Your solution to high oil prices? - Political Fever

Oregon Elephant · #1 (**permalink**) 05-01-2008, 11:50 AM

Let's face it, whether you're left or right, you're probably not overjoyed to see the gas prices rising weekly. We've heard some of the ideas from McCain and Clinton, suspending the gas tax for a few months. What do you think we should do? And how do you think that will help?

Okay, I'll give my idea (and brace for it to get shot down). ANWR has billions and billions of barrels of oil in it, and there are numerous oil deposits off of the american coasts. Now, I don't want to open it up to private organizations, but to the government and have the state own and opporate the drills and refineries for this (not talking about taking over everything in oil, but just these areas that have no one there). The government can setup their oil "company" just like a real company, but when the profits reach the top (where billions go to the top dogs and shareholders) it goes to the government and it's shareholders, the people. Every dollar that the government makes from this would be one less dollar they need to collect in taxes. So the profit could be, essentually, given back to the people in that way, or by providing for more funding to programs that need them (such as funds for alternative energy or road improvements).

How will this help us now? Well, it won't help tomorrow, but it will help as quickly as possibly (several years) by raising the supply of oil without directly effecting the demand, this will drive down the costs (I'm not about to speculate on to how much or how little, but it will to some degree) of oil and reduce the amount of oil that we buy from other countries, meaning more money stays in the US (thus helping our economy much more and helping the value of our dollar).

How will this hep us in the long run? The state oil company (I'll call it SOC for short) will be more likely to invest it's money in alternative energy for the future. Right now, oil companies only invest a few percentage points of their total profits to alternative energies, but the SOC (if the people approve and they likely will to a high degree) is free to invest a much higher percentage so the total dollar amount invested by the SOC to alternative energy might likely be greater than invested by the oil companies, putting SOC in the lead for alternative energies and forceing the oil companies to invest more money to keep up (after all, they wouldn't want to be left behind).

Now oil will always be needed, even after we switch most of our energy from oil and coal to something else. We will need it to make plastic. Other, poorer nations will need some power source to get their economies and the well being of their people kicked off. If the US and other developed nations move from oil, that will greatly lower the demand of oil and so lower the price, making it easier for the poor to get the oil. Then there nations can grow and eventually they will have enough money to afford the alternative energies and also move past oil.

Okay, I tossed it out there. If you feel like shoting it down, be sure to mention what you think would work better.

Thanks

Skerlnik · #2 (**permalink**) 05-01-2008, 12:12 PM

I am not going to pretend I have the level of expertise that others do on here, but my understanding about it is that it's not so much the supply. We apparently have a huge oil stockpile, and oil is still flowing in from places other than Iraq. This goes beyond simple supply/demand metrics.

This, I think, is purely political. I hear about Exxon/Mobil's record profits and it seems there's a dot or two to connect. OPEC seems to be fiddling with the taps, and I think they are sending a clear message to us, about Iraq and ME interference in general.

Quote:

Amount of U.S. oil consumption that comes from the Middle East: 2 mbd -- 12 percent, only three percent from Iraq and Kuwait. The rest of our imported oil comes from places like Canada, Venezuela, Mexico, Nigeria, Algeria, Ecuador, and England.

(source: Basic Facts About Energy and the Middle East )

So, logically (if simplistically), if we've "lost" three percent, by failing to figure out out to get our oil out of Iraq (still!), then I would expect a 3% increase in price, not 300%. Again, I am no economist, but the massive increases seem rather out of proportion with the slight loss in supply.

I hear that we've passed peak oil. Maybe so, but it's not like there's a massive precipitous drop in supply yet. Our oil prices went ape at the time of the Iraq invasion...isn't there a big fat correlation?

Or maybe the oil companies finally figured out that we'll pay literally anything. In that case, you bet I favor price fixing, cutting the profits of one industry to relieve the pressure on the rest of us.

Oregon Elephant · #3 (**permalink**) 05-01-2008, 12:26 PM

Quote:

Originally Posted by Skerlnik

I am not going to pretend I have the level of expertise that others do on here, but my understanding about it is that it's not so much the supply. We apparently have a huge oil stockpile, and oil is still flowing in from places other than Iraq. This goes beyond simple supply/demand metrics.

