Higher gas prices here to stay…
So I read this article today about how OPEC will cut production to keep oil at $55/barrel. So there you have it, that is why gas is expensive. It’s not the government’s fault. Oil prices are not a political issue. I would love to see oil prices come down again, I would love to pay $1.15 for gas again, but oil is about supply and demand not about the President.
Now granted, Congress could open up more drilling in ANWR to get more supply out there. They could build more refineries to help the cause as well. But to say that any political party, or government official, sets the gas prices is completely false.
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Agreed! Let it also be known that no company is setting gas prices either. Like you said, this issue is about the market, i.e. supply and demand. To be even more specific, the oil prices we see published in the news aren’t even current prices; they are the future contracts that are being traded. So if you want to be even more accurate in your oil debates, sign up for a basic econ course at your local college and learn more about our great market system!
Comment by BGerdin — October 5, 2006 @ 12:05 pm
i don’t see how oil isn’t a political issue…
Comment by brooke — October 5, 2006 @ 12:25 pm
The government has no control over oil prices.
People gave Bush bad approval ratings when the prices were high, now that they’ve dropped they give him good approval ratings. He had nothing to do with the oil prices.
People want the government to do something about the prices, but the government can do about oil prices is to make more supply (by new drilling and refineries).
They did not make oil prices go up to nearly $80, or down to the approx $55 it’s trading at today.
Comment by bleaus — October 5, 2006 @ 12:36 pm
I call BS on bleaus. Sure, the gov’t doesn’t *control* oil prices, but they it sure does influence them a great deal, maybe even just as much as oil companies et al.
Arguing that oil prices are entirely dictated by supply and demand is short sighted. Demand for oil is almost completely independent of supply. People don’t drive or heat their homes because there’s just so much oil around, they drive and heat their homes because they need to. People drive more during the summer because they want to, not because there’s a sale on gas that week.
Government’s role in society, at least in the society that the USA has constructed, is to provide people with basic common necessities and protect it’s citizens with law enforcement and military operations (when absolutely necessary). You’d be hard pressed to find anyone who didn’t think that energy was a basic common need in today’s world. Therefore, the government has policies and regulations on how energy is made available to its citizens. These may take the form of tax incentives for various types of energy consumption or production, grants to find new sources of energy, and trade laws and tariffs for energy imports.
Now, you could maybe argue that the government can’t make the price of oil go up or down in a small window of time, but that’s because very few single influences on oil prices can do such things (even the BP pipeline incident didn’t change anything), not because they do not influence oil prices at all. If the current government would have spent less time worrying about the gays and a little more on energy conservation and alternative energy sources, perhaps we wouldn’t have had that year long just about $3 a gallon spree.
You might find a subscription to something like The Econimist helpful in learning the intracacies of global markets and governmental role in the economy.
Comment by schdav — October 5, 2006 @ 1:50 pm
While I agree that saying government officials set prices is wrong, I don’t think that it’s fair to throw up ones arms and just point at the oil companies and say “they did it”. You mention supply and demand but then only delve into solutions that address the supply side of the equation (drilling in ANWR ) and don’t get into the demand part. This is where I feel the US could make the biggest change.
Oil deposits exist where they exist and currently, and for the foreseeable future, a good chunk of the worlds oil is sitting under countries that either don’t like us all that much or at least want to make their money on it. That’s been the case and will be the case for a while as far as I can tell.
How much we depend on this finite resource seems like something that can be varied. Hydrogen, wind power, water power, etc can take up some of the slack for oil if we build infrastructure to harness those resources.
Sidenote: I know that electricity in cars is a big topic but that just shifts the generation from the cars to the electricity plants so that’s really not a “solution” just a transport mechanism for power.
I know that renewable resources are really popular now but it seems like we’re getting on the bandwagon a little late. Building infrastructure for this stuff takes years and while we’re ramping up now, a solution to the present issue would have needed to start a while ago. To me, it seems like the debate should be on the current administration’s energy polices through the course of time they’ve been in power, not on changes in the last 6 months or some other, smaller timeframe. This is an issue of foresight, or the lack of it, and possibly of the oil companies dealings with public officials to alter the introduction of alternate fuel options.
Additionally, I think that the current administrations foreign polices have some effect on OPEC and its member countries stances towards the oil consuming market and the US specifically. I’m not going to try and quantify the effect but to assert that our foreign polices have no effects on oil supply cuts/prices/policies seems like the issue is being minimized from the complex equation that it is down to one point. This seems like over-simplification to me and not the most accurate way to go about debating and suggesting future processes. The standard analogy of picking on the kid with the ball and him deciding to leave and taking his ball with him isn’t entirely inaccurate in this case. We don’t have the ball, therefore we might not get to make all the rules.
