How low will it go?

Sure. I see where you are coming from.

For my part, I believe that the long-term benefit of starting conservation/alternative fuel efforts now outweighs the near-term social cost of suddenly rising gas prices.

To stretch your analogy - it’s as if the Netherlands won’t build new sea walls until they get flooded. In that case, it really doesn’t matter when the flood happens - the country will still be unprepared because they are short-sighted and refuse to invest in the necessary infrastructure. That’s the US mindset in a nutshell.

So I’d rather have the wakeup call happen now, in my lifetime, rather than leave it for my kid to clean up the mess. I do realize that it’s easy for me to say, as I’m not particularly hard hit by higher oil prices.

I didn’t agree that supply “at best stayed constant.” The key is that demand never exceeded supply.

Prices did rise, and then they kept on going up way past the point of reason. If the price was actually (there’s that word again) defined by supply and demand, it would be a bit under $70/barrel today.

But that’s not where the price comes from. The price is defined by what people do on the exchange, guessing what the value of a barrel will be no fewer than two weeks in advance.

Are you desperate to have an argument with me about price fixing? I don’t agree with it. I just told you. In fact I’m totally, fundamentally opposed to the idea.

I just think that gradual price increases are better than sudden spikes (which I think is obvious). I also want permanently low prices and puppies that talk, but that doesn’t give you any right to infer I want the government to make these things happen!

http://news.yahoo.com/s/ap/20080724/ap_on_go_co/congress_energy

Republicans kill bill to release 70 million barrels of oil from the reserve. The White House vowed to veto it. Assholes.

70 million barrels would do … what, exactly?

Hopefully, the same thing that happened when they did it back in 1991.

I think the hit in supply in 91 was bigger and the fears of the market more easily assauged than they are now. The 91 war was much shorter and in 91, people didn’t think it would last as far into the future as they think our current conflicts will.

I think this crisis should be used as an opportunity for aggressive measures to bring down domestic demand. We should be at the point where we have the reserve to maintain air travel and military power in an actual supply crisis.

And I’m still confused. What exactly are you asking for then? How are prices supposed to increase gradually without some tampering?

I’m not asking for anything. I just disagreed with the idea that high oil prices are a Good Thing. If I disagreed that drinking was a Good Thing, would that make you assume that I wanted governments to ban alcohol in order to lower consumption?

If I was to ask for something, I’d ask for governments like China and Indonesia to stop subsidising the price of oil, because that’s keeping the price of oil artificially high. I would also ask for restrictions on oil futures speculation, because I believe that recent, rampant expansion of speculative trading has also contributed to higher prices.

It’s not a Good Thing, but it is a Necessary Thing.

It’s kind of a chickens coming home to roost situation for people who bought 8 mile per gallon guzzle-wagons for commuting purposes.

Catastrophe is the only thing that ever drives capitalistic democratic societies to action. It’s sad but true.

Next on the agenda - Social Security and the Baby Boom generation!

There are two supplies: (1) found oil in the ground and (2) how much you can pump out at a time. Neither of those increased. It doesn’t matter if demand never exceeded supply, in a functioning market it never will, the price will rise until demand equals supply.

Prices did rise, and then they kept on going up way past the point of reason. If the price was actually (there’s that word again) defined by supply and demand, it would be a bit under $70/barrel today.
What are you basing this on?

But that’s not where the price comes from. The price is defined by what people do on the exchange, guessing what the value of a barrel will be no fewer than two weeks in advance.
And at the end of those two weeks they have to take possession of real oil, not a futures contract. Real oil that either has to be used or stored.

I think the recent spike in oil prices was a good thing, assuming that a) it’s temporary and b) it causes some of the necessary changes in energy use and production, and people don’t just go back to driving full size SUVs and hemi-powered station wagons when prices drop again. I’d like to see high-speed rail in North America, electric or hydrogen fueled cars, and more nuclear/wind/solar/hydro generated electricity.

Hopefully, what we just had will shock governments and companies into preparing for the inevitable move away from oil. However, if it’s not a temporary spike and the price of oil stays high and goes higher, that means it’s too late for a head start. Pretty much everything except solar panels for houses require huge, multi-year projects.

An increase in price increases demand? And shortages – where demand exceeds supply – can never occur?

What are you basing this on?

An article published (and linked) the last thread we had this discussion, a month or so ago.

And at the end of those two weeks they have to take possession of real oil, not a futures contract. Real oil that either has to be used or stored.

Correct me if I’m wrong, but can’t they still sell the contract to someone else OTC? Also, even if they do intend to take delivery, they’re guessing what the price will be in two weeks.

An increase in price decreases demand, so shortages only occur when prices aren’t allowed to rise.

An article published (and linked) the last thread we had this discussion, a month or so ago.

That nut?

Correct me if I’m wrong, but can’t they still sell the contract to someone else OTC? Also, even if they do intend to take delivery, they’re guessing what the price will be in two weeks.

They can sell it to someone else, but at the end of the contract that person still has to take delivery or sell it to someone who will.

Is that what happened in the 1970s?

That nut?

Whether he’s psychotic or not has no bearing on the accuracy of his facts; they are right or wrong on their own merits.

They can sell it to someone else, but at the end of the contract that person still has to take delivery or sell it to someone who will.

Or you can buy and sell through an oil futures fund that does all of the work on your behalf.

And the person (or refinery!) who takes delivery is still speculating as to what the proper market value will be, and the market value itself on a day-to-day, month-to-month basis is based on speculation based on how people predict supply and demand will be. In other words, it’s not actual supply and demand but perceived supply and demand that determines the day-to-day cost.

What happened here was that people anticipated massive shortages based on gross demand increases that didn’t happen and supply drops that also didn’t occur. Actually, there’s a bit more than that.

You take hysteria over the mythical Peak Oil, a belief that the undervalued US Dollar would only get worse due to “Bush being a bad man” and other such nonsense, a somewhat justified fear over inflation due to the lowering of interest rates to try and mollify the Real Estate crisis and – as we’ve seen on this thread – some actual wishful thinking that oil prices might rise, there’s been a huge influx of buyers into the oil futures market.

At the same time, the actual oil producers have been running under capacity, for the simple reason that they know where demand actually is, that it’s well under what they were selling, and what they were selling was well under capacity.

So it’s not just about the perception of supply and demand, but ultimately about the kinds of investment choices people have made recently, which may not have a thing to do with actual supply and demand.

In fact yes, that’s exactly what happened in the 70s.

There were price controls on oil until 1981.

EDIT: Beaten by jeffd

The quote so nice we’ll say it twice.

And was that the root cause of shortage, and would it be the only possible cause of shortages?

Pretty much. 1973 and 1979. The price went way up, but it was the price controls and rationing that caused shortages.