Oil Is Still Cheap

Even with oil prices soaring, by some estimates, they're still short of historic highs.

Kevin Bullis 04/23/2008

12 Comments

High oil prices are supposed to get people to use less, yet oil consumption continues to rise in many places. That could be because oil really isn't as expensive as it's been in the past, according to some ways of looking at it. A recent article in the Economist says that because Western consumers' incomes have risen considerably over the past few decades, oil prices would need to top $134 a barrel to have the same impact as prices in 1981. The price of oil was a mere $119 a barrel yesterday.

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zig158

64 Comments

1391 Days Ago
04/24/2008

Give it 6 months, then it will be up to your $134

deafwolf

1 Comment

1348 Days Ago
06/06/2008

Re:

It hit $138 today.
Now what?

danimiller

1 Comment

1391 Days Ago
04/24/2008

Oil needs to be cheap for the economy to work

The whole economy functions on cheap oil to be able to transfer goods cheaply so it doesn't affect the U.S. economy deliberately by limiting production. If people cannot see this they are either blind to the truth or haven't studied the situation correctly. China is cooperating with the saudies and deliberately buying unneeded amounts of oil to bring the price up and strangle the U.S. economy. Because everthing is further away in the U.S. they consume much more oil. The high price of natural gas is also strangling the economy because it is used for heating, 90%of fertlizers, powering electric gas stations and trucks powered by liquified.

z0rr0

99 Comments

1391 Days Ago
04/24/2008

Re: Oil needs to be cheap for the economy to work

Oil needs to be expensive for Government to work ! About half of every dollar is TAX, federal or state. Vote the incumbents out, get the right people in, and cut the price by half. An aside, Europe pays $5-6 per gallon, and in the major cities, the rush hour traffic rivals NYC. Psychologically, we haven't maxed out yet - behavior hasn't changed.

ChuckInReno

20 Comments

1387 Days Ago
04/28/2008

Re: Oil needs to be cheap for the economy to work

I suppose that depends on what you mean, when you say "for the economy to work". If you mean the economy of consumer spending, cheap goods from China, then yes, cheap oil is required for that. We should have a debate about what constitutes a good economy, i.e., quality of living. I'm pretty sure it's closer related to education, health care, rather than big cheap TVs. But, that's a conversation for a different day...

However, we certainly haven't had cheap oil in a long time, if you include all the costs you and I are paying. Estimates vary, but it's safe to say that the US government subsidizes the cost of oil imported from the Persian Gulf to the tune of $1 - $2 per gallon.

MakeSense

99 Comments

1391 Days Ago
04/24/2008

If Oil is a Bargain ...

If oil is such a bargain, then coal-to-liquids and gas-to-liquids, which are profitable at $50 a barrel, ought to be just what we need. Seriously, let's get started on some alternatives.

There's something much different today than back in the OPEC-induced crisis of yore. We import 75% of our crude oil consumption (30 Quads out of 40 Quads or so). Back in the 1970s, we imported about 30%. This means that high prices impact our trade deficit to a much greater extent than back in those perfectly acceptable days of gas rationing, locks on gas caps and lines for miles at filling stations.

It's funny that people say in effect, "Oil isn't quite as expensive as it was in the days of oil Hell." What's the take away from a statement like that? Kevin, you're awesome, but I think this is bad news, not glass-half-full news. Maybe you had to experience those days as I did to realize that they were anything but normal times.

Kevin Bullis

178 Comments

1386 Days Ago
04/29/2008

Re: If Oil is a Bargain ...

In so many ways oil isn't a bargain. That includes the trade deficit you mentioned as well as environmental, military, and political costs. And I'm sure people who have no alternatives to buying gas to get to work don't think its a bargain either, especially the poor for whom gasoline is a big chunk of their income.

The blog is just pointing out one of the reasons people continue to pay for oil largely from other countries. There are other reasons, too, such as people living far from work and having no choice. Even if prices reach historic highs, many people will have to keep paying.

What's the solution? How will people come to use less gasoline? I don't know. One interesting proposal is to increase gas prices still further with taxes, and then take that money to help those who can't afford the gas, to invest in the development of gasoline alternatives, and to promote changes to American cities so that people can live closer to work.

MakeSense

99 Comments

1376 Days Ago
05/09/2008

Re: If Oil is a Bargain ...

Raising taxes and prices would probably not fly politically, but I think that a federally mandated oil price floor would encourage development of alternatives.

If we want to import far less oil, then we have to anticipate that success will bring lower oil prices. If oil could not be bought or sold for less than say $55/bbl, then companies that could potentially impact oil imports would not have to fear their own success, a la lower oil prices. If the international oil price fell below the minimum price, the resulting tariff would go to the government.

Guest (energymv@gmail.com)

1370 Days Ago
05/15/2008

Re: If Oil is a Bargain ...

You've actually suggested a very wise and logical solution. Oil will continue to be the cheapest fuel as long as we have an abundance of cheap recoverable oil reserves around the world. OPEC can afford to reduce oil prices to undercut any alternative. However the U.S. could combat OPEC's monopoly on energy by enacting a floating price floor (i.e. market price plus tariffs). The price floor could even be "reset" on a weekly basis as the need (for price relief) fluctuates.

But as we deplete the most abundant cheap oil reserves in the world in 2030 or 2040, oil prices will steadily rise until final depletion of cheap reserves. Price floors are an excellent way for the U.S. to develop a stable and reliable alternative energy industry. But no politician has the cajones to do this.

energymv

19 Comments

1363 Days Ago
05/22/2008

Artificially Cheap Oil....

We subsidize and externalize the SOx, NOx, particulate matter, smog, greenhouse gas climate change, etc. We also subsidize a military complex in the mid-east for secure access to cheap oil in unstable regions. We ostensibly went to war in Iraq partially because of their abundance of cheap oil. And we sometimes fund the other side of the "war on terror" indirectly. Saudi Arabia is the largest exporter of oil, not exactly a model democracy. You could say that oil is the 800 lb gorilla that sometimes corrupts our foreign policy, which is yet another hidden cost of imported oil.

energymv

19 Comments

1363 Days Ago
05/22/2008

Don't forget about income distribution

The rich have gotten twice as rich, but the poor are just as poor as they were 30 years ago. Here is a graph from the U.S. census bureau that illustrates the point. The flat blue line in the middle is the median 50th percentile income in the U.S. which remains FLAT, while the top yellow line is the 90th percentile super rich getting richer.

Real income data based on http://www.census.gov/prod/2004pubs/p60-226.pdf

Income Distribution Graph...(shown in 2003 dollars)
http://upload.wikimedia.org/wikipedia/en/thumb/a/a7/United_States_Income_Distribution_1967-2003.svg/800px-United_States_Income_Distribution_1967-2003.svg.png

gmm76127

1 Comment

1362 Days Ago
05/23/2008

Want to lower oil prices?

Yet another reason to buy American. The growing economy of China and other countries is often cited as reasons for the price of oil. We, consumers in the US, are responsible for the current cost of oil. Buy products made in the United States. It is an investment in your future.
Oil prices will drop. China will have less money to build it's military (yea, believe it. China will be a threat to us) and more jobs will be available in the United States.

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