You want to know why oil and gas cost so much?

[mercurial]

In the past, you could reasonably exclude energy because petroleum futures were subject to volatile upswings and downswings; supply was plentiful enough and demand was low enough that all sorts of factors (geopolitical and economic) could cause it to swing either way.

However, I don't think you can reasonably make that case anymore; supply is sufficiently tight and demand is sufficiently high that it is quite safe to assume we will not see $10-20 oil anymore. We still need to account of speculation, but it seems like there should be some way to amoratize future gains and losses over a sufficient period of time to produce some sort of energy "constant" that adjusts the CPI upwards.

 

[mercurial]

The "natural" rate of inflation

There is nothing "natural" about it, controlled inflation is a product of specific monetary policy. That sounds close to a "mandate" to me.

Whether the government MUST have this controlled inflation to repay its debt is another far more complicated argument. Nevertheless, it is undeniable that controlled inflation is extremely helpful when you carry multiple trillions in debt, and helps substantially offset government expenditures on interest for its Tbills.

 

[Joebar4000]

I blame clinton for removing china's blocks to becoming a growth economy (remember the annual renewal of favored nation trading status) while ignoring its human rights issues. China and indias burgeoning middle class and industry is whats making the oil so bank. The devaluation of the dollar is from bush's continuation of hte clinton free trade deals and the addition of more deals. I also blame bush and clitnon for allowing dumping of products on american markets as well as not taking japan EVER before the WTO for not allowing in most non Ag. american goods. Then bush went and borrowed like a drunken sailor. So now we borrow from china to buy from china. Then borrow from china to go to war to keep china from getting all the oil.

Yes, because we should be the only ones to have access to oil...

You are upset that dreadfully poor countries are finally starting to develop? The nerve!

Hmmm, selective reading much? Here, let me help you with the important parts you missed that put it into context:

while ignoring its human rights issues. ...So now we borrow from china to buy from china...

 

[jdhu]

There is nothing "natural" about it, controlled inflation is a product of specific monetary policy. That sounds close to a "mandate" to me.

Whether the government MUST have this controlled inflation to repay its debt is another far more complicated argument. Nevertheless, it is undeniable that controlled inflation is extremely helpful when you carry multiple trillions in debt, and helps substantially offset government expenditures on interest for its Tbills.

I suppose we are arguing semantics. It is a "natural rate" (that is the economic term) that governments believe is a stable rate to promote growth. Currency has a tendency to inflate (at least within the last few decades) and the government tries to keep it within 2-3%.

The other poster used the term "mandate" as one uses "creates," as in the government purposely creates a certain amount of inflation so that debt payments become less burdensome.

 

[jdhu]

Hmmm, selective reading much? Here, let me help you with the important parts you missed that put it into context:

You completely missed the point. This is an oil/gas cost thread; for some reason, you highlight a normative human rights argument.

This poster (who actually has a supply/demand point) blames Chinese/Indian growth for our increased oil prices (somewhat true) and then makes some weird argument about Bush, buying from China, or something. Hard to tell with his punctuation.

Are you guys economists, or have significant economics backgrounds? You guys post with such conviction...Im curious whether its warranted.

 

[Joebar4000]

You completely missed the point. This is an oil/gas cost thread; for some reason, you highlight a normative human rights argument.

This poster (who actually has a supply/demand point) blames Chinese/Indian growth for our increased oil prices (somewhat true) and then makes some weird argument about Bush, buying from China, or something. Hard to tell with his punctuation.

Are you guys economists, or have significant economics backgrounds? You guys post with such conviction...Im curious whether its warranted.

Erm, because you somehow took 'we shouldn't have gone to bed with China because of their human rights violations' as being, 'we should keep them damn 3rd world countries down.'

You totally missed the point and instead started to pick a baseless argument over the content of the post, which is apparently impossible to read because of a couple of trivial punctuation problems.

And yes, I have a piece of paper that says I know a lot more about everthing there is to know about anything than you do. It's about as useful as this chocolate teapot I had made.

Either the argument is valid or not, tackle it on it's own points instead of looking to attack the posters accreditation. I think you'll be surprised what qualifications and experience some of the people that have posted in this thread have, but I'll leave it up to them to reveal that or not. Like I said, it's irrelevant - either the argument is sound, or it isn't. What school someone went to doesn't make their post more or less valid.

 

[jdhu]

Erm, because you somehow took 'we shouldn't have gone to bed with China because of their human rights violations' as being, 'we should keep them damn 3rd world countries down.'

You totally missed the point and instead started to pick a baseless argument over the content of the post, which is apparently impossible to read because of a couple of trivial punctuation problems.

