# Fuel is much too cheap

Discussion in 'Business & Economics' started by alain, Aug 23, 2006.

1. ### NasorValued Senior Member

Messages:
6,230
I get the point you are making, but you are badly exaggerating.

The US spends much more on schools, roads, community projects, healthcare, and the poor than it does on the military. We spend more on both the Department of Health and Human Services and Social Secutiry than we do on the military, even with the recent wars.

3. ### swivelSci-Fi AuthorValued Senior Member

Messages:
2,494
Heck, we spend more on Interest Payments on our outstanding loans than we do for the Dept. of Defense.

5. ### The Devil InsideBannedBanned

Messages:
8,213
here in europe, trucking companies generally own their own fuel pumps, thereby passing the majority of "at the pump" taxes. i didnt know this until today.

there is a petrol station across the street from my apartment, and i have gotten to be pretty decent friends with the guy that runs the place over the last year or so. he told me about the truck stations.

the mass transportation system is simply an issue of subsidizing the new profits the government would have from the raised tax on gasoline. i travel about 50 miles a day on the train to go to work. it is faster, more environmentally friendly, and easier than trying to find a parking spot for a car. it would be a simple matter to dole the profits out to cities of 100,000 people or more, on a yearly basis to create a new mass transportation system.

but the fact of the matter is: big oil has a stranglehold on our government, and want taxes at the pump to be low, to stimulate consumption. the more consumption, the more money these companies stand to make. it is a sick cycle, and one reason i believe that special interest groups should be made illegal. the paying of a congressman or senator's campaign should be illegal. political parties should be registered with the federal government, and given a yearly stipend to use for campaigning. this makes the government more representative of the people, as more parties would inevitably gain prominence.

sorry for the ramble....
summation: gas tax is good, as it pays for a society to be weened slowly from fossil fuels.

7. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

Messages:
23,198
Exactly the point I have been making in threads that speak of "suburban infrastructure" US created with foolish tax laws and relatively cheap gas. It will take at least 20 years to change this "suburban infrastructure" to one suitable for the era of expensive oil. Unfortunately, the US will collapse long before it can make the change.

8. ### DaleSpamTANSTAAFLRegistered Senior Member

Messages:
1,723
We have had this discussion before. I still object to the term "special interest groups", but I do appreciate that you here have specifically identified the activity that you deem primarily responsible for corruption. I would simply make the activity illegal and not the groups.

-Dale

9. ### kingcarrotRegistered Senior Member

Messages:
92
petrol is cheap so that the petrol companys can continue extractin the petrol and turning a 2000% profit on it. sure they could get more but then people would start thinking, about what you say, well lets hope you start thinking about it. of course we could try other ways but we' would have to spread profit out which would in turn hurt the american worshipped freemarket subsidized consumerism. "oh kiss me george bush, kiss me alan greenspan, mm show me your junk oprah winfrey

10. ### alaindu hast michRegistered Senior Member

Messages:
1,179
Because petrol is one of the cheapest liquids available, despite the fact that it is much more scare then most - Orange or apple juice, cola, lemonade, cordial, basically anything. Bottled water was a single example.

Same goes to the rest of you

11. ### The Devil InsideBannedBanned

Messages:
8,213
bottled water is about 25 cents a liter in belgium.

12. ### spuriousmonkeyBannedBanned

Messages:
24,066
All of which leads to the ultimate question:

Is it ethically acceptable to profit from the dead? That is extract oil from the gravesites, refine it to take away it's essence, and then burn it in combustion engines?

(just came to my mind after reading so many silly threads on the moral problems of eating meat, or killing fetuses)

13. ### DaleSpamTANSTAAFLRegistered Senior Member

Messages:
1,723
The gas company's profit margin is around 10%. Even in the US, with our relatively low taxes, the government's cut is bigger than the oil company's cut.

-Dale

14. ### DaleSpamTANSTAAFLRegistered Senior Member

Messages:
1,723
How do you objectively measure scarcity? The only good measure of scarcity that I know is free-market price. By that measure it is not a scarce liquid at all. If you instead want to measure scarcity by volume produced anually, then I suspect petroleum is still less scarce than all of the beverages you listed.

-Dale

15. ### swivelSci-Fi AuthorValued Senior Member

Messages:
2,494
Thank you for pointing that out. Most people are clueless when it comes to economics. They don't get that any of these oil companies could make more money by lowering prices and undercutting the competition, but can't because their margins are already too thin.

The record amounts of money these companies are making is because demand is going up around the world. It isn't because they are selling the same amount of fuel for more money, it is because they are selling TONS more fuel for more money. Which means their own costs are going up. Big time.

When fuel hits $80 a barrel, that is what the oil companies have to pay before they ship, refine, and distribute the fuel. Just because they "made"$400 billion dollars doesn't mean that they made that in profit. Their expenses for last year also broke all records.

Of course, last year was a boom year for profits simply because of the boom economies of India and China, and the recovery of the East Asian Tigers. But the people that think the oil companies are keeping prices jacked up for extra profit are insane. If you have to blame anyone in the oil loop, it would be OPEC, but they should be commended for keeping the flow as slow as they can. They are the number-one energy conservation group in the world. (even if their motives are not environmental, the effects are the same)

16. ### spuriousmonkeyBannedBanned

Messages:
24,066
Boohoo...poor oil companies.

