Why Do Higher Gas Prices Anger You?

Yes, I do that - but only when driving constantly, without speeding up and breaking a lot.
(With 100km/h - 62mph it's 40,3 mpg)

really 37.3 mpg at 192 kph?

180 kph, sorry. 111 mph.

Sheesh, that's still extremely efficient. What do you drive, if you don't mind me asking?

Cycloptichorn

Sheesh, that's still extremely efficient. What do you drive, if you don't mind me asking?

Cycloptichorn

An Opel Astra (GM) which is [nearly] exactly the same as the Vauxhall model - you find the technical data when going HERE to 'cars' >'view the range'> 'Astra' > 'SRi' > '5-door hatchback' > '1.9CDTi 16v [150PS] - manual' :wink:

I have no problem with the current higher prices for gasoline.

The net cost of transportation is still a bargain compared to what people spent (in relation to their earnings) during most of the past century.

Moreover the higher price will likely spur renewed exploration and may even overcome the truly absurd opposition of environmentalists for the development of our own oil fields in Alaska and even in the Rcky Mountain region (Canada is almost unnoticed in its development oif Canadian north slope Arctic oil fields,). Hell we may even see the construction of some new refineries that we have needed for a long time.

Finally the higher prices will stimulate automobile manufacturers to offer a greater variety of higher mileage vehicles and the public to buy them (that is much better than the ridiculous notion that we should allow government to design automobiles through regulation.).

All that is needed to "secure" a source of petroleum is money and free market development of our own resources. We have lots of money and only our environmental fanatics stand in the way of the development of our own resources. The current market imbalance will soon correct itself and we will also see an eventual reduction iun the price of oil -- just as we have seen many times before after such market crunches.

George,

You don't think that the failure to build new refineries has to do with the fact that there is no incentive for oil companies to do so?

Stricter environmental regulations have made it much more expensive to build refineries, therefore, they haven't been built. But the lack of refineries is one of the reasons the cost of fuel is so high. So how is this a loss for the oil companies? They create their own demand situation in this case. Building new refineries not only requires captial up front, it lowers prices overall; a net loss for the oil companies in our climate. So there is no incentive to do so.

Why bother increasing capacity when it is much easier to just charge more? It isn't as if the oil companies are hurting for clients or consumers these days....

Cycloptichorn

Thing is that people love big cars. They don't need them, they LOVE them. Seriously, how many of those cars do you usually see in the streets:





Admit it, there are LOTS of them. Many with confederate flags, btw. And, by comparison, how many of these:





(just picked the second one because Walter mentioned it)

Cyclo,

Not sure I fully follow your argument. However it is true that environmental regulation has not only eliminated incentives for capital investment in energy resources in this country, it has virtually stopped them cold. The result is we have virtually no reserve capacity for either the generation or transmission of electrical power, and no reserve for the production and distribution of refined petroleum products. Worse the EPA has mindlessly dictated the use of more than 12 distinct formulas for the gasoline distributed and sold in the various regions of the country, adding a major complication to an already strained system - and doing so for truly marginal air quality benefits.

It is true that - as you said - the added costs due to inefficiency, and occasional shortages are simply passed on to the consumer. The problem for capital investment in energy resources is not that the costs of compliance with environmental regulation are high - the market can easily deal with that - but rather that they are impossible to calculate. The regulatory liability due to unknown future actions of bureaucracies and third party liability torts have stopped capital investment cold.

The current controversy over the proposed amendment to the Air Quality Act to permit owners of coal fired electrical power plants to upgrade their generally 30+ year old plants to increase their efficiency (and therefore reduce fuel consumption) without fully complying to the stringent requirements that have virtually halted new plant construction, is a case in point. A producer who complied with the mandated new plant standards could not compete in the free marketplace for electrical power. (Instead we waste natural gas on power peaking plants to meet local diurnal peaks in electrical power demand.) Given that these coal plants generate about 50% of our electrical power, and that we don't have anywhere near the natural gas required to replace them, the matter is serious.

Alternatively we could increase our use of emission-free nuclear power, but that too is stuck in a regulatory impasse that had prevented any new plant investment for over 25 years.

Old Europe,

What then is your point? Do you propose that government prohibit the manufacture of large vehicles and pickup trucks - especially by folks who like to display Confederate flags on them? (I think you are relying on rather dated recollections on this point.)

Such regulation and restrictions to freedom don't appear to me to be consistent with the thought expressed by Thomas Paine in your signature line.

I am content to see others drive around in large vehicles - as long as they are willing to pay for the fuel required to operate them. I don't own one and I don't enjoy following one on the road, but I value my (and their) freedom more than I want to see more government regulation in our lives.

I've heard of people taking engines out of forklifts and such things that run on electricity and making their own sort of hybrid cars. I guess necessity really is the mother of invention...

Also, I've heard several times that the oil companies own patents on engines that get 100 mpg, but they won't manufacture them in order to keep demand up. But I believe that U.S. patents are in the public domain, so as long as they aren't selling them, the more mechanically inclined among us SHOULD be able to look at the schematics on the patent and create a super-efficient engine for their own personal use. So why don't we see that happening?

This is where I believe you are completely wrong George. Its not a question of economics, is a question of geology. Oil from shale is messy and has a low energy-return. Conventional oil is about to peak, and no amount of money will find oil that's not there to be found. I'm not saying we're all doomed...but the world and in particular the developed world, faces an unprecedented challenge over the next few decades. The first step is to acknowledge that we (and particularly you) are addicted to the profligate use of fossil fuels, and it cannot go on.

There is an awful symmetry in the worlds problems. Immediate term: terrorism. Long term: climate change. And literally fuelling both is the medium term problem of our hydrocarbon habit.

