Fuel Prices got you down?

[AHarris]

Not just supply and demand

Supply and demand can only provide a partial explanation for today's historically high oil prices. However, the supply of oil against world demand writ large is tight, especially in light of China's and India's growing thirst for fuel as their economies develop and record numbers of their middle classes can afford to stop riding bicycles and buses and start driving their own cars and motorcycles.



The supply and demand issue is at work more in a perceptual sense than in an actual one. The world is not running out of oil or even close to it. What we do lack is REFINERIES. Because of a world perception of shortage, speculators take advantage of the anxiety every time oil workers threaten to strike in Nigeria, Iran and Israel flex their muscles at each other, a bomb goes off at some pipeline in Iraq, or some Peak Oil theorist says that we're running out of oil. Not helping matters is Morgan Stanley and T. Boone Pickens predictions of $150 per barrel oil by July. It's a self perpetuating bubble which will eventually burst as the market corrects itself.



Investors are using oil and other commodies as a hedge against inflation when the dollar falls. The fall of the dollar against the EURO due to today's gloomy jobs report immediately boosted the price of oil since oil is priced on the world's market in dollars.



One factor not helping diesel fuel prices right now is China. It's demand for diesel surged recently, because they need diesel to run throusands of diesel generators to provide temporary power as their Southwestern region recovers from its recent massive earthquake (which took many coal power plants out of service). Also, Beijing is cutting back on coal power production near the city for the next year and using "cleaner burning" diesel generators to provide power to lower the smog in preparation for the Olympics. This is putting temporary pressure on the market and is partly to blame for the current disparity between gas and diesel prices at the pump.



Between our own oil shale deposits, the tar sands of Canada (which is actually the biggest oil exporter already to the U. S. ), deep offshore exploration, coal, and known oil reserves, we have 300-500 years of fuel remaining. Not helping things is the environmental whackos and Democrats who keep blocking construction of new refineries and new oil drilling ventures.



The market will only tolerate the high gas/diesel prices for so long, and eventually the bubble will burst and prices will stop climbing and maybe even fall a little bit as demand drops worldwide due to high prices (this is already starting in the US). Just like the housing bubble, it will burst and prices will drop incrementally as the market corrects. Just like the house that was $425,000 in Tampa last year, now it's $335,000. At the end of this current instability in oil prices, I'd guess we'll be paying $3-$3. 50 per gallon in 2009 for ULSD.



Cheap gas and diesel is gone forever. I think in the long term it will settle down and fuel prices will become more reasonable, but the days of buck or two per gallon gas and diesel have gone the same way as the $50,000. 00 home.



I'll give it a year to see if my theory is right. If I'm paying $7/gallon next year for diesel, then I'll be looking to downsize to a Dakota, Tacoma or something. :{ If I'm right, then I'm gonna keep smilin' and keep drivin' my CTD for 10 years!



I'm not an expert--my main sources of information are Bloomberg.com, the Economist magazine, and Fox News--and this is just my opinion to add to the discussion FWIW.

 

[Sled Dog]

Supply and demand can only provide a partial explanation for today's historically high oil prices. However, the supply of oil against world demand writ large is tight, especially in light of China's and India's growing thirst for fuel as their economies develop and record numbers of their middle classes can afford to stop riding bicycles and buses and start driving their own cars and motorcycles.



The supply and demand issue is at work more in a perceptual sense than in an actual one. The world is not running out of oil or even close to it. What we do lack is REFINERIES. Because of a world perception of shortage, speculators take advantage of the anxiety every time oil workers threaten to strike in Nigeria, Iran and Israel flex their muscles at each other, a bomb goes off at some pipeline in Iraq, or some Peak Oil theorist says that we're running out of oil. Not helping matters is Morgan Stanley and T. Boone Pickens predictions of $150 per barrel oil by July. It's a self perpetuating bubble which will eventually burst as the market corrects itself.



Investors are using oil and other commodies as a hedge against inflation when the dollar falls. The fall of the dollar against the EURO due to today's gloomy jobs report immediately boosted the price of oil since oil is priced on the world's market in dollars.



One factor not helping diesel fuel prices right now is China. It's demand for diesel surged recently, because they need diesel to run throusands of diesel generators to provide temporary power as their Southwestern region recovers from its recent massive earthquake (which took many coal power plants out of service). Also, Beijing is cutting back on coal power production near the city for the next year and using "cleaner burning" diesel generators to provide power to lower the smog in preparation for the Olympics. This is putting temporary pressure on the market and is partly to blame for the current disparity between gas and diesel prices at the pump.