That being said, I’m not an economist and I’m not a political theorist. I just feel like this issue is being addressed as either a “this is a problem now, lets assign blame” or alternatively “look, I passed a bill this week, go me” when the effects of a bill on energy issues likely won’t have an appreciable effect for years and changes, if they are to be meaningful, need to be made to core policies, not one off bills to slot X dollars for research into technology Y for the next 5 years. This is a lifestyle/holistic challenge and needs to be addressed with a holistic solution that addresses current consumption, alternate options, avoiding future situations like the one we’re in now, etc.
Comment by JoeBuck — October 5, 2006 @ 2:07 pm
Oh, and I like you Austin, this is just me pecking a bit of an ideological tussle with a friend, not an attempt to thumb my nose at your or your stance. We’re all free to hold our own beliefs and act in a way that reflects our believes and I respect your stance and I respect the fact you are working to exact positive change in our government. Also, you wear a suit which lends you instant credibility
Comment by JoeBuck — October 5, 2006 @ 2:10 pm
Dave, it seems that you’re pegging the last 30 years of energy policy on the current administration, which doesn’t seem the most fair. As you said, the energy situation takes a while to alter in any meaningful way, is 5 years enough time to do that? I’m not saying it isn’t, I’m just asking how long it takes for a given policy change to bear fruits, which I don’t know. I think some of this administrations polices are affecting the current situation, but there were fuel crisises(sp?) before we were born, if we’d gotten on the train to oil independence (which we didn’t)then I think we’d be there by now. I guess I’m saying I don’t think we can realistically peg this all on one group or one event or one anything, there are several significant and different forces at play here.
While I agree with your core tenants, that the supply angle is pretty much fixed( as in limited), I disagree that he government should, or can, via fiscal maneuvering, dictate how much fuel gets to the people at what price. A rationing system could be implemented but I feel that that would be a very poorly received temporary fix and not the way to go. I think the government can have an impact, via the mechanism you mentioned Dave, but, at the end of the day, we the people must also bear some burden. While people need to drive and need to heat their home, they can conserve on both. Nearly every energy related company will do an energy audit to figure out if you could be saving money via insulation, sealing windows, etc. As far as traveling, we, as a society, are very fond of cars and a sense of freedom,which we enact by going wherever we want on a whim when we could accomplish the same thing while using less resources if we planned and made some small adjustments to our schedules. Many other developed countries get by with fewer cars and less driving than we do. I think we need to look a lot more seriously at car pooling and mass transit and what we “need” to do. We need to work, agreed, but do people we work with live near us? Do we *need* to take the kids to the mall four days a week? Could we do all our shopping on Saturday instead of 6 different trips to 4 different stores throughout the week? It seems to me that there are a lot of steps that could be taken that are not being brought up.
Going back to countries in Europe; they had a much, much higher tax rate on fuel, and because of that public transportation is used much more. That being said, they still felt the sting of the higher prices in their home heating bills, the cost to their governments to run the mass transit and in other sectors. The fiscal incentives can influence people’s decisions but I don’t feel that incentives can dictate what people do. By definition incentives are meant to influence, not dictate.
For example of ineffectual incentives consider smoking. The .gov here is taxing that through the roofs in an effort to discourage something that is pretty much universally admitted to be nothing but bad news. People still do it though.
At the end of the day, I feel the government needs to foster innovation as we need alternatives and people need to conserve what we’re using now until the alternatives are realistically available and even then, I feel this is a call to the US and the west as a whole to address the rate and manner in which we consume resources. Even if we ‘fix’ the energy crisis, what’s next, the copper crisis? ( there’s a projected shortage on copper due to the developed worlds fondness for electronic gizmo’s coupled with our poor rates of recycling on discarded items ). Not to be a tree hugging hippie but I think we need to start looking at ways to be less taxing on the earth or we’re gonna be right back at this point for some other resource in the future, maybe copper, maybe water…something.
Comment by JoeBuck — October 5, 2006 @ 3:43 pm
test one, two. trying to figure out if this comment thingy hates me or what.
Comment by JoeBuck — October 5, 2006 @ 4:55 pm
It’s barely supply and demand, as gasoline has a short-term inelastic demand. What’s happening is a cartel is using the global supplies as a tool to maintain what they consider a reasonable price. The only bad part about it is it’s a cartel, people seem to have no issue with the same thing otherwise (like Fair Trade). The big question is in how or if the government should do anything about it. It’s unfortunate that people are shortsighted enough to base their view of the government on the short-term results of this.
In my opinion, the best thing to do is let them do whatever, and just make sure they’re not putting barriers into the way of the industry finding alternatives (tarriffs/subsidies or regulations). Short term there could be cuts to the gas taxes, but people want roads, and the government shouldn’t really encourage extra use.
