Instead of looking for MadMax's old thread titled "Oil, Again", I decided to start a new thread on the subject. Gas prices have become a big story once again with the Summer driving season approaching very quickly. It seems every place I look, including Yahoo!, CNN, and even local news outlets are covering the story. Every source is asking and saying the same thing as well. How high will gas prices rise? To that question, there are three common answers. 1. It depends on things such as usage of the material, weather events, and global stability in volatile regions (ie. the Middle East). 2. They will simply continue to rise because demand is ahead of production. 3. There is no ceiling for gas prices and records could very well be broken before the year is up. Now I have been hearing from people around my locale and different areas in the country that they expect gas prices to rise to unprecedented levels by the end of May. They have been saying that toward the end of the month the national average for a gallon of gas will be around $4 a gallon, about $1 more than where it is right now. Now when I first heard whispers of this several weeks ago I just blew it off as paranoia of what has happened in the past but now that I take a look at the situations it does not look too far-fetched. There are several reasons that I am saying this. 1. I travel between 30-70 miles daily doing my job and the recent gas prices have caused me to start rethinking my employment even though it is the best job I have had. It is simply getting to the point where it almost costs me to go to work. 2. I haven't seen the usual up-down swings in gas prices that I am used to seeing at other times. It has been steady or rising, there has been no downfall. 3. Even though gas prices are steep and everybody I know complains about them just as much as I do, they still take long drives that eat up plenty of gas and I do the same. That makes demand stay steady or on the rise. 4. All forecasts and analysis indicate the price has no where to go but up. So, with all that said. What do you think?
In a nutshell, to lower gas prices, we need to do the following: 1) Expand refining capacity 2) Relax environmental regulations w.r.t. sulfur content 3) Make permitting of refineries easier 4) Detonate a nuclear bomb on Al Gore's face 5) Create more fuel efficient vehicles 6) Produce more oil in places not named Iran, Iraq, Venezuela, Nigeria The environmental movement has put a LOT of upward pressure on gas prices, there is absolutely no question about it.
What about looking for and further developing alternative fuels, making alternative fuels cheaper and more readily available, developing vehicles that can use these fuels more available and cheaper, etc. etc. etc. Why must we keep looking for oil. I know it is the close to the only source we have now but with research, development, and technology it can be phased out.
For cleaner air, at the very least, you reduce health costs, aesthetic damage on buildings, and sick days with lost productivity. It's not like there isn't a method to the CAA regulations. They've reduced criteria pollutants related to gasoline every year until the mid 90s when SUVs became widely popular. A permanent easing of these regulations would pass the price of gas to other externalities.
I totally agree. I would also support Ethanol if we quit wasting money on subsidies and imported it from Brazil. Also does anyone remember when oil was at 50 and I said it would go to 65, and they laughed at me?
What do you agree with? More detail please. I remember you stating this but I don't remember anybody laughing at you. The first two questions are serious and not any attempt to argue with you. I am really interested on the subject.
No new refineries have been built in the US since 1976. Think about it. It has nothing to do with environmental regulations and everything to do with control. The oil/energy companies are one big Enron manipulating the markets. I paid $1.69 a gallon the night before Katrina hit. Why are the prices still up? Trade papers report all refineries are back up and all platforms working except one. First step, a circuit breaker on the price of oil that kicks in when the price goes over a set amount. When it kicks in oil and gas are removed from the commodity market ending the obscene profits the companies make when prices rise on speculation.
no, i don't remember that at all. i think most people have always assumed oil was going up and there wasn't anything we can do about it. i think most people were shocked when it went down to $50. and by the way...the interesting thing about all this is that as the price of gas has gone up in recent weeks, the price of oil has been on a pretty steady decline.
i agree. i might even take it a step further. there are certain things that are so costly and yet so important to society that they warrant government control. governments build roads. they've built a lot of them. they're useless if people can't afford gas. our entire economy runs on oil. if cost is a barrier to building new refineries, then maybe we should be building them collectively.
What a horrible set of ideas just put forth. When you strip out the profit motive, you get less investment in the space. Less investment = less supply. Less supply = higher prices. Dumb move. Period. The oil & gas markets are worldwide markets (oil moreso than gas -- and that's natural gas, not gasoline which is a refined oil product -- you'd be surprised how many people don't know that...) which are subject to thousands of supply and demand determinants. None of Exxon, Shell, Chevron, Valero, Citgo, etc are able to manipulate prices at your filling station. If they attempted to do so, their competition would squash them. That's the little thing called competition that has made our economy go since the 1700's....which is why MadMax's nationalization of the refining industry concept is so ridiculous. Just the other day, Marathon announced they were greatly expanding one of their Louisiana refineries. Investment is happening. The problem isn't firms being unwilling to invest. The problem is getting the sites permitted. No NEW refineries have been built since the 70's because of that. Now, plenty have been EXPANDED, but no new greenfields have been built. The notion of the government building/running our refineries goes against every economic prinicipal that has fueled our nations unprecedented growth. It's shortsighted and flawed. Furthermore, oil and gas price movements do not exhibit a linear relationship. How could they? Yes, crude oil is the big feedstock into a gasoline refining process. BUT, there are a lot of other variables that come into play, such as supply chain movements (barges, tankers, terminals, pipelines, etc), refining capacity, refining efficiency, demand for gasoline (one of SEVERAL refined prodcuts from oil -- not the only one), inventory stocks, I could go on and on. Do you want to bring in alternatives? Great, so do I. Let's build 10-20 coal to liquids plants that produce low sulfur diesel fuel to power automobiles and jets. I'm all for it. The US has a huge coal supply and the Fischer Tropsch technology (and other technologies) to convert coal to transportation fuels has existed since the Nazi scientists created it in the 1930's. There is no technical risk -- it's proven. Look at Sasol in South Africa. The problem is for these plants to be commercial, they require enormous scale and capital investment. With the fluctuations we've seen in the oil & gas price market, it's a tough pill to swallow for a group to invest the billions needed when their plant could be rendered uneconomical by a sharp dip in crude prices. Now, if there is a place for the gov't to step in, it's HERE. Backstop the price of oil, like one would in a private hedging transaction. This program would be similar to backstopping credit in the Fannie Mae/Freddy Mac programs. This is the future of transportation fuels in the US and we need to act FAST to get things started. If you want to learn more about the above, look at a few companies --> Headwaters, Rentech, Syntroleum, Sasol.