Between our own oil shale deposits, the tar sands of Canada (which is actually the biggest oil exporter already to the U. S. ), deep offshore exploration, coal, and known oil reserves, we have 300-500 years of fuel remaining. Not helping things is the environmental whackos and Democrats who keep blocking construction of new refineries and new oil drilling ventures.



The market will only tolerate the high gas/diesel prices for so long, and eventually the bubble will burst and prices will stop climbing and maybe even fall a little bit as demand drops worldwide due to high prices (this is already starting in the US). Just like the housing bubble, it will burst and prices will drop incrementally as the market corrects. Just like the house that was $425,000 in Tampa last year, now it's $335,000. At the end of this current instability in oil prices, I'd guess we'll be paying $3-$3. 50 per gallon in 2009 for ULSD.



Cheap gas and diesel is gone forever. I think in the long term it will settle down and fuel prices will become more reasonable, but the days of buck or two per gallon gas and diesel have gone the same way as the $50,000. 00 home.



I'll give it a year to see if my theory is right. If I'm paying $7/gallon next year for diesel, then I'll be looking to downsize to a Dakota, Tacoma or something. :{ If I'm right, then I'm gonna keep smilin' and keep drivin' my CTD for 10 years!



I'm not an expert--my main sources of information are Bloomberg.com, the Economist magazine, and Fox News--and this is just my opinion to add to the discussion FWIW.

Have you read this?



Asia Times Online :: Asian news and current affairs

 

[AHarris]

Have you read this?



Asia Times Online :: Asian news and current affairs

I just read this... . thanks for the link. Great article and makes a lot of sense!

 

[Gary - K7GLD]

Have you read this?



Asia Times Online :: Asian news and current affairs

YUP - first paragraph tells the whole story, but all the rest is spot-on, as far as I'm concerned, and supports what many of us have been preaching for some time now...

 

[Tractorat]

On the news, it sounds like even the Chinese are complaining to opec about the high oil prices. It will be interesting to see what happens there. I heard on the radio that the reason the price spiked again by $11, was because the head of the Euro Bank said that he could raise interest rates, which torpedoed the dollar even more. But I heard on another report this afternoon that the spike was because some ex (?) Israeli official said that Isreal would attack Iran if they didnt stop their quest for nuclear weapons.

 

[Sled Dog]

Watch this if you really want to learn something.



The Money Masters - How International Bankers Gained Control of America

 

[HBarlow]

I amazes me that so many Americans choose to believe bizarre conspiracy theories are the answer to every question or every issue that occupies the news.



There are actually rational reasons that explain most concerns. We in the US, because we buy and sell manufactured goods and raw materials from around the world, participate in a world wide economy. Anything that disrupts, or is perceived to have a potential to disrupt world oil supplies or the stock markets of industrialized nations around the world will always be felt in the US as well as other nations.

 

[JesseJ]

I agree Mr. Barlow. What Americans need to understand is we participate in a world economy. The whole world uses oil. The whole world needs more oil. Everyone else is trying to drill and bring more oil to the market all around the world except us. What happens if we reach a point where Saudi Arabia says "Screw you americans, you didn't participate in trying to bring more oil to the world market like the rest of us have. You don't want to be a team player then get off our team, and find oil somewhere else. Besides, China will pay us more for our oil than you did anyways. "



Here's another scary thought:What happens when a hurricane or two or five decided to roll through the gulf? We all saw what happened during katrina. Gas went from $2. 25 to $3. 29 around here. Can we say $6-9/gallon fuel?

 

[HBarlow]

You're right JesseJ.



Continuing your thought, what happens when a future weak America which has withdrawn from the middle east and cut it's military forces in half to reduce the military budget in order to double social (read handouts) spending and a nuclear armed Iran decides to takeover all the oil fields of the middle east.



Our economy and the economy of much of the free world would be shut down within 30 days, possibly only two weeks. And I mean shutdown. Without crude oil there will be no gasoline or diesel fuel. Our entire transportation system would stop. Food would be gone from the shelves of our grocery stores. People would not be able to get to work so business and government would stop.



We are not energy independent. It is criminal what the blow-dried emtpy suits in the congress have done to us. We, the greatest most powerful nation the world has ever seen, are forced by our own congress to depend on the whims of radical muslim dictators and the whims of nature to keep our economy afloat. We are very vulnerable and becoming more vulnerable each day.

 

[RGardner]

Harvey, we may not agree on the cause but we do agree on the effect of an critial oil shortage. Our government has let us down in the name of big business.

 

[HBarlow]

Harvey, we may not agree on the cause but we do agree on the effect of an critial oil shortage. Our government has let us down in the name of big business.