And yes, I have a piece of paper that says I know a lot more about everthing there is to know about anything than you do. It's about as useful as this chocolate teapot I had made.

Either the argument is valid or not, tackle it on it's own points instead of looking to attack the posters accreditation. I think you'll be surprised what qualifications and experience some of the people that have posted in this thread have, but I'll leave it up to them to reveal that or not. Like I said, it's irrelevant - either the argument is sound, or it isn't. What school someone went to doesn't make their post more or less valid.

Dude read again. His post blamed China's growth as the cause of our energy increases, and then blamed Bush for helping China' economy to grow. Never mind that China's growth helps us and the rest of the world.

I argued against (what I thought) were his points. He implied that we somehow had a right to the world's oil.

If someone comes on here saying they know the best way to ride is to be as harsh on the bike as possible, brake in turns, wack the throttle and is resolute in his beliefs, it is perfectly relevant to ask their riding experience and background.

Oh and...apparently his punctuation/grammar problems are not so trivial, since you missed the point of his post.

 

[faz]

war is good for business...

 

[afm199]

Mandates inflation? No way to pay off debt without inflation? You must tell us where you got your Econ Ph.D.

The "natural" rate of inflation is not mandated nor necessary to repay debt. It is simply what is a sustainable, "reasonable" rate of inflation. From the 1880s into the middle of the the 20th century, we experienced deflation. When inflation is excessive, it distorts prices, increases volatility (and increases wild investments, as people try to beat the high inflation by getting high returns on money), and harms the poor (who can least afford higher prices).

You make all sorts of wild, opinionated statements without one shred of solid evidence or proof. Again, did you ever TAKE an econ course? Or is this what you hear on Lou Dobbs?

I don't know who Lou Dobbs is. When I say mandate I MEAN mandate. The limit is set and adhered to. That IS a mandate. You obviously believe you know something about economics. Yet you maintain inflation is at 2%. Why do you think gold and oil (and look at home prices) have doubled or tripled in two years? Lack of supply? Try a dollar that is so inflated nobody wants it. Your measure of inflation apparently revolves around Chinese manufactured consumer commodity items, which have become quite cheap. The ONLY thing keeping inflation as low as it is.

 

[planegray]

...............Chinese manufactured consumer commodity items, which have become quite cheap. The ONLY thing keeping inflation as low as it is.

So....you're saying China is helping us out ?






(thanks for this thread afm199, great info here)

 

[Joebar4000]

Dude read again. His post blamed China's growth as the cause of our energy increases

Going to assume you meant 'cost' at the end of that, in which case, yes, the growth of other industrialized nations useage of oil has had an inflationary effect on the cost of oil.

, and then blamed Bush for helping China' economy to grow. Never mind that China's growth helps us and the rest of the world.

Um, actually it was Clinton, mostly, but whatever. Bush hasn't done a lot to reverse it.

How is China's growth helping us, as far as the price of oil goes?

I argued against (what I thought) were his points. He implied that we somehow had a right to the world's oil.

I didn't see any such implication. Methinks your own agenda is putting words in other people's mouths.

What I took from it was that why on earth were we helping China when the US is supposed to be all about human rights and being the good man? I mean, talk about shooting yourself in the foot. You seem to have a different interpretation based on what you think was implied, but it was never stated and I'm struggling to see any such implication when he threw in the caveat about human rights violations.

You're assuming too much instead of reading literally.

If someone comes on here saying they know the best way to ride is to be as harsh on the bike as possible, brake in turns, wack the throttle and is resolute in his beliefs, it is perfectly relevant to ask their riding experience and background.

Not really. If they're wrong, they're wrong. I don't care what they're experience is.

Oh and...apparently his punctuation/grammar problems are not so trivial, since you missed the point of his post.

Well, we'll have to agree to disagree. Papi-Chulo, care to give us another, simpler explanation with immaculate spelling and grammer so jdhu can understand? Apparently capitalization and missing apostrophes are too hard to overcome...

No, tell you what, lemme make the the fixes in that all-too-vital first sentence:

"I blame Clinton for removing China's blocks to becoming a growth economy, while ignoring its human rights issues."

I don't know how on earth you get from that ^ to, America is the only country with the rights to oil and screw everyone else. I think it's telling that you interpret it that way, however.

