09.

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              • #52
                Guys have you seen this? Look, I dont vauge for what I dont know and I dont know this mans credibility so I leave that to you.

                Perhaps we should be asking ALOT more questions.

                In the sense of open mindedness give it a look and see what you think.
                The Energy Non-Crisis
                Fortitude.....The strength to persist...The courage to endure.

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                • #53
                  Originally posted by ArmchairGeneral View Post
                  In economic terms, no. High prices mean surplus, not shortage. Shortages exist when prices fall below the balance point.
                  You are citing a general economic concept. It does not, however, refute the point that oil prices today do not ENTIRELY reflect either the current level of supply or demand. Artificial conditions can exist which skew both. Heavy speculation in oil futures causes spot (today's) oil prices to rise. If the cost of a contract for oil to be delivered in the future drives the current price, there can be only one of two possibilities 1) oil is in short supply due to abnormal conditions or 2) investors believe it will continue to be in short supply and are buying it now to take advantage of what they believe will be a higher price in the future. There are no abnormal conditions. What we have is a form of hoarding and that is PARTLY the reason why prices are so high now.

                  You are right in general that high prices suppress demand which in turn increases available supply. But in the case of oil there was no supply problem when prices skyrocketed. This is not a case of bad weather causing a shortage of cocoa beans or coffee. This is a case of investors rushing to buy up oil and producers who could have but didn't until now increase production.

                  Why should they? The same oil was changing hands at higher and higher prices while in fact the oil being produced (pumped) was adequate to meet demand. In other words, this is an investment driven bubble, which will eventually bust.

                  Now, I don't mean to say that when the bubble busts oil will go back to $40/bbl or even $80/bbl, where it was when the current price spiral started, but it will go back under $100/bbl. Even at that level, there is plenty of incentive to spur efforts to develop alternatives.

                  Suffice it to say that the current high price of oil is not sustainable given the world economy's dependence on oil. If it continues, consumption in non-oil sectors of the economy will decrease and that will lead to economic contraction, weakened currencies and inflation.

                  All these pie in the sky notions that $135/bbl oil prices is good because it will lead us to finally break our dependence on oil are silly insofar as they expect it to happen while the price stays high. Fact is we don't have any adequate alternatives yet and we don't know when we will, and the effort to find one will cost money. Meanwhile bleeding our economies is no help, incentive though it may be.
                  To be Truly ignorant, Man requires an Education - Plato

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                  • #54
                    Originally posted by Dreadnought View Post
                    Guys have you seen this? Look, I dont vauge for what I dont know and I dont know this mans credibility so I leave that to you.

                    Perhaps we should be asking ALOT more questions.

                    In the sense of open mindedness give it a look and see what you think.
                    The Energy Non-Crisis
                    Worth looking into, but it seems a bit fantastic that our own government is holding back such vast reserves.

                    Here's one that has the government impematur on it.

                    http://www.usgs.gov/newsroom/article.asp?ID=1911
                    To be Truly ignorant, Man requires an Education - Plato

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                    • #55
                      54 posts and NO ONE has gotten the real reason why gas is too dam' expensive.

                      it's because the Butter Cookies will it so- Butter Cookies, the future of energy.

                      :))
                      There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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                      • #56
                        Quite frankly, I thought it was because of the midichlorians.

                        -dale

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                        • #57
                          Nah it is a coalition of Smurfs and Tranbillian Nomes whom are driving prices up. They are secretly supplying Atlantis as we speak. Their plan is to supply Atlantis with enough fuel so it can surface once again and bring new order to the world. And the whole project has been financed by Bulgaria.
                          Last edited by Versus; 16 Jun 08,, 19:49.

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                          • #58
                            Originally posted by ArmchairGeneral View Post
                            In economic terms, no. High prices mean surplus, not shortage. Shortages exist when prices fall below the balance point.
                            Shortages exist when I have to breakout the Louisville slugger to hold my place in the gas line.:))

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                            • #59
                              Originally posted by JAD_333 View Post
                              Worth looking into, but it seems a bit fantastic that our own government is holding back such vast reserves.

                              Here's one that has the government impematur on it.

                              USGS Release: 3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation—25 Times More Than 1995 Estimate— (4/10/2008 2:25:36 PM)
                              Not to mention that it can trigger a violent response from all those gun lovin nutcrackers or worse...

                              Comment


                              • #60
                                Originally posted by JAD_333 View Post
                                Shek:

                                It isn't about who is blaming who. It's about why the price is high. It seems you believe it's the suppliers and/or producers. That's a fair opinion, but it isn't a proven fact, or else there wouldn't be all this speculation about causes.
                                I think the reason prices are high is because demand is rising faster than supply. I'm just pointing out that citing OPEC as an honest broker in pointing the finger is probably not the best way to build a case.

                                If I am not mistaken, you believe that unless it is being stored in tanks somewhere, then there is a shortage in the market, ergo the price goes up.

                                I maintain the seller will sell at $80 just as soon as sell at $135. We know that from past experience. The production rate, as you yourself have shown, is at the highest level it has ever been. Oil is flowing at a rate that meets demand, so why is the price going up?
                                If the supply of oil was increasing at the same rate demand was increasing, then you wouldn't see an increase in price. However, we see the rate of growth of demand outstripping the ability to increase supply, and so the price is increasing.

