Oil prices increasing? I think not

[ReverendRyan]

March 16, 2005
Oil $55.17/barrel (record high to date in USD)
Gold $443.00/oz
1 barrel oil = .12453 oz gold

March 17, 2008
Oil $111.80/barrel (new record high in USD)
Gold $1011.25/oz
1 barrel oil = .11056 oz gold

Net decrease in actual price of oil 3/16/05 - 3/17/08: 11.2%

[Free libertarian]

 Good point...Oil has gone down if you own gold.  Since my car doesn't know that, and my wallet only contains fiat money I am one of the many who are captive to our oil driven lifestyles.
  Being a uh "crunchy conservative" I've been trying to kick the oil habit for awhile with some success.  That walking thing is okay, but if you live in the sticks it's hard not to drive.  The cost of fueling a vehicle and heating living space is kicking alot of asses lately and regardless of how we state the reasons for it (the devalued dollar etc.) the "rise" in oil and gasoline prices is hurting alot of people.
  Maybe I'm being simplistic but most of this countries goods seem to move by diesel powered trucks, last time I checked diesel was well over $4 per gallon.  Next time you go to a grocery store take note of the increases...maybe gruel and porridge will make a comeback?

My thoughts - get a fuel efficient vehicle, plant a garden and shower with a friend. 
   
   
     

[John Edward Mercier]

Gold must have taken one hell of a hit... oil is over $110, but gold is only $929.

Also try a longer system... say the last 30 years. The last time gold was around these prices... oil was $35 per barrel.

[ancapagency]

At the risk of preaching to the choir...

All this stuff about "oil dependence"  is a complete misconception.  The only way "oil-dependence" would be a problem would be if one or more of the following conditions existed:

    A.  The cost of oil were rising in REAL economic terms, which would be the case if and only if:
                   1) The supply of oil were reduced or was dropping due to actual depletion of the quantity of
                       oil in existence; OR
                   2) The supply of oil were reduced due to economic circumstances, e.g. for whatever reason
                       pumping capacity, refining capacity, etc. were to reduce; OR
                   3) The demand for oil were increasing without (for whatever reason) a corresponding 
                       increase in the pumping/refining/transportation capacity.
     B.  The supply of oil were only available from undesirable sources, such as actively hostile people or
          some such.
     C.  The use of oil caused a serious and drastic danger to the environment and/or health.

The facts are, to go in reverse order:

    * Condition C is not really the case, and the very small extent to which it is true is being corrected via
       technological advances, and is already at the point at which condition C is negligible.

    * Condition B is patently not the case.  Yes, there are some hostile nations that sell oil, but in the case
       of the US, very little (at a maximum, 2-3%) of the oil imported comes from these nations.  The largest
       source of oil consumption in the US is domestic sources, followed by "friendly nations:" e.g. Canada,
       Mexico, Nigeria, etc.  Even Venezuela isn't actively hostile (except for the antagonism of the Bush
       Administration), and the only significant supplier in the Middle East is Saudi Arabia which is actively
       friendly to the US.

    * Condition A is just simply not the case.  The fact that in real terms (i.e. adjusting for real
       inflation--not the "official" gooferment figures) the price of oil is dropping is evidence that Condition A
       does not apply.  The "increase" in price we see is 99% due to three simple factors:  1) inflation; 2)
       increased taxes and regulatory costs; and 3) the mandated addition of ethanol to gasoline, which is
       more expensive and less efficient (thus causing  an increase in the cost at the pump, and causing
       decreased fuel efficiency and thus requiring more frequent fill-ups.  There is a small amount of
       increase in the cost (actually more than made up for by downward pressure from INCREASING supply
       of oil) due to a slow-down in construction and expansion of refining capacity caused by two factors:
     
       1) regulatory pressure preventing construction and expansion; and
       2) the increasing rhetoric (and admittedly, demand) for alternative fuels decreases the advisability of
           financial investment in multi-million and billion dollar investment in construction when the demand
           may well decrease in the near future.


   

[memenode]

Interesting. We ought to be buying as much of gold or silver as possible.. or it's just gonna get harder. As the gold economy remains stable, the dollar based economy keeps going down pulling everyone dependent on it down with it.. OK, so much for stating the obvious.

