Peak Oil - counterargument
 

I am sure it would double quickly, but not for government reasons.

Large, public corporations are controlled by the stockholders. By
stockholders, I don't mean John Q. Public's personal investments, but by
major institutional investors managing big money market and retirement
accounts.
These investors are as much interested, or more so, in revenues and the
steady growth of .... than in the minor quarterly swings in profits.

If the segment of oil company's revenues that are derived from gasoline
sales suddenly dropped by one half, these investors would be screaming for
the revenue deficit to be made up immediatately. The big oil companies
cannot afford to lose confidence in the investment banking community, and
would raise prices to make up the revenue deficit.

So, switching to high mpg cars may make you feel good, and, if you believe
the world is about to run out of oil you could convince yourself that you
are doing some good, but if you think it's going to control the price of a
gallon of gas, you are really misguided.


Your logic is flawed, Richard. Just how flawed depends on whether you
believe the oil companies are guilty of collusion and anti-trust law or
whether you believe that free markets are at work. The oil companies have
no direct control of the price of crude, which is the primary driver of the
price of refined products such as gasoline. World markets set the price of
crude not the oil companies. Just as a meat processor doesn't have any
direct control of the price of beef or pork. As with any commodity, current
prices are set by current conditions of supply and demand. Now it becomes
reasonable to ask if supply is being tinkered with. Reducing supply would
be the most effective way of influencing market prices. But if we're
talking about crude, then OPEC is who you want to look at as far as the
ability to tinker with supply. That is done through production quotas and
limits. But OPEC and the oil companies are not synonymous.

Now if you're talking about the supply of refined products, then that is
most certainly the oil companies rice bowl, assuming an adequate supply of
crude. But since it appears that all refining facilities are running at
capacity, it doesn't look like there's any effort to reduce supply by
running refineries at reduced volume. You could ask why the oil companies
haven't built any new refining facilities in the last 30 years, but I
suspect that has more to do with the difficulty of getting approval to build
such a facility than it does with the lack of desire to build one.

So, in your premise that demand for gas drops by half, I believe it is
unreasonable to think that the oil companies would be able to double prices
as a response. Your scenario implies that the demand for gasoline is highly
elastic. In reality, nothing could be further from the truth. But high
elasticity is the only thing that would allow for such a large hypothetical
reduction in demand. And if that were the case, then a further doubling of
price would only cause a further drop in the demand for gas due to the
highly elastic nature of the demand (in your hypothetical world). This
result is the exact the opposite of what the oil companies desired, assuming
they have that kind of pricing power, which they don't. In a case of demand
falling by half, prices would have to drop as a result of what would now be
excess capacity or supply. Ultimately gasoline prices would reach
equilibrium with the new realities of supply and demand.

In today's reality, what you have is a product with a very inelastic and
increasing demand and with a limited and ultimately reducing supply. The
combination of these two is a natural recipe for high prices.

Peak Oil - counterargument
 

"RG" wrote in message
m...

I am sure it would double quickly, but not for government reasons.

Large, public corporations are controlled by the stockholders. By
stockholders, I don't mean John Q. Public's personal investments, but by
major institutional investors managing big money market and retirement
accounts.
These investors are as much interested, or more so, in revenues and the
steady growth of .... than in the minor quarterly swings in profits.

If the segment of oil company's revenues that are derived from gasoline
sales suddenly dropped by one half, these investors would be screaming
for the revenue deficit to be made up immediatately. The big oil
companies cannot afford to lose confidence in the investment banking
community, and would raise prices to make up the revenue deficit.

So, switching to high mpg cars may make you feel good, and, if you
believe the world is about to run out of oil you could convince yourself
that you are doing some good, but if you think it's going to control the
price of a gallon of gas, you are really misguided.


Your logic is flawed, Richard. Just how flawed depends on whether you
believe the oil companies are guilty of collusion and anti-trust law or
whether you believe that free markets are at work. The oil companies have
no direct control of the price of crude, which is the primary driver of
the price of refined products such as gasoline. World markets set the
price of crude not the oil companies. Just as a meat processor doesn't
have any direct control of the price of beef or pork. As with any
commodity, current prices are set by current conditions of supply and
demand. Now it becomes reasonable to ask if supply is being tinkered
with. Reducing supply would be the most effective way of influencing
market prices. But if we're talking about crude, then OPEC is who you
want to look at as far as the ability to tinker with supply. That is done
through production quotas and limits. But OPEC and the oil companies are
not synonymous.

