Alaska oil field closure. What do we do now?

Quicksilver · #1 08-07-2006, 05:15 PM

Are we in a heap of trouble?
http://money.cnn.com/2006/08/07/news...ex.htm?cnn=yes

SANguru · #2 08-07-2006, 05:17 PM

we pay up the ass for gas for no reason! AGAIN..

Quote:

Originally Posted by Quicksilver

Are we in a heap of trouble?
http://money.cnn.com/2006/08/07/news...ex.htm?cnn=yes

BradATL · #3 08-07-2006, 10:05 PM

Quote:

Originally Posted by SANguru

we pay up the ass for gas for no reason! AGAIN..

Au contrare, mon frere! There is a clear reason.

As we all know from our undergraduate economics courses, commodity prices are far from stable: if there is a shortage of one barrel of oil, the price shoots up; if we have an overcapacity of one barrel, its price collapses. Commodities are priced on the margin. And with modern commodity exchanges, where all participants (both buyers and sellers) possess essentially the same information, buyers and sellers instantly bid the price up or down depending on whether supply exceeds demand, or vice versa.

There are many clear and straightforward reasons why prices have increased dramatically over the past couple of years. Here are just two out of many:

1. First and foremost, the global demand for oil is growing rapidly, while supply is growing much more slowly. Most of the growth in demand is coming from India and China, two rapidly industrializing countries with rapidly growing middle classes. Hundreds of millions of people driving cars who, ten years ago, were riding bicycles.

2. In America, essentially no new refinery capacity has been added during the past 20 years. We can produce/import all the crude oil we want, but to burn it in our cars and trucks requires it to be refined into gasoline. I won't go into the reasons that no new refineries have been built -- would be a good topic for another thread in the future.

High oil company profits are a result, not a cause, of high crude oil prices. It has certainly been a huge windfall for the oil companies, and one can argue that a portion of the windfall should be recaptured by the "public" (i.e., the government) and used for alternative energy R&D or other activities in furtherance of the "public interest". However, you can't accuse them of a "conspiracy" or other manipulative, anti-competitive behavior. The simple truth, like it or not, is that these companies happen to extract, refine, distribute and sell a commodity product that, through no brilliance or manipulation of their own, has skyrocketed in price over the last few years.

Love 'em or hate 'em, either way, these guys are a major beneficiary of the problem, but are not the cause of the problem. In fact, when this "problem" (i.e., demand exceeding supply) was with us in the 1970s and then reversed itself in the 1980s, the oil companies were anything but "beneficiaries" -- they darn near went broke. A major recession in China, which will probably spread into a worldwide recession, will bring us back to $40 oil pretty quickly. Not that I'm advocating that.

I would propose that we raise the national gas tax by $1.00 or more per gallon, phased in over the next 2 years. The revenue generated by this tax would be used to lower the employee-paid portion of Social Security (FICA) tax, thereby returning the money into workers' pocketbooks. The higher price of gas would reduce demand and would incent people to use mass transit and to purchase fuel-efficient vehicles. This would create a larger market for fuel-efficient vehicles and auto manufacturers would develop and produce more of these vehicles to meet demand. Reduced use of petroleum in this country would provide environmental as well as national security benefits.

Eric5273 · #4 08-07-2006, 10:33 PM

So you don't think that the oil companies have had anything to do with squashing alternative energy r&d?

BradATL · #5 08-08-2006, 08:01 AM

Quote:

Originally Posted by Eric5273

So you don't think that the oil companies have had anything to do with squashing alternative energy r&d?

Exactly how would they "squash" it? Alternative energy R&D was "squashed" by plentiful, cheap oil.

Eric5273 · #6 08-08-2006, 02:27 PM

Quote:

Originally Posted by BradATL

Exactly how would they "squash" it?

They influence government policy through very powerful lobbying.

It is well known that most of the R&D in the energy industry comes from government funding and tax credits, and that also applies to the oil industry that for decades did not have to pay any corporate income taxes due to the oil depreciation allowance. Today they still get large tax credits for any money they spend on R&D -- at a time when they are showing record profits.

And at the same time, the government has refused to provide similar tax credits for companies developing alternate energy sources. But that is what you get when the oil lobby writes the government's energy policy.