My thoughts - get a fuel efficient vehicle, plant a garden and shower with a friend.   

I don't actually drive and if I will I'm hoping it to be a super efficient water or air powered car. I'm not sure about water, but air cars already exist (http://www.theaircar.com/ , http://www.mdi.lu/eng/affiche_eng.php?page=moteurs ). Meanwhile I'm relying on "public" transport (not really "public", since you pay for tickets or a monthly fee, regardless of whether you pay taxes or not) and a bike.

But the nature of my business (web publishing) doesn't require me to travel a lot.

About planting a garden or.. showering with friends... um.. not my thing. 

[ReverendRyan]

Gold must have taken one hell of a hit... oil is over $110, but gold is only $929.

Also try a longer system... say the last 30 years. The last time gold was around these prices... oil was $35 per barrel.

I was referring to the bullshit you hear on the news every day. Over the long term, regulation and foreign intervention have driven the price of oil up, but the trend in price since the Iran-Iraq war has been downward.

[Free libertarian]

   I guess my point (not being an economist or anything) is that if an individual hasn't gotten a raise
and his/her income is low to begin with...it hurts when oil/gas prices go up.
  If a working stiff is spending more of his discretionary money on keeping warm or gassing up the jalopy, that's less money for the corner store 6 pack, local greasy spoon, big night at the movies or the friendly landlord.

If you make $400 a week and last year you were spending $100 a month on heating fuel and this year $150,  last year $100 a month for gas and this year $150 that's $100 per month "extra" for oil related expense.  That "extra" money has to come from somewhere and it usually means some other item(s) that was bought last year will not be bought this year. That has to ripple thru the economy.   

I'll admit I'm no John McCain when it comes to the economy (had to see the debates to get it) so
I'll allow the devalued dollar, price of gold and tea in China all probably have something to do with the cost. I respect those who know more about those things than I do...
 
  However, I maintain if you're a poor working stiff, making the same amount of money this year as last year, the real result is a greater percentage of your available cash is going towards Oil products and record profits for oil companies.
No, I don't think Congress should regulate oil companies, I just don't think we should subsidize them by supplying them with an army, navy and air force.   

As far as alternative fuels, I'd like to see more things develope if for no other reason than it might help change our foreign policy (I know I'm probably dreaming).  I'm of the opinion that if there were no oil in the middle east we'd be less inclined to bring them "freedom".     

We ARE oil dependent in this country, in fact the world is and when we talk about the "price" of oil, I don't think it should only be measured in dollars, gold or other units of monetary exchange.
Alot of soldiers have already come home in body bags and Iraqi civilians have suffered immensely.
The other "hidden cost" of oil is we have yet to get a real $ number of the cost of Bush'  war in the middle east...so maybe the "cost" of oil has risen when we consider these other things?   

[ancapagency]

 ...The other "hidden cost" of oil is we have yet to get a real $ number of the cost of Bush'  war in the middle east...so maybe the "cost" of oil has risen when we consider these other things?   

The point is that the present war ISN'T for oil--if it was, it would at least make some sense on a strictly greedy and immoral level--but the simple fact is that it isn't.  We get hardly any oil from the Middle East.  Yes, some of the Neo-cons tried to cynically sell the idea in the back rooms on the basis of the war "paying for itself" via oil--but there was never any real chance of that, although I'll grant the neo-cons weren't smart enough to figure that out.

Again, the problem isn't the oil--it has gotten objectively cheaper.  The problem is that the damned gooferment keeps stealing real value from folks by inflating the currency, thus devaluing the few dollars they are managing to bring home.  Thus, it doesn't make any sense to attack the problem from the "oil dependency" angle--the only way the problem can be fixed is by attacking the REAL problems: 1) inflation; and 2) gooferment interference.