Now if you're talking about the supply of refined products, then that is
most certainly the oil companies rice bowl, assuming an adequate supply of
crude. But since it appears that all refining facilities are running at
capacity, it doesn't look like there's any effort to reduce supply by
running refineries at reduced volume. You could ask why the oil companies
haven't built any new refining facilities in the last 30 years, but I
suspect that has more to do with the difficulty of getting approval to
build such a facility than it does with the lack of desire to build one.

So, in your premise that demand for gas drops by half, I believe it is
unreasonable to think that the oil companies would be able to double
prices as a response. Your scenario implies that the demand for gasoline
is highly elastic. In reality, nothing could be further from the truth.
But high elasticity is the only thing that would allow for such a large
hypothetical reduction in demand. And if that were the case, then a
further doubling of price would only cause a further drop in the demand
for gas due to the highly elastic nature of the demand (in your
hypothetical world). This result is the exact the opposite of what the
oil companies desired, assuming they have that kind of pricing power,
which they don't. In a case of demand falling by half, prices would have
to drop as a result of what would now be excess capacity or supply.
Ultimately gasoline prices would reach equilibrium with the new realities
of supply and demand.

In today's reality, what you have is a product with a very inelastic and
increasing demand and with a limited and ultimately reducing supply. The
combination of these two is a natural recipe for high prices.


Fortunately for my family, I was a better engineer than an economist.
My theory came from the experience of selling a small, private company to a
large, public one and the dramatic change that took place in terms of
emphasis on quarterly - actually monthly revenue reporting.
It was quite an eye-opener.

RCE

Peak Oil - counterargument
 

"P. Fritz" wrote in message
...

Nope. You make the false assumption that the "big" oil companies are
colluding in setting prices. In reality, simple economics dictate
price.....supply and demand.

What makes you so sure they are NOT fixing prices?

Peak Oil - counterargument
 

"RG" wrote in message
m...

I am sure it would double quickly, but not for government reasons.

Large, public corporations are controlled by the stockholders. By
stockholders, I don't mean John Q. Public's personal investments, but by
major institutional investors managing big money market and retirement
accounts.
These investors are as much interested, or more so, in revenues and the
steady growth of .... than in the minor quarterly swings in profits.

If the segment of oil company's revenues that are derived from gasoline
sales suddenly dropped by one half, these investors would be screaming
for
the revenue deficit to be made up immediatately. The big oil companies
cannot afford to lose confidence in the investment banking community,
and
would raise prices to make up the revenue deficit.

So, switching to high mpg cars may make you feel good, and, if you
believe
the world is about to run out of oil you could convince yourself that
you
are doing some good, but if you think it's going to control the price of
a
gallon of gas, you are really misguided.


Your logic is flawed, Richard. Just how flawed depends on whether you
believe the oil companies are guilty of collusion and anti-trust law or
whether you believe that free markets are at work. The oil companies have
no direct control of the price of crude, which is the primary driver of
the
price of refined products such as gasoline. World markets set the price
of
crude not the oil companies. Just as a meat processor doesn't have any
direct control of the price of beef or pork. As with any commodity,
current
prices are set by current conditions of supply and demand. Now it becomes
reasonable to ask if supply is being tinkered with. Reducing supply would
be the most effective way of influencing market prices. But if we're
talking about crude, then OPEC is who you want to look at as far as the
ability to tinker with supply. That is done through production quotas and
limits. But OPEC and the oil companies are not synonymous.


True but how much is a manipulated or intentional shortage? Iraq has the
second largest oil reserves in the world, and production is less than it was
in 2002 - coincidence?

Now if you're talking about the supply of refined products, then that is
most certainly the oil companies rice bowl, assuming an adequate supply of
crude. But since it appears that all refining facilities are running at
capacity, it doesn't look like there's any effort to reduce supply by
running refineries at reduced volume. You could ask why the oil companies
haven't built any new refining facilities in the last 30 years, but I
suspect that has more to do with the difficulty of getting approval to
build
such a facility than it does with the lack of desire to build one.


