Another Reason for High Gas Prices?

[Toro]

Why are politicians so eager to pin the blame for oil prices on speculators? Because it lets them believe that we don’t have to adapt to a world of expensive gas.

A perhaps even bigger reason why Republicans want to blame speculators for sky high gas costs is that they don't want the public to put the blame where it's really due – on them.

For decades Republicans have constantly blocked Democratic attempts to increase fuel mileage and many other efficiency and conservation measures. They've also constantly blocked or cut spending on alternative energy, all the while mindlessly chanting "Free market". The economics community had proven long ago that there are many situations and ways where a government role can add greatly to efficiency, wealth, and welfare, but this is a party that long ago refused to think beyond slogans. They acted as though not being simple-minded was a vice, liberal and un-American, when in fact, thinking, and believing in science, evidence, and logic is one of the things that made this country great, and the richest and strongest in the world.

Now we're paying a big price for Republican ideology in energy and so many other things. Had the Democrats not been outvoted, filibustered, and vetoed from enacting their "big government" mileage, conservation, research, and other energy measures over the last almost three decades, gasoline might be less than half its price today...

Economist's View: "The Blame for High Gas prices"

Unlike the partisans who want to blame only Democrats or only Republicans or only speculators or only OPEC or only environmentalists or only China and India or only oil companies, etc etc, to support their own pre-conceived dogmatic worldview, there is plenty of blame to spread around.

 

[BaronVonBigmeat]

Ewww....Paul Krugman. For shame, Toro.

For decades Republicans have constantly blocked Democratic attempts to increase fuel mileage and many other efficiency and conservation measures. They've also constantly blocked or cut spending on alternative energy, all the while mindlessly chanting "Free market".

Government spending on alternative energy hasn't produced jack squat. Now that there are real reasons to find alternatives (ie, $4/gallon gas), private companies are producing huge technological gains in terms of batteries, solar, alternative fuels and so forth. Private companies have done more to find realistic alternatives to gasoline in the last 5 years than government research has done in the last 30.

And CAFE (Corporate Average Fuel Economy) laws haven't reduced our energy consumption. Thanks to the rebound effect, people can use their fuel savings to live even further from work. Suburban sprawl is the real root cause of our oil addiction btw, and it's almost entirely caused by big government policy at all levels of government.

Really, there isn't lots of blame to spread around. The high cost of gas is almost all due to big aggressive government. Namely the Iraq war, and it's related expenses.

 

[jreeves]

Ewww....Paul Krugman. For shame, Toro.



Government spending on alternative energy hasn't produced jack squat. Now that there are real reasons to find alternatives (ie, $4/gallon gas), private companies are producing huge technological gains in terms of batteries, solar, alternative fuels and so forth. Private companies have done more to find realistic alternatives to gasoline in the last 5 years than government research has done in the last 30.

And CAFE (Corporate Average Fuel Economy) laws haven't reduced our energy consumption. Thanks to the rebound effect, people can use their fuel savings to live even further from work. Suburban sprawl is the real root cause of our oil addiction btw, and it's almost entirely caused by big government policy at all levels of government.

Really, there isn't lots of blame to spread around. The high cost of gas is almost all due to big aggressive government. Namely the Iraq war, and it's related expenses.

 

[BaronVonBigmeat]

There they go again, those elitist, liberal, academic economists and scientists with their fancy book learnin'.

I wonder what this non-economist non-scientist thinks the whole ethanol debacle has been? Here's a prime example of condescending ivory-tower eggheads in government rolling up their sleeves, and getting results that were exactly the opposite of what was intended. And now we see the supreme irony of liberal policies on alternative fuels (promoted when republicans were in power, btw) pushing millions of impoverished brown people in other countries to the brink of starvation.

 

[Toro]

I wonder what this non-economist non-scientist thinks the whole ethanol debacle has been? Here's a prime example of condescending ivory-tower eggheads in government rolling up their sleeves, and getting results that were exactly the opposite of what was intended. And now we see the supreme irony of liberal policies on alternative fuels (promoted when republicans were in power, btw) pushing millions of impoverished brown people in other countries to the brink of starvation.

I think ethanol has more to do with the power of the farm lobby than anything else.

 

[editec]

I do not think I KNOW that the government could help the American people by promoting energy efficiency in ways we don't even consider right now.

There is no excuse for the footdragging we've done for the last thirty years in the area of energy independence except that this government is the government of the wealthy, by the wealthy FOR the wealthy.

Always was, likely always will be too.

Incidently last week's ECONOMIST suggests that the current run up in oil prices is due to price manipulation...they didn't use the word conspiracy, but clearly somebody is manipulating the prices for their own benefit.

There is, according to the ECONOMIST NO shortage of supply...none!