[dalebert]

I'm not 100% certain that buying gold and silver right now is a smart thing. I'm beginning to become more receptive to the idea that we may have deflation. Yep, with all the loans defaulting, we're looking at a possible rapid contraction of the money supply. I know it seems counter-intuitive based on the recent behavior of gooberment, but most of the inflation happens from fractional reserve banking; not printing money, though that's part of it also. If that happens, gold and silver will drop too. It's complicated and I don't pretend to understand it all but it's starting to make some sense to me. The Fed is a bunch of self-interested banks, as we all know, and they're not going to want to buy up a bunch of crap loans. That's the gist of it. I need to read some suggested books on the subject but I haven't had time.

[Free libertarian]

 Just because we aren't getting our oil from the middle east NOW doesn't mean we're not there because of oil.  If there were no oil under the sand I don't think we'd be there, but I'll admit I have no inside scoop as to any other possible reasons.  
A bit off topic but if we aren't in the middle east because of oil, why ARE we there?

 

 

[toowm]

From the Fed minutes of 3/18/08:

Votes for this action: Messrs. Bernanke, Geithner, Kohn, Kroszner, and Mishkin, Ms. Pianalto, Messrs. Stern and Warsh.
Votes against this action: Messrs. Fisher and Plosser.
Messrs. Fisher and Plosser dissented because, in light of heightened inflation risks, they favored easing policy less aggressively. Incoming data suggested a weaker near-term outlook for economic growth, but the Committee's earlier policy moves had already reduced the target federal funds rate by 225 basis points to address risks to growth, and the full effect of those rate cuts had yet to be felt. While financial markets remained under stress, the Federal Reserve had already taken separate, significant actions to address liquidity issues in markets. In fact, Mr. Fisher felt that focusing on measures targeted at relieving liquidity strains would improve economic prospects more quickly and lastingly than would further reductions in the federal funds rate at this point; he believed that alleviating these strains would increase the efficacy of the earlier rate cuts. Both Messrs. Fisher and Plosser were concerned that inflation expectations could potentially become unhinged should the Committee continue to lower the funds rate in the current environment. They pointed to measures of inflation and indicators of inflation expectations that had risen, and Mr. Fisher stressed the international influences on U.S. inflation rates. Mr. Plosser noted that the Committee could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures.

Benanke is not going to "fail" like the Fed did in 1929. Higher inflation is so certain that the real yield on TIPS (inflation-indexed bonds) is negative due to demand.

Yes, there will be continued price decreases in real estate, credit, bank balance sheets and technology, but there is way, way too much liquidity for broad prices to go down.

We actually should have seen deflation in the 80s and 90s as technology made productivity soar. False fear of falling prices made Greenspan inflate, giving the conditions for boom bubbles and the current bursting.

[J’raxis 270145]

I'm not 100% certain that buying gold and silver right now is a smart thing. I'm beginning to become more receptive to the idea that we may have deflation. Yep, with all the loans defaulting, we're looking at a possible rapid contraction of the money supply. I know it seems counter-intuitive based on the recent behavior of gooberment, but most of the inflation happens from fractional reserve banking; not printing money, though that's part of it also. If that happens, gold and silver will drop too. It's complicated and I don't pretend to understand it all but it's starting to make some sense to me. The Fed is a bunch of self-interested banks, as we all know, and they're not going to want to buy up a bunch of crap loans. That's the gist of it. I need to read some suggested books on the subject but I haven't had time.

This is why I have some value in dollars and some value in silver and gold. If either "worst-case scenario" hit (the dollar lost all its value due to hyperinflation, or precious metals dropped precipitously), it would hurt, but it wouldn't be the end of the world. I'd rather do that, than try to guess if we're going to have in- or deflation, guess wrong, and lose it all.

I'm looking at this from the point of view of "protect what I have," not as an investment to make money, of course.

[ancapagency]

Just because we aren't getting our oil from the middle east NOW doesn't mean we're not there because of oil.  If there were no oil under the sand I don't think we'd be there, but I'll admit I have no inside scoop as to any other possible reasons.  
A bit off topic but if we aren't in the middle east because of oil, why ARE we there?

Actually, compared to the rest of the world, the Middle East doesn't really HAVE that much oil--and Iraq has very little.  That's part of why Saddam invaded Kuwait--disputes over the little (relatively speaking) oil they do have.  In fact, Russia is the up and coming big oil exporter.

