[SFU2236]

In a nutshell, for people who don't understand much about economics and business, I decided to write this 5 page document summing up reasons why the price of gas is so high, its affect on the economy, and a decent yet ambitious way to fix it.


I encourage you to spread this document to other forums, or even to send them to your congressmen. I do not use big numbers, and I did not write a 200 page thesis, in order for it to be easy to read and understand.

It's in a Microsoft word .doc 97-2003 format:


{edit: create a PDF file please, you aren't authorized to post documents. see [email protected] with questions, thanks!}

[Starvid]

I can write it even shorter: high prices is the market's way of telling you that you use too much. Use less and prices will go down.

[SFU2236]

If you read it, you'd understand elasticity

Meaning that oil is a necessity. If people stopped driving, it would cause a major economic downfall worldwide. If trucks stop moving, every retail store would go out of business. If you didn't drive, we wouldn't have corporate CEOs and we wouldn't have people coming in to work.

Not driving is not the solution, it's an over-simplistic idea which people come up with while failing to review the consequences.

[MonteQuest]

If you read it, you'd understand elasticity

Meaning that oil is a necessity. If people stopped driving, it would cause a major economic downfall worldwide. If trucks stop moving, every retail store would go out of business. If you didn't drive, we wouldn't have corporate CEOs and we wouldn't have people coming in to work.

Not driving is not the solution, it's an over-simplistic idea which people come up with while failing to review the consequences.

Yes, as I have written:

Solving Oil Depletion; Solutions in Isolation

[Starvid]

I do know what elasticity is. I did study economics before I decided to switch to engineering.

I also remember that elasticity is not a fixed value. It is different over different periods of time.

[Cashmere]

SFU - we've got it figured out here, no worries.

I'll keep it short for you.

World production of oil is now dropping faster than demand.

Prices therefore go up.

There are no alternatives to oil.

That's it.

No 5 pages needed.

By the way, you're missing a "T" in your letters.

[SFU2236]

I do know what elasticity is. I did study economics before I decided to switch to engineering.

I also remember that elasticity is not a fixed value. It is different over different periods of time.

Oil has remained primarily constant since it was used on a massive scale, and businesses began depending on it for transportation.

It's simply a measure of necessity. Luxury driving, like taking a cruise, flying for fun, driving to the next town over for the hell of it, will decrease dramatically as the prices keep getting higher. But this only makes up a very small fraction of the oil being bought. Most of it is from necessity, from businesses, getting to work, and so on.

Thus, the demand will stay the same, and prices will increase via the artificial demand created by oil companies, increasing prices.

With a massive profit margin now on oil, seemingly unprecedented in any industry ever (since there was a monopoly on oil nearly 100 years ago), what's the difference between this massive profit margin and the one a monopoly would obtain in a similar situation?


There isn't a difference, the price increase is simply at a slower pace, meaning we need some intervention here otherwise the oil companies are free to reign on any price they want.

[SFU2236]

SFU - we've got it figured out here, no worries.

I'll keep it short for you.

World production of oil is now dropping faster than demand.

Prices therefore go up.

There are no alternatives to oil.

That's it.

No 5 pages needed.

By the way, you're missing a "T" in your letters.

According to the Saudi's, they've been increasing production of oil, and as you should know they are the top supplier for the United States.

Knowing that the oil companies have no competition but themselves, they follow each others trends. One raises price, the others ensue, because if they didn't would mean suicide. Note the airline industry, if an oil company decided to keep its prices low it would probably lead to a cutthroat market for oil, leading to the death of multiple companies.

In order to increase prices, an oil company will buy up every possible barrel it can, and store them. Now releasing just a fraction of the barrels it has bought to the pumps, it has artifically created demand. It has bought "x" barrels, while the pumps only see "y" barrels, where x>y, leading to higher demand and thus higher prices.

Everyone follows suit, there is no end, problem repeats to infinity until a competitive market is established.

[basil_hayden]

SFU - we've got it figured out here, no worries.

I'll keep it short for you.

World production of oil is now dropping faster than demand.

Prices therefore go up.

There are no alternatives to oil.

That's it.

No 5 pages needed.

By the way, you're missing a "T" in your letters.

According to the Saudi's, they've been increasing production of oil, and as you should know they are the top supplier for the United States.

Nope, North America is.

Knowing that the oil companies have no competition but themselves, they follow each others trends. One raises price, the others ensue, because if they didn't would mean suicide. Note the airline industry, if an oil company decided to keep its prices low it would probably lead to a cutthroat market for oil, leading to the death of multiple companies.

Economic solutions to geologic problems...don't work.

In order to increase prices, an oil company will buy up every possible barrel it can, and store them. Now releasing just a fraction of the barrels it has bought to the pumps, it has artifically created demand. It has bought "x" barrels, while the pumps only see "y" barrels, where x>y, leading to higher demand and thus higher prices.

