Significant Reduction in Petroleum / Gasoline Prices, HOW?

Discussion in 'Economics' started by limitdown, Apr 3, 2006.

What can you do to make these oil prices reasonable?

Poll closed Apr 21, 2006.
  1. Take economic action?

    12 vote(s)
  2. Take political action?

    3 vote(s)
  3. Do both?

    10 vote(s)
  4. Do nothing?

    17 vote(s)
  1. Question: Who / How can lower petroleum and petroleum based product (gasoline, diesel fuel, heating oil, petroleum based plastic products, etc.) prices?

    Answer: Your Congressman/woman!

    Problem Statement (without it seeming overly simplistic or attempting to cover every possible deviant or variation on this equation) Influence of and Perception of America's (so called) dependence upon Oil has been used quite adeptly to cause the anticipated multiple outcomes of:
    • taking the fight out of many companies, municipalities, peoples and public perception
    • caused many to just accept the prices at the pump as if there were nothing that could be done about it
    • allowed many oil companies to get away with collusion, extortion, price gouging and general bad citizenry
    • too many to have to live just to support the oil administration and their cronies in the oil companies, whilest stealing from their other pursuits, as if one could have afforded to pay so much unnecessarily

    We have all heard it said and argued, and seemingly whether testifying before congress or public opinion on CNBC (as those commentators and anchors ask more tough questions that the congressional testimony sessions) the oil executives suggest that they deserve these humongous windfall profits whilest justifying what they're charging at the pump as if they really don't control what the price is that is being charged versus the old notions of:
    • supply and demand of oil, and the greater world demand for oil and oil based products
    • the overall reduction in the number of refineries in the US, as being the problem and bottleneck
    • the nimby syndrome with respect to getting refineries built or brought online, as if it really takes over 7+ years to achieve
    • the general attitude that continues to be suggested that "there's nothing you can do even if you wanted to"
    • we're not benefiting from these high prices, oh excuse me whilest I report over $31 Billion in operating profits in 1 quarter
    • its not our money, its the (mysteriously anomalous) shareholders money and deserved profits
    • the perception that there needs to be over 20+ formulations of MBTE's, ethanol and other pollution limiting additives to gasoline as part of the problem influencing supply through the refineries

    Solution: restore competition

    since the problem is both this oil administration and their tacit encouragement of these oil companies as well as their blocking efforts to deflate or talk down the oil prices, then consider the logical alternatives to them

    --- identify the lack of action on the part of so many municipalities, state governments and local / regional administrations as the problem too

    --- commit publicly to deflating these artificially high and propped up petroleum prices by beginning to talk them down

    --- acknowledge that whilest global demand for oil and oil reserves has risen, the prices for oil based products in the US has quintupled out of proportion to this global rise in demand and as such is significantly overvalued

    --- remove the bottlenecks to creating new refineries and most importantly not leave it in the hands of the oil administration or companies to build, run or control

    --- in short, compete with the refineries to increase supply and collapse these artificially high gasoline and petroleum product prices

    Fact: Some of the lowest gasoline prices exist regularly in South Carolina and New Jersey. New Jersey has a tremendous industrial and refinery base and their state residents reap the benefits of gasoline many times almost $.20 lower than the surrounding states of Pennsylvania, New York, Delaware and Connecticut. It is no coincidence that where the refineries are, the cost of gasoline is as low as possible.

    IDEA: Take the same determination and can-do approach that was used before and during WWII in the US to solve the monumental problems that they were facing at that time. Consider these oil prices and how its being shoved down the economy as a monumental problem, in the US. Commit to building state owned and run small to medium sized refineries on state controlled lands. Commit to bringing these online in 12 months, not 84 months. Commit to waiving the prohibitive restrictions and other impediments to building refinery capacity that are state mandated and can be negotiated down on the federal mandates so that this could be achieved. Commit to bringing online at least two to four of these in each state or at least in each pair of states. Remove from the arguement and public debate that it can't nor will be done.

    Or, accept present conditions as we continue to slide into financial collapse whilest these oil companies and this oil administration continue to allow these conditions to strangle everyone.
  2. wow,


    you surpassed yourself on this thread.....

    wonder if anyone else is reading this one?
  3. thanks OT,

    yeah, this took time to formulate and convey in an intelligent manner....

    hope it gets the ball rolling.....

    hey, isn't it Kudlow who keeps touting competition and free markets....
  4. Economic Benefits

    • obtaining the latest in refinery technology and capacity
    • increased refinery capacity with smaller and medium sized facilities
    • easier distribution due to closer sources of refined products
    • early adopters (states that do this first) reap the benefits of moderated and lower petroleum prices and can be used to attract or retain business within their state borders

    Feel free to comment on the benefits that you might observe...
  5. DrChaos


    There are two things:

    oil (crude) prices

    gasoline prices.

    I don't see strong evidence that oil prices are at all "artificially" high due to reasons beyond supply and demand.