As for why are we there, it's really just that they provided the most plausible excuse for the neo-cons to get into a war of conquest that could be strung on for a long time, and which was "controllable"--that is, even if things do go badly, they won't be able to come over here and do anything too serious to the US--like actually turn around and conquer us.  The could commit some acts of terrorism, but they just don't have the organization or capability or logistical capacity to bring off an invasion of the US.  Essentially, they were a small target the US Gooferment bully could attack with relative impunity.  And the neo-cons KNEW they didn't have nukes--if they did, they wouldn't have been a target for invasion.

[Free libertarian]

Just because we aren't getting our oil from the middle east NOW doesn't mean we're not there because of oil.  If there were no oil under the sand I don't think we'd be there, but I'll admit I have no inside scoop as to any other possible reasons.  
A bit off topic but if we aren't in the middle east because of oil, why ARE we there?

Actually, compared to the rest of the world, the Middle East doesn't really HAVE that much oil--and Iraq has very little.  That's part of why Saddam invaded Kuwait--disputes over the little (relatively speaking) oil they do have.  In fact, Russia is the up and coming big oil exporter.

As for why are we there, it's really just that they provided the most plausible excuse for the neo-cons to get into a war of conquest that could be strung on for a long time, and which was "controllable"--that is, even if things do go badly, they won't be able to come over here and do anything too serious to the US--like actually turn around and conquer us.  The could commit some acts of terrorism, but they just don't have the organization or capability or logistical capacity to bring off an invasion of the US.  Essentially, they were a small target the US Gooferment bully could attack with relative impunity.  And the neo-cons KNEW they didn't have nukes--if they did, they wouldn't have been a target for invasion.

  So when do we attack Venezuela?       Are you saying if there were NO OIL there (middle east) we'd give a
  flying fuck about what goes on there?  If the Saudi's didn't have oil would we still be cozy with them?
    So we're there just to kick some ass, try out new military toys and practice beating on a weaker country?
   
   I'm aware Russia has a shit load of oil...bet we don't try to "bring freedom" to them though.
   If the middle east doesn't have that much oil, we still want to keep an eye on it, don't you think, especially since
   we aren't about to attack Russia. 

    The earlier point I was trying to make is I am not an economist, I'm as dumb as John McCain when it comes to the economy (well maybe not THAT bad) so I can't say with certainty whether we have inflation, deflation or both.  I appreciate that some of you are more conversant with the cost in gold etc. and understand the points you have made. I'm not equipped to argue those points, and wouldn't anyway...you guys seem to know your stuff there.
I understand the "price" is measured in historical terms, present value of money etc. but when a person on a fixed income goes to buy gas and they're paying $3.20 instead of $2.00 a gallon, for them the "price" has gone up.
When a son comes home in a body bag the price has gone up.  I'm still not convinced our middle east wars aren't somehow tied to the control of oil, but I remain open to hearing more on this topic, since most of my experience with oil was asking people if they wanted me to check the level in their car back in the day 30 years ago when I worked at a gas station.     
   

[ancapagency]

  So when do we attack Venezuela?    

Don't laugh.  The neo-cons like to keep their attack options open.  Why do you think the low-flame has been kept going with regards to Hugo Chavez?

Are you saying if there were NO OIL there (middle east) we'd give a flying fuck about what goes on there?  If the Saudi's didn't have oil would we still be cozy with them?

The Romans and Greeks and everyone else throughout history and before petroleum was useful did.  Why do you thing the US Gooferment is any different?  The arabs have the mixed curse and blessing of living on the crossroads of the world.  It's where everyone runs their trade caravans through, and marches their armies through. It can get a little tough to build any sort of civilization for any period of time when every time you do, someone comes through and stomps the shit out of anything and rapes and pillages along the way.

So we're there just to kick some ass, try out new military toys and practice beating on a weaker country?

Well, the thing you have to remember about US Gooferment foreign policy is that it doesn't make any sense until you realize that it's always about justifying domestic power grabs.
   

I understand the "price" is measured in historical terms, present value of money etc. but when a person on a fixed income goes to buy gas and they're paying $3.20 instead of $2.00 a gallon, for them the "price" has gone up.

Thus the need to educate folks, rather than attempting to solve the wrong problem.