So where exactly are they storing these x-y barrels? The Moon?

Everyone follows suit, there is no end, problem repeats to infinity until a competitive market is established.

You're close - once there are alternative energy sources to oil, then there will be a competitive market. Until that occurs, we'll be paying through the nose for this energy-dense liquid called petroleum. Get used to it.

[nero]

SFU,

I admit I haven't read the link but what you have posted here doesn't encourage me to do so. The oil companies are storing large quantities of oil? Got any proof for that? It's not showing up in the reporting to the EIA.

[HEADER_RACK]

I love these kinds of threads. Somebody is gonna get schooled. Hope you hang around SFU this should be fun.

[SFU2236]

SFU,

I admit I haven't read the link but what you have posted here doesn't encourage me to do so. The oil companies are storing large quantities of oil? Got any proof for that? It's not showing up in the reporting to the EIA.

What, do you honestly think that the oil magically goes from the drilling station to the pumps?

The oil companies exist to refine the oil, and then distribute. In their REFINERIES, they store massive quantities of oil, and then ship out the quantity that they want.

There is no shortage of oil, just a shortage of it in the market.

Any serious economist will tell you the same.

[Cashmere]

SFU, the blunt truth of it is that you're clueless.

You got some economics learning somewhere along the way, and you adopted some text book theory on such and such.

Let's end this debate right now, shall we?

All but a few of us on this site believe that oil has peaked or is peaking.

But you don't right?

So we're not interested in your economic textbook theories, because your theories don't account for the critical fact that <i><b>we're running out of oil</i></b>.

Your books never told you what happens when the world's most important energy source, which is not fungible, goes into permanent depletion.

You see?

So, to us, you're just some guy who wandered in here lacking the critical piece of information who is trying to show us all how to bang a square peg in a round hole.

If you don't believe in Peak Oil now, then state that and we'll debate you on that.

But if you don't agree that Peak Oil has occurred or is about to occur, then there is no use for us to discuss your theory with you.

Why?

Because, if you're correct that Peak Oil is a long way off and there's plenty of oil around, then we'd probably agree with you.

Get it?

[Homesteader]

By the way, you're missing a "T" in your letters.

Cripes, these guys are like orcs coming out of the woodwork.

This is priceless:

"There is no shortage of oil, just a shortage of it in the market.

Any serious economist will tell you the same."

and yet S(T)FU doesn't even know the top suppliers of oil to the U.S. are.

Next he'll crow that he works for the government or Exxon/Mobil in an effort to build credibility.

[Jack]

Folks - beware.

This is a download, apparently of a Word document.

It may have malicious macros embedded. It may have images or links that facilitate tracking who and where you are.

SFU2236, I invite you to tell us why you created such a document instead of providing a web page.

[MonteQuest]

Knowing that the oil companies have no competition but themselves, they follow each others trends. One raises price, the others ensue, because if they didn't would mean suicide.

Duh?

Oil companies no more set the price of oil than farmers set the price of corn.

The market sets the price. Oil is sold at auction , so to speak.

Three exchanges in the world set the price of oil. NYMEX, London, and Singapore.

[green_achers]

... why the price of gas is so high, its affect on the economy, and a decent yet ambitious way to fix it.

...

I didn't figure it was worth reading after seeing just this part.

1. The price of "gas" is not high. It's still staggeringly cheap.

2. The price is NOT what needs to be fixed.

And thanks for the warning, Jack.

[Wren]

SFU, the blunt truth of it is that you're clueless.

You got some economics learning somewhere along the way, and you adopted some text book theory on such and such.

Let's end this debate right now, shall we?

All but a few of us on this site believe that oil has peaked or is peaking.

But you don't right?

So we're not interested in your economic textbook theories, because your theories don't account for the critical fact that <i><b>we're running out of oil</i></b>.

Exactly. And you can replace "economic textbook theories" with "why technology will save us theories" and apply it to that thread from yesterday.

Geez, you're right Homesteader, these guys just keep coming!

And Header_Rack, I hope you're right. Unfortunately, these guys don't seem to have avery large capacity for learning.
Let's see what happens next!

[ROCKMAN]

SFU2236,

Many of your points are well taken even though we view some matters differently. But to your point regarding "intervention": given that the great majority of crude sold in the world is owned by NOC's exactly what sort of intervention would you offer to force the KSA, Nigeria, et al to reduce the price structure?

[Homesteader]

Folks - beware.

This is a download, apparently of a Word document.

It may have malicious macros embedded. It may have images or links that facilitate tracking who and where you are.

SFU2236, I invite you to tell us why you created such a document instead of providing a web page.

Thanks for the heads-up. If shown to be true would that be grounds for banning?