 

[Chris]

The reason oil prices are going up is because China and India are becoming developed nations. China is adding 9,000,000 cars a year to its roads. In 10 years they will have as many cars as we do. We have to change direction and be smarter.

 

[editec]

that explains a very small part of the problem.

there is no shortage of oil according to the ECONOMIST.

While I have every reason to think you're right about the inevitable pressure on prices, I'm inclined to trust their judgement on this current inexplicable spike in prices, Kirk.

This is NOT a spike resulting from supply demand problems.

 

[jreeves]

that explains a very small part of the problem.

there is no shortage of oil according to the ECONOMIST.

While I have every reason to think you're right about the inevitable pressure on prices, I'm inclined to trust their judgement on this current inexplicable spike in prices, Kirk.

This is NOT a spike resulting from supply demand problems.

The price of oil is influenced by supply-demand, speculators and taxes. You can't view the total picture of price without considering each and every influence.

 

[politicsezine]

I'll take my turn pointing the finger: China and India are the reason for high oil and gas prices.

Their GDPs have grown between 7% and 10% every year for the last 15 years. The result is 2.4 billion Indians and Chinese who can now afford to buy more things, and a booming middle class that can now purchase cars.

Furthermore, the Chinese and Indians pay way more for their gasoline than we do in North America. Oil companies there are really profitable because there is less government control and concern about oil companies trying to gouge the consumer.

However, because most of the world's oil comes from Middle Eastern members of OPEC and countries bid for ownerships of those oil exports it means that American, Indian and Chinese oil investors are in a bidding war to control where those oil exports go.

In the United States our dependency on cheap oil is now becoming a drag on our economy. Even though the USA gets most of its oil from Canada, Venezuela, Africa and Iraq the global demand for oil pushes the oil prices in those countries up too (China is importing oil from every source they can find). End result? The USA is shit out of luck.

Oil is one of the reasons China's economy is growing so fast, but the increase in oil prices is having the reverse effect in the USA and damaging the economy.

Because China's economy is going to continue to grow oil demand is going to get worse, not better, and the USA needs to either learn to deal with high gas prices... or start using an alternative source like hydrogen.

 

[editec]

The price of oil is influenced by supply-demand, speculators and taxes. You can't view the total picture of price without considering each and every influence.

True enough, I suppose.

Please explain to us how the price of oil can double in a year when there is no shortage in supply or equivalent increase in demand.

Feel fee to consider the effect of specuators and taxes, which you apparently understand better than I do, and explain their impact on prices.

Seriously, I don't get it and truly am seeking anyone with a superior understanding of this market to help me get it.

 

[DiamondDave]

Domestic demand has not increased... international demand has... that is an important point

 

[weepingprophet]

To my fellow burdened citizens,

I compose this entreaty with a growing fury which has become such a rarity among the ranks of the sheeple. Wage increases are ceasing for many, or even giving way to layoffs, and yet prices for virtually all goods and services are increasing. Gas prices are above 4 dollars per gallon, and Diesel prices are approaching 5 dollars per gallon. This must end now.

I am calling for a unified and articulate American voice to be raised loud and clear and to be heeded by the political captains of this sinking ship. Simply put, fix the problem now or lose your positions of power and prestige. I want $2 per gallon gas and diesel by November 1st, 2008 or all incumbents will be voted out of office in the subsequent cycle of elections. If the incumbents need a sloganized translation-
Two Dollar Gas or Adios! Two Dollar Fuel or You Are Through! Two Dollar Gas or Good Bye! Two Dollar per gallon or Hit the Road!

This means that if our plea to the politicians of state and federal legislatures is not answered with decisive action (Two Dollar gas/diesel) by November 1st we will vote for the main opposition candidate to those already holding the positions (incumbents). Cut gas and diesel prices in half or you will all be removed from office via democratic voting. This may mean voting for candidates we do not like, or removing a great pork barrel senator or congressman, but enough is enough.

Dear politicians: we do not want a suspended gas tax, we do not want to see you crawl on your knees to OPEC for minor relief, we do not want to see you tapping into the Strategic Petroleum Reserves (SPR), we do not want any more staged productions of oil execs being grilled in front of dour Congresspersons, we do not want other taxes raised or money borrowed. No, we want you to correct prices by November 1st with honesty, integrity, and American ingenuity, or goodbye.

Be careful fellow citizens because you will hear many discouraging words from a surprisingly diverse range of sources- “Clearing out the legislative branches will solve nothing” “This is a knee jerk reaction by an ignorant populace” “The solution to this problem is much more complex than this impetuous response” “This will only make things worse”. My response is to say, “The politicians have done nothing for me so far, so let’s clear house and start over.”

