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TRONZ
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$4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 1:56 pm

Had an interesting "chat" with my neighbor while washing the LEAF today. I like the guy and have known him for 10 years but he has definitely drunk waaaay too much Fox Koolaid. Anyways, he seemed to think that there was currently a SHORTAGE of oil and that was why gas was $4.65 down at the corner... we needed to drill more... now... Obama is a socialist, terrorist, death panel overlord who wasn't even born in this country, blah, blah, blah. Yawn.

So

He seemed really amazed when I showed him that U.S. oil inventories were generally in the same range over the past few months and had even increased recently. Nothing to warrant $4.65. The retail price being paid at the pump was from only the "IDEA" of an oil shortage! Which led me to the big question. With a very real $4.65 price from just the IDEA of an oil shortage, what will gas prices be during an ACTUAL oil shortage??? He did the perfect 1000 yard stare.
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smkettner
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 2:28 pm

But there IS an oil shortage. There is a shortage of $20 crude oil. Plenty of oil at $200. Todays equlibrium is about $100 so that is the price we pay. If drilling will bring in some $50 oil then it will tend to reduce the price but all oil is settled at the equlibrium. This is how a free market works. Your neighbor may not understand that.

A real shortage exists when there are price controls as Nixon tried after he took our currency off the gold standard.
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ElectricVehicle
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 3:14 pm

smkettner wrote:But there IS an oil shortage. There is a shortage of $20 crude oil. Plenty of oil at $200. Todays equlibrium is about $100 so that is the price we pay. If drilling will bring in some $50 oil then it will tend to reduce the price but all oil is settled at the equlibrium. This is how a free market works. Your neighbor may not understand that.

A real shortage exists when there are price controls as Nixon tried after he took our currency off the gold standard.
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thankyouOB
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 3:27 pm

china and india are going to suck up the petroleum and we all need to get off of foreign oil and just use oil for high-end stuff; not commuting, not carrying two 50-pound kids around to school and soccer matches.
the stuff is needed for some things, like flying.
but the way we use it is like feeding pigs on caviar and truffles and lobster meat.
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Spies
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 3:58 pm

thankyouOB wrote:but the way we use it is like feeding pigs on caviar and truffles and lobster meat.
As long as energy is priced in a way that does not include its real cost in terms of the environment, health and wars I just don't see much changing anytime soon unfortunately. Another thing is how convenient it is to get energy such as gasoline, natural gas and electricity. One does not even have to think about it in this country for the most part. However back during the 1973 energy crisis and it was inconvenient it certainly got peoples attention but was soon forgotten the minute it was no longer inconvenient. Imagine where we would be today if we stayed on that course. Also a ton of profit is still being made with the current status quo when it comes to exploiting earths non renewable natural resources for big business to really change as far as I can tell.
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thankyouOB
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 4:03 pm

when I watch MLB via there feed is is chock full of those adds for shale gas.
they have a reasonable looking middle-aged guy in a sport coat and shirt open at the neck talking about how innovation unlocked this abundant and carefree resource.
It must play every inning.
not a hint about faucets on fire, pollution of the aquifer, or other ugly results they are seeing in the alleghenies.

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TRONZ
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 4:09 pm

Basically, he did not seem to understand that you can't drill your way out of an IDEA.... that he was a captive of his own idea... and that earths oil is running out.

@OB, actually the major airlines and U.S. military are already using renewable Bio-Fuels for some jets. This was the reason I got a diesel F350. Retail Bio-Fuels were coming on in CA but then quickly got bought up and shelved by oil interests. B100 is also price matched to Diesel no matter it's supply. Another fictional supply/demand "IDEA" to become captive of I guess.
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evnow
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 8:38 pm

smkettner wrote:But there IS an oil shortage. There is a shortage of $20 crude oil. Plenty of oil at $200. Todays equlibrium is about $100 so that is the price we pay. If drilling will bring in some $50 oil then it will tend to reduce the price but all oil is settled at the equlibrium. This is how a free market works. Your neighbor may not understand that.

Well, it is more complicated than that. There won't be more oil at $200, because of the severe demand destruction that will happen at that price. Demand destruction is another way of saying poorer people won't be able to afford gas - and those poorer people won't be in poor countries like China & India, but here in the US.

The problem is, oil's demand is quite inelastic vs price. So, the price has to raise quite a bit to destroy enough demand so that demand comes down to supply level.

Here is an interesting chart. See how little the production has changed over the decade - though the price has gone up 4 times.

Image
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TRONZ
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 8:45 pm

Nice chart!
Every start, is as good as any start can ever be. - Douglas Darden

Stats;
2011 LEAF SL VIN#202, Delivered 01.30.11. Now, by far, the oldest LEAF in Colorado.

Train
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Re: $4.65 Gas... WITHOUT AN OIL SHORTAGE

Fri May 20, 2011 9:00 pm

Speculation moves gas prices more than anything else. Oil is a traded commodity.

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