This, I think, is purely political. I hear about Exxon/Mobil's record profits and it seems there's a dot or two to connect. OPEC seems to be fiddling with the taps, and I think they are sending a clear message to us, about Iraq and ME interference in general.

The "record profits" should be taken in stride. It is not so much as they are making more profit per barrel, but that they are selling so many more barrels. What price fixing would show, would be that a barrel costs them very little, but they make a lot of profit per barrel (which they don't, they are making the same percentage of profit per barrel as they have been for the last 3 years, between 8 - 10%). Yes OPEC does adjust how much oil it lets out based on a prediction of how much it believes it's customers will use, just like many industries try to guess how much of their product people will buy so they don't have a huge surplus sitting in their warehouse.

Quote:

(source: Basic Facts About Energy and the Middle East )

I hear that we've passed peak oil. Maybe so, but it's not like there's a massive precipitous drop in supply yet. Our oil prices went ape at the time of the Iraq invasion...isn't there a big fat correlation?

Yes, the supply from Iraq (into the global community, not just to the US) was cut at the invasion, the oil needed to maintain the war (for transporting troops there and back, and for all the stuff that uses it there), the other nations that are upset with the US and so have refused to sell oil to us, all of this has caused a decrease in supply and an increase in demand, causeing the price to increase greatly.

I probably should include that ending or greatly reducing our forces in Iraq and taking a minimalist approach there will also help with the supply and demand of global oil and so help to price. Also, not spending so much on the Iraq war will help our debt situation and so stop the fall of the value of the dollar (which is also contributing to the rise in oil prices).

FXASHUN · #4 (**permalink**) 05-01-2008, 12:30 PM

Not to mention that there is a HUGE increase in oil usage in China and India with the economic expansion happening in those countries. The world us sucking oil out of a thin straw. The supply isn't able to keep up with the demand. Just think, gas in Europe is $8 a gallon.
Why gas in the U.S. is so cheap - May. 1, 2008

Oregon Elephant · #5 (**permalink**) 05-01-2008, 12:30 PM

Quote:

So, logically (if simplistically), if we've "lost" three percent, by failing to figure out out to get our oil out of Iraq (still!), then I would expect a 3% increase in price, not 300%. Again, I am no economist, but the massive increases seem rather out of proportion with the slight loss in supply.

You have to look at the global picture for this, rather than just the US us of Iraqi oil. If the rest of the world uses Iraq oil and they can't get it anymore, they have to take it from somewhere else, the same place that we are trying to get it from. But oil has a very high elastisity in it's supply and demand curves, since it is a needed power source for now (until we find something else). And there are other factors besides just Iraq. Iraq just kind of stemmed the others.

Skerlnik · #6 (**permalink**) 05-01-2008, 12:47 PM

That's true. Well, hell, I have no idea, then.

I just found this article on CNN.com, as well, which I thought was interesting. Shows how theUS perspective is perhaps rather skewed.

Quote:

U.S. gas: So cheap it hurts

Relatively low taxes have kept pump prices far below most other developed nations, which some say is precisely why the current runup is so painful.

By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: May 1, 2008: 12:18 PM EDT