RGardner,



I'm glad we agree on that but let me ask you to consider this: I think we'll agree on more, at least to a point.



The fundamental principles of our Constitution and way of life are private property ownership and personal freedom. Those are the foundations of our rapid economic growth as a nation, our success, our wealth, and our high standard of living compared to the rest of the world. Those two principles are guaranteed by our Constitution. It is those two factors that have allowed men, and later, women also to chose their path in life and pursue their dreams. It is those factors that have allowed some of our hardest working, our best and brightest, acting in their own best interests and the interests of their employees, to build huge farms or start small businesses. Some of those farms and businesses have grown to amazing size employing thousands of ordinary Americans, providing good paying jobs and feeding or supplying the world with great, modern conveniences they wish to own. Henry Ford's Ford Motor Company is an example I like to use. Bill Gates' Microsoft Corporation is another. There are millions of examples, most of them smaller and less well known but still operating successfully and providing jobs for millions of ordinary Americans. We probably agree to this point.



But here's where our difference probably occurs. Where in the Constitution does it say that government has a right or responsibility to step in and tell Henry Ford, Bill Gates, or 100,000 Americans who own the shares of Exxon-Mobil what to charge for their products?



Government has let us down in the name of big business (the oil industry) only by preventing them from exploring, drilling, and producing crude oil under our own soil to meet the needs of our nation. If the blow-dried empty suits in the Congress would get off the backs of the oil industry the oil industry would locate and produce billions of barrels of oil freeing us from the world oil market with its overpriced crude oil. The oil industry would provide thousands more good paying jobs for ordinary Americans and bring the price of crude oil and hence gasoline and diesel at the pump for the rest of us ordinary Americans. The oil industry is in the business of producing products made from crude oil. The more they sell, the better off they are. Their goal is to sell as much gasoline and diesel fuel (and other by products) as possible because they earn a few cents from every gallon they produce and deliver to us. It is not in their best interests to pay $1. 40/bbl for crude. They'd like to see the price come back down as much as you and I would.



I guess the place where we disagree is you think Congress should continue to force the oil industry to depend on high priced imported oil and direct the industry to produce it and deliver it without making a profit or even at a loss. I think Congress should get out of their way and allow them to drill and produce more from cheaper sources and lower the price at the pump and continue to make a fair profit.

 

[TFucili]

... and our high standard of living compared to the rest of the world...

Let the bankers, robber barons, and blow-dried, empty suit carpetbaggers continue down their current path of destruction, and that will be but a quaint memory.

 

[Gary - K7GLD]

Let the bankers, robber barons, and blow-dried, empty suit carpetbaggers continue down their current path of destruction, and that will be but a quaint memory.

Absolutely - the notion of our superiority and current high standing of living as compared with MANY other countries is a fast fading fantasy - just do an Internet search on world-wide "standard of living" stats - and be prepared to see how far we have slipped down that list...

 

[HBarlow]

We've gone down that road before, Gary. I followed your links and examined your sources. Your sources were, to be polite, false, biased, or non-existent.



It may make YOU feel better to accept the false myth that America is a failing nation, but it is not true. One only has to consider world trends in immigration to know it is a falsehood.



It is true that some industries and some regions of the country are in decline, that is an inevitable process of decline and renewal as science, technology, and our economy marches on. Old inefficient manufacturing plants, old products losing their place in the market, union labor costs, and democrat state governments are factors in regional and state declines. We participate in a world economy now and labor rates in many other countries, particularly in China and other developing Asian nations, are much lower than ours. That means it is cheaper to produce products in those nations. Buying products made in China instead of labor union controlled American industries allows consumers to buy more for less thereby raising our standard of living. Jobs are moving. Americans are leaving labor intensive industries in favor of information and high tech industry.



Consider Michigan for example. Labor costs and union work rules have all but killed the auto industry and probably eventually will. Couple those high labor costs with the regulatory and tax climate promoted by their state governor and legislature and the reason is clear. Michigan is in decline. Until the voters change their state governement and reduce the influence and burden of union labor it will continue.



If Americans accept that we are a failed or failing nation and elect political leaders who tell us we cannot do something, it may become true. I prefer to believe that America's future is bright and almost unlimited. We have the natural and human resources to continue on a path of greatness. If the voters would rid government of liberal socialists who want to tax and regulate industry to death we could solve our energy problems and many others within a decade.



Your anger and bitterness always shines through. I have learned in my old age that people tend to listen to or view the media programs or read the books and periodicals that tell them what they want to hear or make them feel better about their own failures. In the 21st century the same is true of internet blogs and websites. It is possible to surround yourself with doom, gloom, and reports and predictions of failure if it comforts you in your own life.



