High gas prices curb demand

[bigtree]

Some, most notably those who believe the world's capacity to find and produce oil has reached a 'peak', claim that high prices are the only way we have to curb demand. The argument carries that until we find a way to replace or supplement oil and gas the prices will continue to rise. Increased production, it's said, will not work anymore to drive prices down because the world supply is now heading unabated toward its permanent state of extinction.

It's been said that this is a good thing. Folks should use less, and high prices will force them to do that. That's true, of course, but I wonder what will happen if and when we reach the point where consumption has been whittled down to nothing but necessity. Many have stated that there will be a recession at that point, or a depression. Oil prices as high as $100 a barrel have been forecast for the future. I think that the rumored $4 a gallon would devastate most of the working-class American's budgets. Not to mention the devastating effect on all of the goods and services which rely on fuel.

I don't believe that oil is running out so fast that we can see the tail of the dragon, even though it is obviously a finite supply. What I do believe is that oil producers have figured out how to manipulate production levels to make it appear that they can't keep up with demand. I don't think that we can blame the gas price on 'Peak Oil" at this point. But, I realize that many disagree.

There is a view that cheap oil encourages waste. I think there is an obvious truth to all of that. But, I don't think that it's fair or prudent to rely on crippling gas and oil prices to force reform of our energy infrastructure. Consumers aren't in control of the market; they are almost completely at its mercy, save their own efforts to use alternatives and conserve.

Its not like oil executives are clucking their tongues at increased consumption and demand. It not like they are going to use the increased profits to undermine their own industry. Indeed, the oil industry often invests in alternatives just to prevent them from seriously competing with their main cash-cow.

If we were really serious about forcing the industry to reform we would tax them and use the money to undercut their monopoly by investing in available alternative energy resources and developing others. Instead, many are sanguine as high gas and oil prices threaten drive the most vulnerable among us into financial catastrophe, because of this notion that it will curb demand and somehow force the switch to alternatives.

But, I believe there is a point where there can be no further sacrifice from consumers for an industry that is more than content to take the increased profits from expensive gas and oil and put it in their own bank accounts. If production is the problem with prices then we should find a way, at least for the time being, to increase it. If we want to force a shift in our energy resources then we should make certain that is established and underway before we abandon consumers to what is clearly profit-taking and greed from an industry which has little reason to shut down the good thing it has now.

[bahrbearian]

1. "High demand, raises Gas prices"

[bigtree]

2. not if production keeps pace

[bahrbearian]

4. Thats what Mother Earth Wants "More Pollution" and I'm

sure the oil companies aren't worried about it.

[bigtree]

5. I want the shift away from fossil fuels as much as anyone

But, we rely on them now. A notion of shocking folks off of their dependence ignores the basic needs that surround that consumption.

We need to have a clear path to alternatives before we expect folks to sacrifice the essentials in their lives and livelihoods. The only thing decreased production does at this point is enrich oil executives and allow them to sustain their higher prices.

[bahrbearian]

6. Bla Bla Bla . . We needed to clear that path ,,Yesterday..

[bigtree]

8. Take that phrase away

We need to have a realistic shift to alternatives before we expect the majority of folks who rely on fossil fuels to survive to move away from them. Most of the use is beyond their control. Not all of the consumption is in the form of driving or heating.

[bahrbearian]

9. No, I will not take that" Phrase away",,,"America is addicted to OIl"

That's not the first time it has been uttered. It is something I've been saying for 30 yrs.. and you know something? it pollutes , it's the cause of global warming, and it kills.

[bigtree]

15. Why the high horse? I don't disagree. I just don't think consumers are

entirely to blame. I don't think that putting more money into the pockets of the oil industry through higher prices does anything for conservation. I don't think you can curb demand in any significant way by just impoverishing consumers. There will still be a necessary demand for fossil fuels until there is a serious move toward alternatives. That move won't happen in a depression.

[bahrbearian]

11. Bla Bla Bla.

[bigtree]

16. nice of you to spend my post mocking me

want to stop now?