    If there were strong cartels or rent-seeking/monopolistic behavior in gasoline, then crack spreads (between crude input prices and refined product prices) would be very high.

    They are increasing but not by a large amount.

    The facts of geology and demographics (China) are unarguable and unstoppable.

    Oil will get more expensive, and faster soon.

    We may be able to lower the price in a relative sense---relative to doing nothing---but likely not in an absolute sense.

    What can be accomplished is to lower the economic sensitivity of the economy to higher petroleum prices by virtue of

    1) radically increasing efficiency
    2) developing scientific and economic infrastructure for rapidly substitutable fuels.

    Specific policy actions:

    a) jack up vehicle fuel efficiency standards far higher than they are now. Require that all spark ignition cars be automatically 100% flex-fuel, as they are in Brazil. You can mix just about freely gasoline and ethanol, in various proportions tank-per-tank, and the engine computer figures out automatically how to combust for efficiency and emissions. This is economically deployed technology. Then people can substitute fuels at their will based on actual spot prices: true economic efficiency and competition. Require that ethanol prices are advertised additionally in terms of gasoline energy equivalent.

    b) eliminate egregious import duties on sugar and ethanol

    c) rapidly promote biofuel research and development, designed to help for eventual petroleum substitution on account of science and thermodynamics, not a binge for Archer Daniels Midland.
  6. allowing petrol prices to rise to the stratosphere will after a brief period of pain & disruption, encourage sustainable alternatives. nothing else will.
  7. Alizar


    Agreed, I think gasoline costs are still too low compared to their true costs. I still do not know anyone who has significantly altered their driving habits due to the current cost of gasoline. I hear lots of complaining, but no one making real changes.

    It has yet to have any significant affect on the economy, and prices have been at "high" levels for over a year.
  8. DrChaos


    This is missing the point.

    The problem is that there is a huge time-lag between the time that you make a policy change, and the eventual effect. This is measured in the overall actual fleet efficiency of all vehicles out there. Given the replacement rate, even having great mileage new cars, there will still be a long lag.

    Prices for oil and fuel, however, will grow increasingly hyper-volatile (this is what happens when you get near global peak oil, which is starting).

    The normal 'market forces' can't come close to rectifying supply and demand in a way which is beneficial.

    The logical consequence is is premeditated intentional policy forethought.

    The problem with this is that if the policy is successful the result will be a lack of oil crises, and the economic fundamentalists will say, "Why did you do soooo much stupid government intervention! you are a fucking commie!!!!"
  9. A couple of random thoughts:
    - I forget the percentages, but something like 90% of the oil produced comes from nationalized companies. ie. not "big oil". Exxon is like the 12th largest producer and #12 on the list doesn't have much pricing power.

    - It's important to realize that Government takes in more taxes than "big oil" makes in profits. Government silently rakes in billions while distracting us with evil oil companies.

    - The idea that Peak Oil will be a short-term bump in the road seems short-sighted to me. Unless by short-term pain you mean 5 or more years of chaos. Who's going to pay to have millions of cars retrofitted? Who's going to pay for the new distribution systems and infrastructure? It takes time, money and politics to build companies large enough to distribute whatever technology will be replacing oil. And, to date, that technology is still undefined.

    Not to mention "big oil" won't go quietly. I can't even imagine the number of people who have a strong vested interest in maintaining the current structure. From oil service companies to shippers to refineries to truckers. Employees and management, to small business owners and sales people. To government even. They all earn their living off oil. How is government going to tack their $1/gallon tax onto solar powered hydrogen?

    Noone wants this to change!

  10. In the northeast, we just endured another $.35 increase at the pump, which is the laymans term for gasoline and vehicle related refined fuel prices.

    The explanation given on CNBC just two - three days ago was specifically the refineries as the bottleneck in switching over from Winter based additives to Summer based additives, and in absolute terms specifically Ethanol.

    They credited the inability to produce sufficient quantities of Ethanol in short order to dilute the petroleum in the formulation of gasoline.

    Where or not it will be a moderation of prices, or lessening of them, its more than just doing something.

    It is essential that competition be returned to the US consumers so that the excuses (whether factual or contrived, as most of them have been) be removed from the arguement of pricing of oil products, and in particular, gasoline / diesel fuels.

    China, India and other high consumption nations coming online will find their currencies less able to afford present and future quantities of oil and have already made firm committments to building their economies upon non-petroleum or mixed petroleum based products so that they do not continue to chase ever reduced stockpiles of oil and oil based products.

    The constant suggestion (as its only opinions, given we're talking about nations and national strategies) that "they" are in the market does not fully justify all the artificial price increases that we have been seeing.

    Perhaps it might, but then there's no way that squeezing the cheese sandwich doesn't show up as huge wads of freshly squeezed cheese on the balance sheets of these US Oil companies. IOW the money has shown up in larger amounts than ever before and its not all due to China, India, America, Brazil, Nigeria, Russian and Baltic oil supply/demand issues.
    #10     Apr 4, 2006