NEW YORK (CNNMoney.com) -- Despite daily headlines bemoaning record gas prices, the U.S. is actually one of the cheaper places to fill up in the world.
Out of 155 countries surveyed, U.S. gas prices were the 45th cheapest, according to a recent study from AIRINC, a research firm that tracks cost of living data.
The difference is staggering. As of late March, U.S. gas prices averaged $3.45 a gallon. That compares to over $8 a gallon across much of Europe, $12.03 in Aruba and $18.42 in Sierra Leone.
The U.S. has always fought to keep gas prices low, and the current debate among presidential candidates on how to keep them that way has been fierce.
But those cheap gas prices - which Americans have gotten used to - mean they feel price spikes like the ones we're experiencing now more acutely than citizens from other nations which have had historically more expensive fuel.
Cheap gas prices have also lulled Americans into a cycle of buying bigger cars and bigger houses further away from their work - leaving them more exposed to rising prices, some experts say.
Price comparisons are not all created equal. Comparing gas prices across nations is always difficult. For starters, the AIRINC numbers don't take into account different salaries in different countries, or the different exchange rates. The dollar has lost considerable ground to the euro recently. Because oil is priced in dollars, rising oil prices aren't as hard on people paying with currencies which are stronger than the dollar, as they can essentially buy more oil with their money as the dollar falls in value.
And then there's the varying distances people drive, the public transportation options available, and the different services people get in exchange for high gas prices. For example, Europe's stronger social safety net, including cheaper health care and higher education, is paid for partly through gas taxes.
Gas price: It's all about government policy. Gasoline costs roughly the same to make no matter where in the world it's produced, according to John Felmy, chief economist for the American Petroleum Institute. The difference in retail costs, he said, is that some governments subsidize gas while others tax it heavily.
In many oil producing nations gas is absurdly cheap. In Venezuela it's 12 cents a gallon. In Saudi Arabia it's 45.
The governments there forego the money from selling that oil on the open market - instead using the money to make their people happy and encourage their nations' development.
Subsidies, many analysts say, are encouraging rampant demand in these countries, pushing up the price of oil worldwide.
In the U.S., the federal tax on gas is about 18 cents a gallon, pretty low by international standards.
But those relatively low gas taxes make it hard now for Americans to deal with gas prices that have risen from around $1 to over $3 a gallon in the last seven years.
"Everybody pays more, but the U.S. pays more in absolute terms," said Lee Shipper, a visiting scholar at the University of California Berkeley's Transportation Center. If you're already paying $4 in taxes, said Schipper, then an extra $2 a gallon isn't that big of a deal.
Revenues from Europe's high gas taxes are used to fund a variety of things. One thing they have built is better public transportation, said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm.
They gave people an alternative to driving, something we don't have in North America," said Tertzakian.
Low fuel taxes and prices sprung out of a national love for mobility going back generations, said Robert Lang, director of the urban planning think tank Metropolitan Institute at Virginia Tech.
In fact, the U.S. could not have had the western expansion it did without the cheap mobility railroads and horse carriages afforded long before it became an auto-obsessed culture, said Lang.
"You couldn't have Manifest Destiny unless you could move," he said.
The automobile, and its promise of personal mobility, only deepened the nation's love affair with travel.
"Nobody sang 'She'll have fun fun fun until her daddy takes the tokens away,'" said Lang. 'It's totally romanticized."
Gas consumption Europe vs. U.S. There is some evidence Europe's high gas taxes have capped its oil consumption.
Oil use in the United Kingdom has basically stayed flat from 1980 to now, while in France it's dropped 17%, according to figures from the Energy Information Administration.
In the U.S., meanwhile, oil use is up 21% over the same period, although the country has added more people and seen its economy grow slightly faster.
Americans have taken advantage of cheap gas prices to do other things - like buy bigger cars and bigger houses further away from city centers, said Schipper.
On a per capita basis, Americans use three times more oil than Europeans, he said. That means Americans are more exposed to rising gas prices than their counterparts across the Atlantic.
"Five-thousand square feet in the suburbs, that's much rarer in Europe," said Schipper, referring to big homes. "We dug our hole."

Oregon Elephant · #7 (**permalink**) 05-01-2008, 01:01 PM

Okay, so does anyone have any ideas on how to easy the pain at the pump?

Comrade Joe · #8 (**permalink**) 05-01-2008, 01:58 PM

High oil prices are great, they bankroll Venezuela and encourage others to follow the path of socialism

If people want cheaper oil the answer is simple, stop using so much.

Oregon Elephant · #9 (**permalink**) 05-01-2008, 02:01 PM

Quote:

Originally Posted by Comrade Joe

High oil prices are great, they bankroll Venezuela and encourage others to follow the path of socialism

And I was expecting that from a different user first.

Quote:

If people want cheaper oil the answer is simple, stop using so much.

Funny, you say that higher oil prices encourages others to follow the path of socialism, but the way to correct the issue (according to you) is a capitalist derived method.

leviathon435 · #10 (**permalink**) 05-01-2008, 02:03 PM

Well my suggestion would be to nationalise as much as possible, get a socialist government and start trading with Venezuela and other countries. The socialist government will also help in promoting the idea of using less and as you said nationalised oil means profits go to the people. Simple really, if only the "get a socialist government" bit wasn't fraught with difficulties.

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