There are points of view that the current administration is causing the higher prices, but lets leave that out of the picture. Given that we’re importing a good chunk of it, the only real way for the goverment to force anything with sovereignties would be war (and actually a lot of people say that Iraq is about that, either in the way mentioned above or in trying to stabilize). That’s just a bad idea either way. Domestic means of control (simplified) would be increasing domestic production, subsidizing, and pushing less use. Domestic production is an issue, as many companies have found places to get oil, but it’s not yet economical to do so (oil prices are lower than the cost to extract). The government could put tarriffs on foreign oil, but that’d directly work against lower prices (and while probably good outcome in the long run, generally we don’t want to go this way). Subsidizing is bad, as it just hides the prices in bureaucracy. Everyone would pay for it in taxes, removing incentive to find a way to truly cut the cost. Pushing less use is good, but it’s inelastic for a reason. The biggest chance people have to change is buying new vehicles, and incentives on efficiency/disincentives on inefficiency are ways to push that. Base minimums on efficiency help this issue, whether they’re good overall or not. The best way to promote less use is really to let the prices rise to the point where the market finds alternatives, and not to get in the way of those alternatives being implemented. Which brings up the thoughts on whether the current administration has motives that don’t coincide with the good of the citizens.
Ignoring that, if one believes the government should actually push finding alternatives, at this point it’s unclear which technologies would actually be most economical so it’s probably best to incentivize private research (greed is a great motivator). There are ways of doing that decently without ending up paying the oil companies for a non-solution, but that’s a big issue on its own and I’m tired of typing.
Oh yea, you need a bigger (or expanding) comment box…
Comment by Jeremy — October 5, 2006 @ 8:08 pm
So Jeremy, in your opinion, what *should* be done in the present term? You seemed to mention the government pushing research into alternatives in a less then committal light and played down options to supply. I’m not sure I understand what you think a reasonable short to midterm strategy would be.
Comment by JoeBuck — October 6, 2006 @ 8:24 am
I would love to see the government do more to get us off of foreign oil. I think they could start it rather efficiently with power plants. Nuclear power is used in France for 80% of their energy (according to Wikipedia). New Jersey gets roughly 50% of their power from Nuclear Plants, while Vermont gets over 70% of their power from Nuclear Sources. Granted one must take into consideration the land mass of those states, but why not build a few more across the state and country to help move us from the oil? It is a safe technology, there have been no accidents with it for over 25 years. The standards in place help to ensure it’s safe.
MN is putting a fair amount of money into E-85. We have more E-85 pumps than any other state. I’ve heard it cuts down on gas mileage though, so it’s not economically worth it according to some (or at least it wasn’t when gas was 2.95 and E-85 was 2.55).
JoeBuck: I love having a “ideological tussle”, with friend or foe. Feel free to do it more often! I’m all about the free speech here, and free flow of information (not like the local newspapers, but that’s another issue for another day). And the comment thing doesn’t hate you, I just had to moderate them and didn’t get a chance to last night, because I had a debate.
Comment by bleaus — October 6, 2006 @ 8:30 am
JoeBuck: My opinion is that at this point the government shouldn’t get involved, other than by removing artificial limitations on alternatives. The prices need to rise a lot more to have it make economic sense for companies to pour a lot of money into development (not only to cover their cost, but to see some return).
Back on the topic of alternatives, nuclear power is a great idea long term, but the current situation is such there’s a negative financial side to selling more power (more due to the distribution system than plant construction), thus the free/cheap energy audits and peak control credits. That’s the biggest barrier to electric alternatives, as even though it just shifts the energy the economies of scale help for non-nuclear (can make a plant clean much easier than all the cars) and nuclear would reduce pollution significantly. In addition to being less efficient, E85 costs more than gasoline – its production is just subsidized. Plus people who live near the refineries are pissed at them due to the unpleasant impacts.
bleaus: That 25 years should be clarified to be no major accidents in the US.
Comment by Jeremy — October 6, 2006 @ 6:58 pm
True, that is in the US.
Also, MN only subsidizes Ethanol 13 cents per gallon.
Comment by bleaus — October 7, 2006 @ 10:12 am
I respectfully disagree with you Jeremy. I think the government should be pushing, via funding, the advancement of energy research and development. This is an issue that is crucial to our economy and our existance ( not to be dramatic but there’s already issues with MN families not being able to heat their homes and that’s pretty low on the hierarchy of needs ). Maybe the governmnet signing over large blocks of money isnt’ the way to go but what about something like an X-prize type contest? The US gives 25 million to the first company to achieve each of these 6 goals. Seems like a good way to spur innovation to me.
I think with all the lobby money floating around, and no shortage coming from the oil industry, that maybe the government should toss money into the free market and see what can be done. Like a kind of acknowledgement that there’s a conflict of interets. Maybe that’s not hte reason to do it, but I like the idea.
Comment by JoeBuck — October 10, 2006 @ 12:37 pm