 

[jdhu]

I blame clinton for removing china's blocks to becoming a growth economy (remember the annual renewal of favored nation trading status) while ignoring its human rights issues. China and indias burgeoning middle class and industry is whats making the oil so bank. The devaluation of the dollar is from bush's continuation of hte clinton free trade deals and the addition of more deals. I also blame bush and clitnon for allowing dumping of products on american markets as well as not taking japan EVER before the WTO for not allowing in most non Ag. american goods. Then bush went and borrowed like a drunken sailor. So now we borrow from china to buy from china. Then borrow from china to go to war to keep china from getting all the oil.

"Blocking China from becoming a "growth economy" while ignoring its human rights issues."

Perhaps you are right that I read too much into this. I guess I don't like the idea of trying to restrict a very poor country's development opportunities. Ignoring for a moment the human rights issue, China's growth results in cheaper goods for us, more consumer choice, and also more purchases of US goods. This last one is the most important; China has hundreds of millions of potential middle class consumers.

I also don't like the soapbox human rights argument; we have made some terrible human rights mistakes (backing ruthless dictators, segregation, etc), and the Europeans would say we continue to do so (Guantanamo).

The bit about China/India increasing global energy costs. Yes, they do contribute to this. I still think Papi implies that we have more of a right to oil than they do, could be a difference of interpretation.

The rest of the post is mostly economic nonsense, especially the dumping reference.

Econ, like the law, is a field where you have to have some study or experience. It is not a matter of intelligence.

 

[bigt]

I only took two Econ classes in college, so I want to know when I'm going to see less traffic on my commute to work. Shouldn't all those assholes be losing their jobs, or not be able to afford gas!!!

 

[planegray]

I only took two Econ classes in college, so I want to know when I'm going to see less traffic on my commute to work. Shouldn't all those assholes be losing their jobs, or not be able to afford gas!!!

That's EXACTLY what happened in the bayarea last time....traffic was light for years

 

[bigt]

Excellent! Would the last person to leave the USA, please turn out the lights.

That's EXACTLY what happened in the bayarea last time....traffic was light for years

 

[cease3184]

Gotta love political threads, specially economic ones. Now if we are gonna have a discussion about ECONOMIC principals and the cost of gasoline then we have to be really careful to exclude normative (feeling based) arguments. Human rights, dependence, or "I hate Bush because he is an idiot" statements mean nothing in the world of economics.

I am by no means a phd in economics, but have had schooling in economic theory that most have not. Jdhu, I think you have a good grasp of economics, and I think everyone is entitled to their opinion. I do think its lame when you see statements of conspiracy secret inflation numbers, or when economic facts get mixed with normative statements.

 

[afm199]

G I do think its lame when you see statements of conspiracy secret inflation numbers, or when economic facts get mixed with normative statements.

Interesting. Conspiracy is a word that is basically defined as a group of individuals who plot to bring about certain ends without public knowledge. That is what government does, my friend. There are no sunshine rules on the private meetings that determine policy, only the public ones. We don't hear the discussions in the white house that are held on economic policy, nor those between the bank heads. We are not party to how the system is run, nor do we have any voice in how it is run.

Why the US ( and most) governments like moderate inflation is simple, it allows them to keep spending without any real accountability. The annualized rate of inflation on housing in CA in many areas is 7-10% over forty years. Either the dollar is inflated or homes have suddenly gotten REALLY valuable. Which do you think.

The problem with economic theory is that it is like psychological theory. Several basic relationships are established, like interest/inflation/scarcity or plentitude of funds/investment in enterprise and bond prices, and they interlock. However, in the long run, it is still witch doctor voodoo, like psychology.

And uses the same methodology. Give them the drugs ( lower the interest rate) and everyone is happy, until something really bad happens and we discover the drugs are not exactly what we thought. Or try another method and it may or may not work, because the one variable you can not control is human behavior.

 

[Joebar4000]

"Blocking China from becoming a "growth economy" while ignoring its human rights issues."

Perhaps you are right that I read too much into this. I guess I don't like the idea of trying to restrict a very poor country's development opportunities. Ignoring for a moment the human rights issue, China's growth results in cheaper goods for us, more consumer choice, and also more purchases of US goods. This last one is the most important; China has hundreds of millions of potential middle class consumers.

I also don't like the soapbox human rights argument; we have made some terrible human rights mistakes (backing ruthless dictators, segregation, etc), and the Europeans would say we continue to do so (Guantanamo).

The bit about China/India increasing global energy costs. Yes, they do contribute to this. I still think Papi implies that we have more of a right to oil than they do, could be a difference of interpretation.

The rest of the post is mostly economic nonsense, especially the dumping reference.

Econ, like the law, is a field where you have to have some study or experience. It is not a matter of intelligence.