I don't and don't accept your premises.



If a man choses to spend his working life working for another man at specified hourly or weekly wages, he will probably never achieve much financial success. An employer, whether it be a single proprietor small business or a large corporation, is only going to pay a specified rate within a narrow range for the job the employee performs because of supply and demand. The job is only worth so much and the worker can be replaced by someone else who will do the job. A company owes the worker little beyond decent and safe working conditions and his pay. Pay increases over a lifetime of work will probably only reflect inflationary wage growth.



In order to actually get ahead an individual must create his own job or his own company so that he receives the rewards of his efforts. Or, he can improve the value of his labor by obtaining greater education or skill or learning new more valuable skills.



Many who find themselves in situations with declining income are in jobs like I described above. Nobody owes the worker high pay. It profits decline so will the workers actual compensation.



Think positive Gary. Quit blaming America for your unhappy life.

 

[Gary - K7GLD]

Think positive Gary. Quit blaming America for your unhappy life

.



Still a slave to personal digs and attacks eh Harvey? :-laf:-laf



Provide your OWN stats disproving my earlier points as to the standard of living in this country - IF you can find any...



As to my own "unhappy life" - sorry to disappoint you, but a dandy retirement package and various investments have left us quite well off and contented - but that fact does NOT remove my conscience and concern for others LESS fortunate.



SO, keep on with the "poor disgruntled and poverty stricken old man" bit if it pleases you - it DOES seem to be one of your most used and favorite "debate" tactics - that and that VASTLY over worked "blow dry, empty suits" line - you musta been fed that one by the oil and investors advisory board, as part of their disinformation package... :-laf:-laf



Party on dude - yer a HOOT! :-laf

 

[HBarlow]

Let the bankers, robber barons, and blow-dried, empty suit carpetbaggers continue down their current path of destruction, and that will be but a quaint memory.

TFucili,



I feel saddened when I read comments like those. Those words are just empty phrases that the democrat party and labor bosses have used to incite the emotions of workers and voters for many generations. In most cases the politicians and labor bosses who utter them know they are false. They sound good to a man worried about declining wages or declining companies but they are false.



Banks exist so that people who save and invest can earn a return on their money. Banks serve the citizenry by loaning the money on deposit to other citizens who want to buy a home, buy a car, finance an education, or start a business. Bankers earn a fair rate of return on their money. That's all. I'll bet that you have borrowed money from a bank for one or more of those reasons. If banks didn't exist how could you buy a home or car or finance and education or new business?



So-called "robber barons", I guess that means wealthy people and big corporations, are not different than you or me. A wealthy person is just someone who has worked harder, worked smarter, or saved and invested wisely. A corporation is nothing more than a group of ordinary American citizens who have saved a few dollars from their wages or salaries and invested in shares of ownership in a corporation. The corporation is led by a CEO and a board of directors. Of course CEO's are paid handsomely, they are usually very bright and very knowledgeable people who successfully earn a return on their money for their shareholders. A corporation is not a public service, has no moral or fiduciary responsibility to provide jobs, high wages, or cheap products or services. The legal responsibility of a corporation is to serve as a good steward of the corporation for it's owners, the shareholders. In other words, the job of a corporation is to make money. That's all.



Wealthy Americans and big corporations provide the jobs that most ordinary Americans need to provide for their families. Would you ask a poor man for a job?



Corporations are the backbone of our economy. Corporations produce the goods and services that we want and need. The blow-dried empty suits in Congress couldn't find a barrel of crude oil, pump it from the ground, or refine it into gas or diesel if their worthless lives depended on it. They can only make false accusations and false promises to fool uninformed voters.



Corporations are not taking us on a path to destruction, Congress is. It is the Congress who writes or empowers bureaucrats to write the EPA rules that choke the power and economy out of our cars and trucks. It is Congress that prevents oil companies from producing cheaper oil on and off our own shores.



Anyone in America can become wealthy and independent. Congress, so far, has not completely eliminated opportunity. I have posted anecdotal success stories here before but many seem to prefer to ignore them.



I was career Navy. I never earned a lot of money on active duty but I rose to the top enlisted rank and earned a good pension. After I retired from the Navy, the first time I ever settled anywhere and could stay there, I wanted to improve my financial position so I purchased rental property. I bought single family homes, with mortgages, over a period of 14 years. I did it on a shoe string with a lot of risk but managed them well and carefully. After sixteen years I had paid off the mortgages and sold all the houses for a nice sum of money. I receive a monthly payment from the buyers that will continue over 15 years. A comfortable retirement.