There does need to be a permanent solution on the radar and here is a piece of it.
Our long term plan must be to:
1) Increase supply and decrease demand for fossil fuels.
2) Aggressively pursue alternate energy sources/ fuels, especially hydro and nuclear powers, and methane fuel.
3) Responsibly expand American drilling operations.
4) Build more refineries with more efficient technologies.
5) Relax blending regulations for refineries.
6) Put the speculation racket under a microscope.
7) Place “Big Oil” on notice especially regarding collusion and price gouging.
8) Allow countries such as Iraq to use oil as currency for a broader range of American exports.
9) Increase R&D budgets for public transit solutions, vehicle enhancements, etc.
10) As soon as feasible dismiss OPEC.

In conclusion, please rise up with me and make our voices heard. We are tired and we will be obeyed by our representatives or will we change representation. They can and will fix the gas price problem if their treasured positions are on the line. Join the fight, raise a racket, be heard, and God willing the power will return to “We the People.”

Thanks for your time.

Remember, we want $2 per gallon gas by November 1st, 2008 or we will vote to replace all incumbents in our state and federal legislatures.

Jeremiah Adams

 

[Paulie]

The price of oil is influenced by supply-demand, speculators and taxes. You can't view the total picture of price without considering each and every influence.

Why do you leave out the Dollar and inflation/deflation?

 

[Chris]

When your government borrows $700 billion dollars, it makes your money worth less. It is Bush's invisible tax increase.

 

[Charles_Main]

When your government borrows $700 billion dollars, it makes your money worth less. It is Bush's invisible tax increase.

On this I could not agree more. I have been saying time and time again. The answer to nearly all our problems is first to balance the budget and then to begin paying down the debt. The Deficit is the root cause of he low dollar value, and high gas prices.

 

[BrianH]

110 MPG car : News : WNWO NBC24

Guy gets 110 miles-per-gallon with an 87 mustang using an engine his '87 Ford Mustang.

I wonder how long it will take companies to squash it....

 

[Paulie]

On this I could not agree more. I have been saying time and time again. The answer to nearly all our problems is first to balance the budget and then to begin paying down the debt. The Deficit is the root cause of he low dollar value, and high gas prices.

Not just the budget deficit, but the trade deficit as well. We've been exporting our inflation to other countries which has delayed the effects here at home, but eventually those massive amounts of Dollars are going to make their way back here when those countries no longer benefit from holding them. I believe high oil prices have been an effect of this. Basically the high prices we're seeing all around us in general are an effect. And it looks like the Fed is willing to paper away the debt as it continues to be racked up, so don't expect things to get better anytime soon.

It's either stagflation for a long while, or they cut our throats and raise rates again to boost the Dollar. If that happens this time around, all hell will break loose. This nation can not survive another deflationary recession/depression this time around. We're not nearly productive enough anymore.

 

[jreeves]

Why do you leave out the Dollar and inflation/deflation?

Sorry, Paulitics, yes the crappy dollar also plays a role.

 

[jreeves]

True enough, I suppose.

Please explain to us how the price of oil can double in a year when there is no shortage in supply or equivalent increase in demand.

Feel fee to consider the effect of specuators and taxes, which you apparently understand better than I do, and explain their impact on prices.

Seriously, I don't get it and truly am seeking anyone with a superior understanding of this market to help me get it.

Best explaination I could find for speculators...

Speculators are people who buy things ahead of time, expecting the price to go up. This happens with oil, corn, pork, etc.

So let's say I'm an oil speculator and you are, Exxon. I say to you, I'll buy oil from you 6 months from now for $X a barrell. If you agree to sell it to me, then we have a deal. Now if the price of oil goes up higher than $X, I buy the oil from you and sell it for what it is currently worth and I make some money. If the price doesn't go up and is below $X, then I have to buy it from you for $X and (because I don't really want the oil) I have to sell it at a loss.

The question you didn't ask is why do speculators drive up the price of oil. Supply and demand. They are taking (mind you, future) supply off the market. While it is likely that the supply will go right back on the market, it is not guarenteed. Besides, people assume that speculators know what they are doing and if they are buying a lot right now, that surely the price of oil must be going up in the future, thus the oil in hand today seems more valuable. In the peaks and valleys of the market price, speculators make the peaks higher and the valleys lower.

There is a shortage of oil, kind of. The supply of oil has remained constant, but the demand has increased. India and China are starting to industrialize far more than they have in the past, and so more people can afford cars, and there are more diesel generators, etc.
I don't understand why these countries don't start building an infrastructure of renewable resources (ethanol, etc.) from the get-go. They, unlike us, are no so married to oil at this point. It is difficult (though hardly as difficult as some would make you believe) for us to switch to another fuel source.
What is an oil speculator? - Yahoo! Answers


Speculators have a perceived oil shortage, which in reality there is no oil shortage. At least yet, but speculators are trying to stay ahead of the shortage curve.