When dealing with goods and services it is, unfortunately, always about economics, no matter what the subject or occasion. I love my pets and would like to think I would do whatever it took to make their lives healthier, happier, and longer, but at what cost? Veterinary treatments for doggie cancers are both available and efficacious. I possess the discretionary income that would allow a 5 -10 thousand dollar course of treatment to save Fido's life. However, like every one else, my financial resources are limited, so, choosing between my or my wife's knee surgery and the dog's life must be considered. Sure, this is a "no brainer" choice, but how about my children's college expenses or a good used vehicle for their safe transportation?

The relevance here involves not a choice between a life and a Toyota but simple resource management and allocation. In this situation the price of the item desired helps us to choose. The same principle applies to energy sources. The price signals both producer and consumer as to the given resource's value. Oil from Canada's Alberta Shale deposits has been talked about for years as a possible source of energy to replace ME (Middle Eastern) oil. However, as Steve (as 41oo) mentions, petrol from this source (shale) would be more expensive because more processing is involved in the production of the desired product. Given cheaper alternatives, like ME oil, the choice like my knee surgery is obvious. (Saudi Crude is cheaper than "sweet" crude or WTI -West Texas Intermediate, because it contains more sulfur which requires more refining to remove the sulfur.) The market forces automatically adjust these prices?-no government intervention needed.

So does this mean that when the price of petrol obtained from shale equals that from ME or GOM (Gulf of Mexico) Exxon-Mobil or Royal Dutch Shell will start building more refineries capable of such operations? In a word?-No! It has to be worth their while to do so… it must be profitable. Profit is determined by the difference between price and cost, every one knows this simple rule. Price determination involves supply and demand, both actual and perceived (Speculation is fueled by perceptions and has little to do with the value of a good or service but the resulting price is quite real). Alternatively, cost involves both real and perceived concepts. Real costs involve materials, labor, legal considerations, transportation?-etc. Then are environmental costs to the production of petrol and petroleum products. These are significant and many experts have pointed out that:

The Bush administration is trying to pare back some regulations to encourage such construction but we shall see. So, given a finite number of refineries (Now reduced from the ravages of Katrina) already running at near capacity, Bush's release of some of the U.S. SPR (Strategic Petroleum Reserves) will not increase the nation's supply of petrol.

But, for those like Steve (as 41oo), who rightly point out that there is only a finite amount of crude oil on the earth, there is a concept of cost that might be wise for all of us to factor in when arriving at a more valuable price that would better signal petrol's replacement cost: how much cost should be added to the sale of a gallon of gas in order to replace that irreplaceable resource, in the future, with alternative fuels? This is the only valid argument for raising the price of gasoline to decrease consumption, over and above that naturally determined by market forces. Forget raising petrol prices simply because "Europeans pay more than we do". (European prices may be higher because they demand cleaner petrol for environmental reasons (WTI is preferred) and because of higher taxes needed to support their greater reliance upon "social entitlements")

JM

That's what Nelson Rockefeller said back in the 1910s. What makes you think your idea of the timing is better than his?

It most specifically is not mine Thomas

http://www.hubbertpeak.com/summary.htm

Very well, then what makes you think Hubbert's idea of the timing is better than Rockefellers? After all, Rockefeller was essentially making the same argument.

thanks for the economics lesson JM

You overlook one fundamental and crucial difference when considering oil. Its not like any other resource. It is the resource that enables us to obtain resources. It is energy itself. The difficulty with which oil is extracted from a well increases as the well matures. At some point it will require more energy to extract the oil than is contained in the oil thats extracted. The well is then dead, and its stays dead regardless of the market price.

Thats a fair question Thomas. The crucial word is "the timing". Hubbert got it bang on in predicting the peak of American (sub 47 parallel) oil. Oil companies and governments all say oil will peak, its just a question of when.

As Thomas has correctly noted, thre "peak oil" myth has been around for a long time, and there is no more reason now to embrace it than there was 90 years ago.

All terrestrial resources are finite, just as the history of the earth and the solar system are finite. We don't inhabit a steady state universe and the implicit notion in the posts above that we should somehow manage our lives and resources as though we do is simply contrary to the facts.

Petroleum is not a habit - it is a necessity for the maintenance of a population greater than five or six billion on the planet. Perhaps we could return to the relatively more bucolic world of 1820, but that would require that several billion people volunteer to die. Alternative sources of energy are indeed needed, however the public debate on this subject is centered too much on illusion and falsehoods - We are led to imagine that the disposal of the long lived radioactive wastes of nuclear power plants is somehow an intractable problem when, in fact, it is not We are also led to believe that somehow solar and wind generated power will replace fossil fuels when, in fact, after several decades of promises these sources amount to no more than a single digit, trivial contribution to our energy consumption.

The falsehoods and illusions surrounding the economics of petroleum reserves, production, and distribution are also pervasive. Canada is a larger source of petroleum imports to the United States than the Middle East - they produce it through their north slope oil fields and production from the Alberta tar sands - while we in the USA leave our own resources, both on the North Slope and in the Rocky mountain regions untouched. Reserves of oirdinary petroleum are a strong function of the expected price, and new discoveries are still being made. Oil at $60/barrel is no more expensive in real terms than was $6/barrel oil in 1960. Petroleum will remain a principal component of our energy consumption for many generations to come.

We do need to develop and exploit alternative energy sources and to use those we consume more efficiently - to protect both our economies and our environment. However, we need to do so rationally, using the same basic principles that produced the riches of the developed world, and avoiding the approaches that have already proven themselves ineffective and destructive. We certainly don't need government bureaucrats designing automobiles and electrical appliances. As JM has implied, we do need to consider realistically the tradeoffs among environmental, public welfare and economic issues, recognizing that there are no ideal options.