A LOT of rhetoric has centered around the shortage of refineries. The
greenies have been blamed for that shortage, but who has profited from that
bottleneck - not the greens. EPA regulations are more strict than they were
20 years ago, but refineries can still be built. The oil companies just
like to use the refineries shortage as an excuse to boost their profit
margins.

So, in your premise that demand for gas drops by half, I believe it is
unreasonable to think that the oil companies would be able to double
prices
as a response. Your scenario implies that the demand for gasoline is
highly
elastic. In reality, nothing could be further from the truth. But high
elasticity is the only thing that would allow for such a large
hypothetical
reduction in demand. And if that were the case, then a further doubling
of
price would only cause a further drop in the demand for gas due to the
highly elastic nature of the demand (in your hypothetical world). This
result is the exact the opposite of what the oil companies desired,
assuming
they have that kind of pricing power, which they don't. In a case of
demand
falling by half, prices would have to drop as a result of what would now
be
excess capacity or supply. Ultimately gasoline prices would reach
equilibrium with the new realities of supply and demand.

In today's reality, what you have is a product with a very inelastic and
increasing demand and with a limited and ultimately reducing supply. The
combination of these two is a natural recipe for high prices.



Agree - but I just saw a chart (I'll try to find it again) that showed the
disproportionate amount charged for gas versus oil. The price of oil has
gone up $10 per barrel in the last month or so, that should translate to
$.20 per gallon - but price has gone up $1 per gallon - price gouging??????

Peak Oil - counterargument
 

On Wed, 26 Apr 2006 13:55:01 +0000, Gorf wrote:


A LOT of rhetoric has centered around the shortage of refineries. The
greenies have been blamed for that shortage, but who has profited from
that bottleneck - not the greens. EPA regulations are more strict than
they were 20 years ago, but refineries can still be built. The oil
companies just like to use the refineries shortage as an excuse to boost
their profit margins.

The refinery shortage is a canard. In point of fact, the oil industry has
been closing refineries to streamline operations, and increase
profitability. There is nothing wrong with that, but to hold refining
capacity as a bottleneck, is disingenuous. In truth, I have been unable
to find any verifiable attempt to build a new refinery in the past twenty
years.

Can't afford gas?
 

http://www.atomfilms.com/contentPlay...ant_afford_gas

Can't afford gas?
 

On Thu, 27 Apr 2006 05:52:55 GMT, "Calif Bill"
wrote:

http://www.atomfilms.com/contentPlay...ant_afford_gas

I sent it to my brother, who got real ****ed at me for the last bit of
humor about Democrats that I posted for Doug. This will show him I'm fair
and balanced.

Thanks, I needed the help!
--
'Til next time,

John H

******************************************
***** Have a Spectacular Day! *****
******************************************

More gas on gas
 

JohnH wrote:
If you do not like the fact that ExxonMobil used part of its 9 cents per
gallon profit to compensate a retiring executive, patronize another
supplier of the company's products.

If you do not like the fact that government taxes account for 40 cents per
gallon, well, there's nothing you can do about that.

From where comes the 9 cents a gallon figure and the 49 cents a gallon
figure?

Out of his ass. He leaves off how many billions of government dollars
are either given to or spent on the behalf of the fossil fuel industry,
particularly oil. He also seems not remember that gasoline taxes are
earmarked for highways.

Peak Oil - counterargument
 

RCE wrote:
Again, stolen from another NG, the following is a portion of an article
published in the "Economist".

It seems to refute some of the Peak Oil doom and gloom arguments.

http://en.wikipedia.org/wiki/Hubbert_peak

Peak Oil - counterargument
 

wrote in message
oups.com...
RCE wrote:
Again, stolen from another NG, the following is a portion of an article
published in the "Economist".

It seems to refute some of the Peak Oil doom and gloom arguments.

http://en.wikipedia.org/wiki/Hubbert_peak


Based on rigorous scientific research (i.e.: picking their noses while
taking a crap), some here don't believe *any* limited supply theories.