Quote: thecesspitThe markets are irrational in the short term... plenty of of examples of it throughout economic history.
I'm not sure that applies here, though--the oil markets are rational in the sense that they achieve the goal of their manipulators--an artificial pegging of both price and supply that results in maximum profits. The oil companies were just about the only companies that not only survived, but positively thrived during, the Second Great Depression. They were able to command historically high prices for their products at the very same time when the world economy was in its worst shape since 1929. Quite a feat, if you think about it.
My point earlier was that the "petroleum market" isn't a market at all, not in the sense we understand it. Again, the most obvious manifestation of that is that it in no way acts like a real, free market would.
According to the EIA (US Energy Information Administration) for the month of December, the US imported the following total amount of petroleum (in thousands of barrel per day). Of the 11,104 thousand barrels per day imported, 4,614 thousand barrels per day (42 percent) was imported from OPEC countries (asterisked). Only 1,564 thousand barrels per day come from the Persian Gulf region.
Canada - 2,713
Mexico - 1,365
Saudi Arabia - 1,087*
Nigeria - 1,070*
Venezuela - 917*
Russia - 514
Algeria - 484*
Iraq - 336*
Angola - 319*
Brazil - 295
(Libya - 66). Even though Libya's number is small, at $80/barrel, the US paid Libya very close to a cool billion for oil products in the last six months of 2010. That's alot of guns.
The spot price for Gasoline is what dictates what you eventually pay for gas (plus taxes, delivery, and the gas station markup, of course). The EIA shows stats for this here. The daily price for March 23th for Conventional Gasoline delivered to New York Harbor was 2.821/gallon which the highest since September 18, 2008 (gas was 3.147 that day).
The market is highly volatile due to speculation and perceptions on demand. Much as I don't like it, it is how the free market works. Fixing prices does not make sense.
In my opinion, if anything, the price of gasoline in the United States is far too low -- you really want to change market conditions to get off oil and onto other types of energy that you don't have to import, like Natural Gas, Coal, and renewables that the United States have plenty of. I know that Americans have love affairs with the car which is partially a function of the size of the country compared to compact countries everywhere else but it's time to move away from oil.
Quote: boymimboIn my opinion, if anything, the price of gasoline in the United States is far too low -- you really want to change market conditions to get off oil and onto other types of energy that you don't have to import, like Natural Gas, Coal, and renewables that the United States have plenty of. I know that Americans have love affairs with the car which is partially a function of the size of the country compared to compact countries everywhere else but it's time to move away from oil.
Far too low--why? The reason why Europeans pay so much for gasoline is that it is ridiculously heavily taxed. There are two reasons for this--culturally, driving a car is regarded in Europe as a privilege of the elite, while in the US, it's considered the right of any average Joe; also, the European welfare state needs to suck in huge amounts of tax revenue, and taxing gasoline like crazy is a good way of soaking the aforementioned rich elite--you want to drive YOUR OWN PERSONAL VEHICLE, buddy, instead of crowding onto the streetcar like everyone else, well, you're gonna pay for it.
If you remove the overlay of the tax paid for a gallon of gas in both Europe and the US, you'll find that the retail prices for the gas itself are about the same in both places. In France, for example, about 70% of the retail price is tax; in the US, it ranges from 7-17%.
So in reality, the price of gasoline in the US isn't "far too low"--the nontax component of the price is about what everyone else pays. What is true is that the fuel taxes in Europe are far too high. In the commerce in any retail good where the tax is more than twice the actual cost of the item, something is seriously out of whack, which pretty much describes European redistributive economies in general.
Taxes are a way to discourage one's use of a product or service. Add enough taxes on smokes and you drive the teenaged smokers away. It works. America gets into conflicts because of its interests in foreign oil. If it didn't have as much interest in foreign oil by switching over to other forms of fuel, it wouldn't act on the events in Libya, probably wouldn't have be involved in overthrowing the Iraqi government and the ensuing war, and wouldn't have to kiss Saudia Arabia's (and overlook the fact that 18 of the 19 bombers in 2001 were Saudi Citizens) and Venezuela's ass either. It would take away Aberdinijad's voice too. Because America would control the prices on its fuels (which are self-sustaining to some degree), it would have more control over its economic stability rather than some day-traders who jack the price of gasoline up because of Khadafi taking over some city in is own country. That's why we pay far too little for gasoline.
If gas was $10/gallon instead of the $3.75 it is now, you can bet that alot of people would be dumping the SUV for the hybrid or the Volt. They'd be dumping their oil furnace for natural gas. You'd drive less. You'd fly less. They would take the train or subway alot more. $5/gallon gas doesn't stop many people from driving. They just whine on forums like these.
Quote: boymimboI'll agree to disagree.