                                Also, oil sold at $135 may not be sold if the price were $80. If it costs you $81 to extract a barrel of oil, will you sell it for $80? The marginal barrels of oil being produced today are the most expensive barrels of oil to produce.

                                It's being hoarded by speculators in the form of futures contracts.

                                If we look at trading on the NYNEX for oil futures, we see an enormous jump over the past year in the number of oil contracts created. The same phenomenon is happening on the COMEX with grain and other ag staples that are reported to be in short supply. This is not all on account of consumer demand.
                                Remember, for everyone that goes long on a futures contract, someone must go short. The futures market is a zero sum game.

                                Originally posted by JAD_333
                                I am going too long here, as is my habit. I'll end with one more thought. Peak oil is here. There are 1 trillion barrels of known reserves and it is estimated that they will last 40 years at today's anticipated growth in demand. The owners of that oil do not want to get caught holding it. A high price just might do that.
                                I think that it is a possibility that we may have reached a plateau in oil production. However, we will never run out of oil.

                                Speculation and the Price of Oil - Seeking Alpha

                                That immediately insinuates that a few comments about oil futures markets are justified. In l980 the volatility of physical oil prices became so large that a futures market became attractive to speculators as well as dealers in physical oil. For instance, , there was a decreased propensity by some categories of the latter to hold inventories as a precaution against having to buy in a rising market. Instead, individuals and firms requiring oil in the future bought a number of futures contracts, which (as explained in my textbooks) enabled them to lock in the existing oil price. Later they went into the spot market to buy their oil, while at the same time making an offsetting sale of futures contracts. The markets for oil options and oil futures-options also functioned well. Without going into detail, the presence of these derivative markets contributed to restraining rather than increasing the price of oil, since they reduced the risks faced by buyer and sellers. They upgrade market efficiency by providing an increase in the quality and quantity of information and, as noted once by Professor Lester Telser, “they facilitate trade among strangers”. Well, so do some of the bars near the university where he teaches, but perhaps that subject belongs in another scientific discussion.

                                Then why has the oil price been lingering around $130/b for the last few weeks? To begin, it is not “little guys” in Las Vegas or big guys at the New York Mercantile Exchange (Nymex) or the International Petroleum Exchange (in London) who are responsible, but changes that have taken place in the actual movement over time of [FLOW] supply and demand, as well as the expected movement. To be precise, expectations about the long run price are greatly influenced by the rapidly increasing demand of China and a few other countries, as well as the steadily increasing demand of many other countries (to include countries that are large producers and exporters of oil), and movements in short run prices. The latter now helps to emphasize the slow growth of readily accessible conventional and non-conventional oil supplies – the simple fact that the supply response is no longer as flexible/spontaneous as it once was.
                                InvisibleHeart.com: Sample Pages: Chapter 1 of The Invisible Heart: An Economic Romance, by Russell Roberts

                                "Actually, this is the senior elective, 'The World of Economics.' There is no prerequisite for this class other than an exceedingly open mind. Quiz time!" Sam suddenly announced with delight. "Take out a piece of paper and put your name at the top."

                                A few quiet groans rose up from the students.

                                "I know," Sam said. "First day of class, senior year of high school, and already a quiz. Don't worry. It's easy."

                                He went to the board and wrote down two numbers: 531,000,000,000 and 16,500,000,000.

                                "The first number, 531 billion, is the amount of crude oil, measured in barrels, that's still under the ground. They're called reserves. The second number is the world's annual consumption of crude oil. Here's the quiz: when will the world run out of oil? You have one minute."

                                "One minute?" a protester blurted out. "Can we use a calculator?" asked another.

                                "Yes," Sam said.

                                "Do you want it in days or years or hours or minutes?" asked another.

                                "That's up to you."

                                As the students pounded on their calculators, Sam looked peacefully around the room. The Edwards School was a beautiful place to teach—richly patterned, full-grained oak everywhere, from the door frame to the crown molding to the desks arrayed in neat rows. Sam felt the sweet ache of nerves and anticipation that marks the first day of a new school year.

                                There were 18 kids in the class. A tall blond-haired girl slouched in the third row, staring off into the distance, refusing, it appeared, to even try the quiz. The others continued to scribble feverishly and work their calculator keys. "Ten seconds!" Sam announced. More groans.

                                "Time's up. Circle your best guess, please." Sam walked down the rows, picking up their papers. He leafed through them as he made his way back to the front of the room.

                                ***

                                By the way," Sam was saying, "that 531 billion barrels of reserves and the 16.5 billion barrels of consumption were actually for 1970. If nothing else had changed, we should have run out of oil around thirty years later. But by the time the year 2000 actually rolled around somehow reserves had somehow climbed to a trillion barrels even though the world was using about 26 billion barrels annually. We suddenly had almost forty years worth of consumption left."

                                "How could that be?" a student asked.

                                "Self-interest. When the price of oil jumped up later in the '70s, consumers found ways to use oil more efficiently and producers found new reserves. So we're even farther away from running out of oil than we were in 1970. Never underestimate the power of self-interest. You see this tie?" Sam said, pointing to his neckwear. "The profile on this tie is Adam Smith, probably the most famous economist of all time. He understood the power of self-interest as well as anyone." The bell rang, announcing the end of class.
                                "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

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