refinery capacity isn't a problem. if oil companies felt the need to build new refineries they would. a refinery is a huge investment.
Honestly, I've been largely unaffected by it. I live in a city that's very dense, and everything is within a 20 minutes walk or a 5 minute bike ride (including work). Plus, I telecommute 4 days a week. I always thought that the horizontal model of expansion of southern and western cities made no sense (LA, Phoenix, Houston, Atlanta, etc). It costs so much for upkeep of all those giant freeways and then again the cost of gas, and yet again the enivronmental impact. It's not like NY or SF or Boston are enlightened in their thinking...the vertical design of their cities has more to do with constraints in geography than anything else. One day much of the US will look like Los Angeles. There's not much heavy industry there, you know. Most of that brown air is from commuters. The fact that gasoline has been so cheap for us compared to the rest of the world is one reason why we were able to live this way. I haven't needed a car in over two years. I've also lost over 30 pounds, and it wasn't because I joined a gym or tried the latest fad diet. I guess this irrelevant to the people that live in places like Spring or Katy, but I still think they should be able to take clean, fast and efficient transportation to work in the city center. France, for all of its problems relies mostly on nukes for the powergrid, and have trains that move so fast, it's actually far quicker to take a train than to drive inter-city. Lisbon, when I went there closed off most of the city center to cars, other than a few taxis and small trucks for garbage and city functions, and I think that's one reason it's a tourist Mecca for European tourists. Transportaion costs for my stay were nil. But for Houston, I'm not sure there are any simple solutions. It's too damn hot so much of the year, and short term, to build a giagantic infrastructure of trains that would actually be of any use would be enormous. Not to mention it would require a significant lifestyle change in the way people live. Any talk of trains seems to get many on this board (and people like my grandparents and relatives in H-town) all upset as they feel the effort to coax them into public transportation is nothing short of Bolshevism. But Houston isn't the Houston of 1950's when my grandparents moved there. Their quaint little neighborhood between the Heights and the nortwest loop is now surrounded by high-rise apartments, and not the large expansive empty green spaces that were once there. Sustaining what we have means building wider and wider freeways, and continuing to subvert US foreign policy to appeasing unstable oppressive governments that dicate the pump prices, and using some of that cash to fund terror.. When I lived in Los Angeles I think the most depressing thing I experienced was the need to escape the pavement and concrete and fumes. Often that would take three hours in traffic to get out of the brown clouds and asphalt. At that point I was either in Ventura County, the Mojave desert, or Tijuana. If it was up to me, and I could be Generaliso-for-life of Harris County? I'd create a 30 year program to make a train network. I'd hire consultants from Tokyo, Paris and New York and I would raise your taxes to do it, and everyone would hate me, but your children and grandchildren wouldn't. I would make the museum / Rice/ Montrose/ Medical Center /Downtown areas car-free, but would prioritize building a dense system of 24-hour trains first in those places, and create a ****load of jobs for all the parking garages, taxis and construction required to happen. Laugh all you want, but it isn't nearly as bizarre as the building if the Houston Ship Channel, without which Houston would never have become a major city. And that manged to happen as recently as FDR.
They are building significant new capacity. Within ten miles of me, two refineries who have above average capacity are expanding to be the largest and second-largest refineries in the US. There's a new refinery in southern Arizona (that also makes ethanol and biodiesel) being built (I think there are still some funding issues, but ground has been broken). The fact that BP in Texas City is still completely down hurts. (But I still think the big problem is over-speculation from investors. I have a co-worker from a previous job who had a degree in Petroleum Economics (you'd be surprised about the degrees available in Venezuela), who showed me where the oil price corresponds directly to the number of times that oil futures are traded.
I know that just 6 months ago there was a $25 correction in oil prices because of terrorist attacks on pipelines, and a war with iran that never happened.
During the time that the oil price tripled, the number of times a futures contract was traded also tripled. A similar situation happened with copper. That's all I know.
Volatility drives the pricing of all derivatives. Money is to be made when you have wild swings in price. Trading activity likely FOLLOWS volatility, but let's not attribute the price volatility to the trading activity itself. While I agree that trading can impact prices, trying to say that prices were up b/c trading was up is confusing the cause and effect...