Taxes are a way to discourage one's use of a product or service. Add enough taxes on smokes and you drive the teenaged smokers away. It works. America gets into conflicts because of its interests in foreign oil. If it didn't have as much interest in foreign oil by switching over to other forms of fuel, it wouldn't act on the events in Libya, probably wouldn't have be involved in overthrowing the Iraqi government and the ensuing war, and wouldn't have to kiss Saudia Arabia's (and overlook the fact that 18 of the 19 bombers in 2001 were Saudi Citizens) and Venezuela's ass either. It would take away Aberdinijad's voice too. Because America would control the prices on its fuels (which are self-sustaining to some degree), it would have more control over its economic stability rather than some day-traders who jack the price of gasoline up because of Khadafi taking over some city in is own country. That's why we pay far too little for gasoline.
If gas was $10/gallon instead of the $3.75 it is now, you can bet that alot of people would be dumping the SUV for the hybrid or the Volt. They'd be dumping their oil furnace for natural gas. You'd drive less. You'd fly less. They would take the train or subway alot more. $5/gallon gas doesn't stop many people from driving. They just whine on forums like these.
I think that ascribing the motives for the conflicts America gets into to "interests in foreign oil" is simplistic, easily argued, and 90% incorrect. Of course, that's what all the America-bashers (in America and elsewhere) toot out of various orifices, but the fact of the matter is that if we wanted to militarily dominate the Middle East oil supplies, Iraq and Afghanistan would probably be the LAST two places we would pick. To use your Saudi argument, we actually had a perfect pretext to send in the Marines and take over that country after 9/11--but we didn't. We DON'T "kiss Venezuela's ass", simply because we don't need them. We buy what they sell because it's convenient--that's all.
I agree that if we simply relied on domestic supply, then we wouldn't be as threatened by events in God's Monkey House (as Kurt Vonnegut refers to it), but I don't see how it follows that gas is too inexpensive. Sure, we could raise the price to $8000/gallon, then we would all walk or ride horses, and could tell the entire Middle East to eat sand. But would our quality of life be better, or worse? And to move to your example, what would be the effect on our quality of life if the price did go to $10, and we DID "drive less", "fly less", etc.? What would be the effect on American lives if it cost $500 to drive to the mountains and go camping? If it cost $9000 to fly the family back east to see Grandma and Grandpa? The ability to travel freely and relatively cheaply is a major social good. If you would triple the price of gas because it's somehow "wrong" that people should have relatively cheap transportation (as has been done, pretty much, in Europe), then there'd better be some substantial compensating social benefit.
A typical modern car gets ~30mpg and has a TCO between $0.50/mile and $0.80/mile, of which ~$0.50/mile is non-fuel costs, and, at current prices, ~$0.12-$0.15/mile is fuel costs. Changes in behavior become major at doubling the cost, which would occur with an extra $0.60-$0.70/mile added to fuel costs. At aforementioned 30mpg figure, and adding current cost, that is about $0.75*30=$22.5/gallon. Fuel would begin comprising half the ownership cost at around $15/gallon.
Why do people insist on adding other things? When I walk somewhere, it's free. I'm not counting the cost of food I ate to get the calories to walk, the wear on my body that will cause me to die earlier, or my homeowners/life insurance. Why do it for the car?
Quote: teddysSpeaking of which, can someone please explain to me how people (government, employers, my dad) figure out how to calculate the cost per mile for driving? I use one metric: gas. That's the only thing coming out of my pocket. Everything else is already paid for.
Why do people insist on adding other things? When I walk somewhere, it's free. I'm not counting the cost of food I ate to get the calories to walk, the wear on my body that will cause me to die earlier, or my homeowners/life insurance. Why do it for the car?
Gas+maintenance+depreciation. Of course, at some point, your car is fully depreciated (and hopefully, still operational), but this is offset by the increasing cost of maintenance as the car gets older. The IRS calculation is a weighted average of those three costs over the useful life of the car.
Maintenance is certainly "coming out of your pocket" all the time, since there will be x amount of maintenance needed per y number of miles driven. Your car declines in value (depreciates) as more miles are put on it. This, too, is happening all the time.
Your walking analogy is actually a good one. Walking is NOT free. There are the calories you must expend to do it, the time you must spend to get wherever you're going, and the risk factor of getting mugged, run over, etc. You don't count those factors that you mention, but you SHOULD. (Another cost of walking that people don't realize is opportunity cost.)
Quote: boymimbo
If gas was $10/gallon instead of the $3.75 it is now, you can bet that alot of people would be dumping the SUV for the hybrid or the Volt.
I heard that argument before "If gas was $3 instead of $1.50m people would ...", and then it was $4 ... and nothing happened