Agreed

I'll add the caveat tho, a well-reasoned argument should stand on it's own merits. I don't know enough about econ to know if the law analogy is sound, but it makes sense. But I know some really knowleagable lawyers who have the logic of a cat on PCP. Just sayin

 

[jdhu]

Interesting. Conspiracy is a word that is basically defined as a group of individuals who plot to bring about certain ends without public knowledge. That is what government does, my friend. There are no sunshine rules on the private meetings that determine policy, only the public ones. We don't hear the discussions in the white house that are held on economic policy, nor those between the bank heads. We are not party to how the system is run, nor do we have any voice in how it is run.

Why the US ( and most) governments like moderate inflation is simple, it allows them to keep spending without any real accountability. The annualized rate of inflation on housing in CA in many areas is 7-10% over forty years. Either the dollar is inflated or homes have suddenly gotten REALLY valuable. Which do you think.

The problem with economic theory is that it is like psychological theory. Several basic relationships are established, like interest/inflation/scarcity or plentitude of funds/investment in enterprise and bond prices, and they interlock. However, in the long run, it is still witch doctor voodoo, like psychology.

And uses the same methodology. Give them the drugs ( lower the interest rate) and everyone is happy, until something really bad happens and we discover the drugs are not exactly what we thought. Or try another method and it may or may not work, because the one variable you can not control is human behavior.

This reminds me of that paranoid commercial on TV a few years back, maybe it was the Sacramento area only.

"Watch Channel 3 News, find out what the 'fat cats' do behind closed doors." Then they show the big wooden doors at the Capitol slamming shut hahaha...

Anyway, housing prices are a private issue. In some areas in CA, housing prices have risen much faster than in others. Again, supply and demand. Part of it is truly "irrational exuberance;" people rushed in to buy 2nd homes, thinking that the economy was so set for long term high growth that they could afford a 2nd home on their incomes. Some with very low incomes chose ARM loans (oops). My point is, the government does not "set" a growth rate for property inflation, or any other inflation for that matter.

Your earlier argument about governments preferring inflation so that the debt repayments are lower in real value. Don't you think, as rational people, lenders would take this into account and adjust their interest rates? If they know say, the US government likes a 10% inflation rate so that debt repayments are less painful, they would ask for 16% instead of 6% interest (values made up by me).

 

[uraniaclio]

A simple explanation. As the dollar has fallen to record lows ( which I consider inflation due to the huge amount of money spent to finance the war in Iraq, all of which was borrowed) the Euro is at record highs next to the dollar. Oil is over 400% more expensive than seven years ago in the US. And 200% in Euro land. Does that say something?

From the LA times:

The price of oil has risen much less when considered in Euros rather than dollars. In February 2002, it was at $18.88 per barrel (or € 21.69, based on €1.149, 28-day average exchange rate). Converting the closing price of $105 to Euros equates to € 69.44, based on the conversion of $1.512 per €1. So the increase in U.S. dollars from $18.88 to $105 is a whopping 456% price increase in five years. However, when calculated in Euros, the price of oil rose by 220% during the same period. While this is also a large increase, it is much less than currently reported in the media.

So, it is only logical for the Saudi Oil Minister and other members of OPEC to consider moving away from the dollar peg and adding Euro pricing.
The Risk of Pricing Oil in Euros

If the dollar continues to fall in value versus major currencies such as Euro, Yen and Pound, it will have dire consequences for the U.S. economy. If OPEC begins pricing oil in Euros, we will see spikes in gas, oil distillate, and manufacturing prices in the U.S. Given that the U.S. economy is in a recession and may face slipping into a depression, this is a possibility that we should take into account. Should the U.S. slip into a depression, the Fed would have to continue lowering the Fed rate, perhaps down to 1% or even match Japan’s 0.5%. If that occurs, the falling value of the dollar against other currencies would accelerate.



==========

I consider all of that to be true, and until we stop bleeding dollars and printing obscene amounts of money to finance the war, it won't stop.

Empire building killed Spain, Portugal, Rome, England, Germany, Russia, Persia, Greece, Thrace and many other lands over the millenia. We are now on the list. Twenty years from now China will run the world, Taiwan will be gone, and we will be like England, sans the shitty health care.

The overall effect of falling dollar is still very debatable. Better for manufacturing, inflow of cheap foreign capital investment, lower trade deficit, blah blah blah. The only people hurt by it are consumers really. And in case u haven't noticed...George Bush doesnt care about you. Inflation driven by rising energy prices is always politically tenable. It's the freaking Saudis. It has nothing to do with irresponsible and and untenable credit policies of just a few years ago.