When I owned rental property I met a number of interesting and successful men who provided services I needed. They are worthy of remembering. One of them was a young man who created a carpet cleaning service while in his early 20s. He has 60 or more employees now and trucks running all over town. He is very successful and wealthy now. If he continues to serve his customers in a way they appreciate he will remain so. He is a millionaire now.



My plumber is a good man from a very poor rural west Texas background. He was raised on a small subsistence farm with nothing. He learned the plumbing trade and became very successful. He employs a number of other plumbers and answers trouble calls all over town. He is very successful and wealthy now. I'd guess he is easily a millionaire. .



My daughter married a guy whose old dad was an old German-American with old world values of ambition and hard work. The old man was a small general contractor. He taught his son, my son-in-law, the trade and the value of hard work. My SIL builds large commercial buildings all over west Texas and the region. He is very successful and a millionaire now.



I could bore or annoy a reader with similar stories of people I know or have known for an hour or more. Success and wealth are very common and easily achieved in America.



There are few limits on what an ordinary American can achieve. It is true that some jobs don't pay well and wages in some industries are declining. Instead of whining and blaming (I'm not saying you are) anyone can start a business, a new career, a new life. Opportunity abounds in this great, but not perfect, nation.



A man who is unhappy or unsuccessful, unless he is physically or mentally handicapped, has only himself to blame for his disappointments. A man can chose to be unsuccessful, or can chose to be successful. Everyone in America can make the choice.

 

[DHayden]

There are few limits on what an ordinary American can achieve. It is true that some jobs don't pay well and wages in some industries are declining. Instead of whining and blaming (I'm not saying you are) anyone can start a business, a new career, a new life. Opportunity abounds in this great, but not perfect, nation.



A man who is unhappy or unsuccessful, unless he is physically or mentally handicapped, has only himself to blame for his disappointments. A man can chose to be unsuccessful, or can chose to be successful. Everyone in America can make the choice.

Hear hear! I am saddened by some of the stories I've heard of late. Very educated, hard working men with a "victim" attitude. I have faith that these men will eventually overcome that mind set and thrive.



I myself have not yet succeeded (I still grind for the man) but I know my destiny is in my hands (for now) and success doesnt come easy. I will eventually overcome, and realize I will still fail at least a few more times along the way. As long as I keep getting up I know I will succeed, if I stay down it's no ones fault but my own.

 

[DCreed]

.



Still a slave to personal digs and attacks eh Harvey? :-laf:-laf



Provide your OWN stats disproving my earlier points as to the standard of living in this country - IF you can find any...



As to my own "unhappy life" - sorry to disappoint you, but a dandy retirement package and various investments have left us quite well off and contented - but that fact does NOT remove my conscience and concern for others LESS fortunate.



SO, keep on with the "poor disgruntled and poverty stricken old man" bit if it pleases you - it DOES seem to be one of your most used and favorite "debate" tactics - that and that VASTLY over worked "blow dry, empty suits" line - you musta been fed that one by the oil and investors advisory board, as part of their disinformation package... :-laf:-laf



Party on dude - yer a HOOT! :-laf

After SEVERAL cheap shots and poop shoveling the B. S. ship "SS BARLOW" still sails on here in a fog of ignorance.



Sorry Gary, you forgot "left wing liberal socialists" . :-laf



Please come up with some new material Harvey!:-laf We already know all the gung-ho Pro-American propaganda you seem to need to spew at every opportunity. This international problem is not bi-partisan.

 

[DCreed]

... to be fair I also notice that MOST folks that as yet are still in denial of world news and CURRENT events seem to hail from the south west. a co-incidence maybe?

 

[TFucili]

Harvey,

We've gone around and around on this before, but I need to remind you of a few things:

1. I am not now, and never have been a Democrat.

2. I am not now, and never have been a liberal.

3. I am not now, and never have been associated with a labor union.

4. I grew up in and still operate a successful independent business.

5. I consider myself very, very fortunate from a financial point of view.

6. I have made plenty of mistakes in business, and never sought a bail-out. I just pick myself up, and come back for more... hopefully a bit wiser.



As for those good hearted bankers. Who paid for the savings and loan collapse, when they tried to run a gambit in the 80's? Who is going to pay for the current bunch of scammers who were in a misguided paper trading gambit? You and I Harvey, that's who.



Now that we have that straight, I will repeat what I, and others, have said before: You do NOT have to be a commie-pinko-liberal to see that capitalism, a wonderful concept to be sure, can be so perverted as to work against the good of the country in general. I do not ascribe to income redistribution and all of the socialistic garbage being trotted out by some demagogues. That is not what I am about. We can agree to disagree, but please, please, refrain from the disappointed, unsuccessful, socialistic insinuations when you quote my posts.