How they managed to make record profits again is a mystery to me.

17. ### swivelSci-Fi AuthorValued Senior Member

Messages:
2,494
Because they sell one of the most in-demand products in the world? And a ton of that demand showed up in just the last several years?

Either that, or it is a vast conspiracy, with hundreds of thousands of people involved, who conspire to keep prices higher than market-value. All this, despite the fact that such a scenario (of a monopoly keeping prices jacked up) has never occured in human history and is economically unfeasable. As soon as a monopoly raises prices well above cost, it creates market forces that bring new producers into the market, who can afford to start producing a high-demand, high-profit product. Which increases competition and supply, which results in lower prices.

Most people have the fantasy that Standard Oil was a monopoly that kept prices high, when in reality, like all industries that see consolidation, the prices consistently fell, and fast, under Standard Oil. Monopolies never hurt consumers, they only hurt other producers that want to get into the market unfairly, and want to charge higher prices. That's why most anti-trust suits are brought up by inneficient competitors, NOT by consumers. See Standard Oil, Microsoft, and Kellogg for recent examples. And note that you can not find a single example of a monopoly fleecing the public the way people assume they all do. (and Enron was an example of fraud, not monopoly or price-control)

18. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

Messages:
23,198
"{US} Fuel is much to cheap."

Well Chavez is doing his part to correct that, today. (all this week in fact he is in China, negotiating.)

60% of the oil Venezuela ships out of country goes to US. Two years ago, China got a paltry 12 million BPD, now it is about 150 million BPD and will be 200 by year's end. However, this is just the start of the exports to China.

One main point of the current negotiations is for China to provide Chavez with more tankers. Another part is for China and Venezuela to develop the oil off shore in Cuba's waters, and probably Venezuela's oil sands (probably the world's largest).

In a few years, the 11% of US oil imports that currently come from Venezuela will all be going to China. - That should help the US with the "oil too cheap problem."

Be sure to thank Hugo.

19. ### swivelSci-Fi AuthorValued Senior Member

Messages:
2,494
The American economy wins as other countries become developed. Sure, gas prices will go up, but so will profits and wages as a very large portion of the human species joins us in economic wealth.

We have to stop thinking that it is an "us or them" game with the global economy. The more we trade, the better off everyone is.

So this is good news, not bad news.

20. ### DaleSpamTANSTAAFLRegistered Senior Member

Messages:
1,723
Then apparently you don't understand the difference between a profit and a profit margin. You make big profits (reported in dollars) when you do a lot of business. You make big profit margins (reported in percentages) when you artificially inflate your price.

-Dale

21. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

Messages:
23,198
I agree with that, but not in all cases, because of the historic fact that the US infrastructure erroneously assumed cheap gas for ever. If it could instantly convert to good public transport, small cars, in town living etc then no reservations, but the quality of the jobs available would still drop drastically as other with lower material standards force them to do so.

Perhaps a life-boat analogy may help: 20 days before you will be missed and looked for. Water for 60 man-days with five men on the life boat. The US consumption of oil will drop and it is going to be painful.

22. ### swivelSci-Fi AuthorValued Senior Member

Messages:
2,494
These are good and valid points.

However, the almost immediate demand for many new resources has never given us pause. I don't see how this situation is any different.

If oil reserves start drying up, they are not going to do it all at once. One country will announce that more wells have been tapped than drilled for the first time. Another country will announce that no oil is now being exported. It will be a gradual cycle over many years. Just the statistical probability of them all going dry within the same 100 years is hard to fathom.

So, the fact that this is going to be a slow process, and the fact that we right now posess the capability to get almost all the way off of oil, gives me hope. We could build a few hundred new nuclear reactors. We could build massive solar and wind arrays. We can harnass geothermic vents and the force of the tides. We could do all of this within a few years if we had to. All clean power (except for spent rods), which will be used to charge batteries, which will do all the work.

Worst case scenario, all planes are grounded eventually, which means that shipping takes back over, with small reactors in each vessel.

I just can't buy the doomsday scenarios. They lack imagination, and a grasp of reality. It reminds me of the people who bemoan the sealevel rising a few feet. They love talking about which major cities will be "underwater". Their supposition here is that the process will be fast (which it won't be) and that the occupants of these cities will stand around for a dozen years and watch the water slowly encroach.

Do what? Other countries reclaim land with dykes all the time, and we are going to twiddle our thumbs while Miami is slowly (over 20 years?!) overtaken with a rising sea? It is assumed conclusions like this that make me dismiss almost all doomsday scenarios after a moment of thought.

And before cars, our country was set up for horses. And we covered the United States with rail in only a single generation, and that was when we had to move the rail and materials around with half-finished rail, wooden sailboats, and horses. Each upgrade gets easier and easier. Just remember, the supply will run out gradually, and that should alleviate your fears.

23. ### Billy TUse Sugar Cane Alcohol car FuelValued Senior Member

Messages:
23,198
The wells will never "dry up," that is not the problem. The problem is that liquid fuel will become too expensive to sustain a society like the US has built - "suburban infrastructure" with the average food item traveling more than 500 miles in a truck etc.