Another issue is fuel efficiency standards. The government has refused in recent years to increase these nearly enough. While China has fuel efficiency standards of around 35 mpg, and the European Union has fuel efficiency standards of over 40 mpg, here in the US we are stuck at around 23 mpg. The Model-T Ford from 100 years ago got 24 mpg. That is pathetic.

My computer processor is 100 times faster than one made 15 years ago, and it uses 10 times less energy to operate. My cell phone that has a color screen and is slightly larger than a credit card with a very tiny battery, operates for 5 days on a single battery charge. My cell phone from 12 years ago was the size of a brick with a huge battery, had a one line monochrome digital display, and operated for about 8 hours on a battery charge.

Efficiency can be increased a hundred times over if they really want to. But instead we are still using the same 100-year-old internal combustion engine. It's an old technology that should have died along with the steam engine.

You also may want to watch this movie:

http://www.sonyclassics.com/whokilledtheelectriccar/

Driver8 · #7 08-08-2006, 09:24 AM

Brad - Good points. Add one:

3. There is a significant risk premium added to the pure cost of oil because of the fact that most of it is coming from one of the most unstable regions in the world, a powderkeg, if you will. If we were pumping equivalent amounts of oil out of, say, Canada, all other things considered it would be quite a bit less.

IMO, the time to do the national gas tax was in the late 90s when I was paying $0.79 per gallon to fill up my V8 Taurus SHO. I could fill it up for less than $12!

Mike

Quote:

Originally Posted by BradATL

Au contrare, mon frere! There is a clear reason.

As we all know from our undergraduate economics courses, commodity prices are far from stable: if there is a shortage of one barrel of oil, the price shoots up; if we have an overcapacity of one barrel, its price collapses. Commodities are priced on the margin. And with modern commodity exchanges, where all participants (both buyers and sellers) possess essentially the same information, buyers and sellers instantly bid the price up or down depending on whether supply exceeds demand, or vice versa.

There are many clear and straightforward reasons why prices have increased dramatically over the past couple of years. Here are just two out of many:

1. First and foremost, the global demand for oil is growing rapidly, while supply is growing much more slowly. Most of the growth in demand is coming from India and China, two rapidly industrializing countries with rapidly growing middle classes. Hundreds of millions of people driving cars who, ten years ago, were riding bicycles.

2. In America, essentially no new refinery capacity has been added during the past 20 years. We can produce/import all the crude oil we want, but to burn it in our cars and trucks requires it to be refined into gasoline. I won't go into the reasons that no new refineries have been built -- would be a good topic for another thread in the future.

High oil company profits are a result, not a cause, of high crude oil prices. It has certainly been a huge windfall for the oil companies, and one can argue that a portion of the windfall should be recaptured by the "public" (i.e., the government) and used for alternative energy R&D or other activities in furtherance of the "public interest". However, you can't accuse them of a "conspiracy" or other manipulative, anti-competitive behavior. The simple truth, like it or not, is that these companies happen to extract, refine, distribute and sell a commodity product that, through no brilliance or manipulation of their own, has skyrocketed in price over the last few years.

Love 'em or hate 'em, either way, these guys are a major beneficiary of the problem, but are not the cause of the problem. In fact, when this "problem" (i.e., demand exceeding supply) was with us in the 1970s and then reversed itself in the 1980s, the oil companies were anything but "beneficiaries" -- they darn near went broke. A major recession in China, which will probably spread into a worldwide recession, will bring us back to $40 oil pretty quickly. Not that I'm advocating that.

I would propose that we raise the national gas tax by $1.00 or more per gallon, phased in over the next 2 years. The revenue generated by this tax would be used to lower the employee-paid portion of Social Security (FICA) tax, thereby returning the money into workers' pocketbooks. The higher price of gas would reduce demand and would incent people to use mass transit and to purchase fuel-efficient vehicles. This would create a larger market for fuel-efficient vehicles and auto manufacturers would develop and produce more of these vehicles to meet demand. Reduced use of petroleum in this country would provide environmental as well as national security benefits.

fln8tive · #8 08-07-2006, 05:34 PM

Corrosion in the pipeline can be fixed, will be fixed, etc. May be they are not giving an ETA to be back online so nobody looks bad if it takes longer than expected to repair.

Quicksilver · #9 08-07-2006, 05:37 PM

Don't expect gasoline prices to go down whenever they finish.

blondboinsd · #10 08-07-2006, 05:41 PM

Just another conspiracy