[Name removed]

7. Deleted sub-thread

Sub-thread removed by moderator. Click here to review the message board rules.

[rman]

22. High demand compared to supply raises prices

Demand has been rising ever since oil was discovered (ca 3% per year), yet prices have remained more or less stable. It's now that supply is failing to keep up with demand that prices are clearly rising.

[bigtree]

23. I don't think all of that adds up to $70 a barrel

I think the producers have the ability to produce more and bring the price down. I think the 'demand' issue was adopted by the industry (mimicking the 'peak oil' crowd) to keep the price artificially high. If you go back to 2005, little over a year ago, OPEC was trying to slow production and reduce country's inventories to bolster the falling price. Now, their song is that they can't keep up with demand. I don't believe so much has changed since then to justify all of the nonsense about them not being able to produce more. I don't think we've come to that 'peak' point. I think the bulk of the increase is manipulation and profit taking.

All of the calculations about reserves is mostly speculation without knowing just how much oil the foreign suppliers have under the ground. But, just a few years ago, during the election, oil producing nations were assuring the US that they could increase production to keep the supply in balance. Most notably, Kuwait was assuring us that they could increase supply. OPEC was trying to pressure them at the same time to hold back to keep the price high. It's too convienient for the oil executives with their record profits to now claim they can't keep up with demand.

[rman]

25. I think prices were increased in a pre-emptive response

to peak-oil. It reduces demand and creates a financial buffer for times when extraction and rafination will become increasingly expensive.

[bigtree]

26. I want to keep from being conspiratorial

but, I think that it should concern the 'peak oil' crowd that the industry has taken up their language about production difficulties to justify their high prices. A lot has to have happened since 2005, a little over a year ago, to raise the price of a barrel of oil from $28 to $70.

I just don't buy it. Extraction and other production costs? Those should have been more than offset by the profits they took home. We're being had. Look at their activity just a year ago to slow production and bolster the falling price. To assume that there's nothing they can do to increase production plays into their game. You have to wonder why they just started to adopt the language. I'll bet you wouldn't find one of them who believes they couldn't keep up with demand, at least enough to bring the prices down, but they won't because they are having too much fun robbing us blind.

[rman]

27. No more conspiratorial then usual

The oil industry is a cartel (a conspiracy by definition), and they don't need to tell one another to act out out of self-interest.

[rfkrfk]

3. tax on jet fuel for international flight, zero, not a penny

tax on jet fuel for domestic US flight,
four cents a gallon

[Vinnie From Indy]

10. I don't put it past oil companies to rip their customers off if they can

get away with it. The problem they must confront is that at some point, if they keep the price high, other forms of energy will be exploited and developed. If that happens, an infrastructure appears that is able to manufacture using economies of scale and the price to produce alternatives is reduced permanently shrinking the oil companies market share. That is, of course, if the claim of peak oil is true and it has been reached. If we have reached peak oil, the price will continue to rise and the oil companies will have to compete more and more with alternative energy producers and they will ultimately lose dominance.

[TahitiNut]

12. Golly. Why didn't they just raise the price of gas during WW2?

Hell, they could've paid for the war without the expense and overhead of rationing. :eyes:


The long-standing ethical apologetics for price increases when demand exceeds supply assume the revenue is used to increase that supply and attract new suppliers to the market. Otherwise, it's just immoral profiteering.

I find it astonishing that the corporate spin-meisters are today able to voice the immoral bullshit that price increases are a reasonable conservation measure - without being tarred and featered and run out of the country on a rail. A mere 40-50 years ago they'd be laughed and jeered off the stage.

[bigtree]

13. thanks for this

All of the talk about demand pressures from the industry came right after they were worrying out loud in 2004 about the price falling. OPEC was trying to get their member states to reduce their reserves and cut back production to buck up prices. Weak compliance to the individual quotas they sought was seen as "leaking" production, undermining the organization's efforts to shore up prices.

Then, out of the blue, they're claiming that they can't produce enough to keep up with demand and prices shoot up.

Here's Kuwait from 2004:


Kuwait Says May Up Oil Output If Prices Stay High
Wed, Apr 14, 2004 21:32 GMT

KUWAIT (Reuters) - Kuwaiti Energy Minister Sheikh Ahmad al-Fahd al-Sabah said on Wednesday that his country hasn't yet started implementing the April 1 production cuts agreed by the Organisation of Petroleum Exporting Countries (OPEC) last month.

Asked if Kuwait has begun cutting production as agreed by OPEC, the minister told Reuters: "As of now, we did not do anything with our production levels. No, not yet."

Sheikh Ahmad, who was attending a dinner function in Kuwait City, said Kuwait "always wants to play a role (to ensure) there is always enough supply in the market with a fair price for everybody."

"Until now the price is over the OPEC basket. As we announced on many occasions, Kuwait will continue to make sure of the stability of the market and to make sure there is no shortage of supply in the market," he said.


I don't believe they can't increase production to cover this 'demand' they claim.

[Ksec]

14. Im old enough to remember the lines back in the old days

Thats when the Toyotas started showing up and our big three started making 4 cylinder cars, Pintos, Chevettes,etc. Fast forward to today and its like the seventies all over again. SUVs, pick ups, 8 cylinder gas guzzlers make a big comeback.

Like Yogi said, its deja vu all over again.

[bigtree]

18. there is no reason why we can't make the adjustments we need to

move away from reliance on fossil fuels, like increased fuel efficiency and conservation.

I just don't think that leaving consumers with high prices contributes to that effort unless the increased profits are reinvested in alternatives and reform.

[Catshrink]

17. It's so Exxon Mobil can pay this guy a bazillion bucks.

I guess $400 million is close enough to a bazillion.


Lee R. Raymond

http://www.nytimes.com/2006/04/13/business/13exxon.html?ex=1145160000&en=8a36bf7f5f8acee2&ei=5087%0A

[bigtree]

20. there's your increased demand

How can folks still claim that it took a price increase to cover demand when the majors are posting record profits (for any industry in history) and execs are hopscotching with multi-millions of the increased profit? Wouldn't that money concievably have been used up covering the 'demand' they claim?

[Imagevision]

19. And gas companies will sell less gas and still make more money

[2Design]

21. record gas profits .....n/t

[bigtree]

24. Consumers are starting to change their driving habits

"Still, the apparent move has failed to do anything to fuel prices."

COMMODITIES CORNER: Arguing Gasoline's Summer Fate

The EIA has hasn't been able to "quantify" the idea of demand destruction, said the EIA's Burdette.

Still, data show that gasoline demand has been slowing down.

Gasoline growth averaged 1.55% per year between 2000 and 2004, said John Felmy, director of policy, analysis and statistics at the American Petroleum Institute. In 2005, demand was up 0.2% and preliminary data for March indicate demand was down again, he said.

Consumers are starting to change their driving habits, with a recent Gallup poll showing that almost half of all Americans have cut back "significantly" on driving because of high gas prices, he said. And 57% would consider buying a hybrid car if they're looking to replace their car.

Still, the apparent move has failed to do anything to fuel prices. "People are already changing their driving habits and gas prices aren't going down," Sean Brodrick, an editor at Weiss Research said.

[bigtree]

28. "The IEA has repeatedly said world markets are well-supplied"

events could settle and the industry would be facing another drop in prices . . .


. . . some analysts warned that the market could just as easily plummet.

"The current rally is crucially linked to whether the intensity of the current news flow can be maintained, particularly given the health of fundamentals in (the second quarter)," said BNP Paribas in a research note.

The IEA has repeatedly said world markets are well-supplied and that other OPEC producers have filled the Nigerian shortfall, now at around 500,000 barrels per day.

In February, prices fell by more than $11 in about two weeks after a huge rise in US fuel stocks and a slight easing of geopolitical tensions.

"The rapid fall in the oil price in the first half of February should remind the market how compelling fundamentals can also prove at times," BNP Paribas said.

http://www.timesofmalta.com/core/article.php?id=220913

the price rise is all bullshit and the industry is still trying to figure out a way to maintain this fear bubble to keep the price up.