Discussion in 'General Discussion' started by YtheSoHIGHprice, Jul 26, 2012.

  1. Paroxetine Samurai Moderator

    While I am sure that does play a part of or perhaps is the major catalyst in oil prices, I am not so sure that Bush or Bush Jr. didn't have a hand in it.

    Maybe I am wrong, but gas prices went up to the stratosphere under GWB's reign but is nowhere near what they are under Obama. Then look at Bush Sr.: Gas prices went up. Clinton: Gas prices went down...

    ...then again: That could be a "Corelation == Causality" trap that I fell into.
  2. adhocrat Member

    When I first started driving, the price of gas stayed within a very narrow band (25-33¢) and the main reason prices came down was because two gas stations got in a price war, which lasted a few weeks, then prices went back to normal. There was never the serious price fluctuations we see in crude now. Crude cost $2 a barrel. Then came OPEC. Since then the price of oil is the cost of oil plus the cost of the political uncertainty.
  3. another123 Member

    Also, one more point that I haven't seen mentioned:
    Do you think gasoline refined in the US stays in the US? Think again, my friend.
    USnews: Historically High Oil Exports Helping Keep Gas Prices High
  4. Random guy Member

    There's two factors you have forgotten:

    1. The formation of OPEC coincided with a falling in the relative worth of dollars. In the postwar years, the US inflation was rather stable and quite low. However, a 1960 dollar is almost 8 modern dollars. Your 25-33 cents is 2-2,65 dollars when controlled for inflation.
    2. There's a whole lot more people buying oil these days. The worlds population has roughly doubled since 1960, and more importantly, a large swath of the Chinese and Indian population has started buying petrol too.

    None of these two trends seem to be turning around anytime soon. You think modern prices are high? You've seen nothing yet...
  5. adhocrat Member

    There are other factors, We went off the Bretton Woods gold standard in 1971. And we were paying for the Great Society and the Vietnam War.

    But yeah, the inflation is already in the system, it's just a matter of it showing up in ways people finally get, like bread prices going up. Which is happening. I am seeing prices at the grocery store rising far faster than the official rate of inflation.
  6. Random guy Member

    The inflation rate is an average, and the food prices internationally has soared the last couple of years. Hence, the prices in the grocery store should rise faster than the an average inflation rate. While uncomfortable to us, it's a bit worse in 3rd world countries. The bread prices is what sparked the Egypt revolution.

    I'll give you one point about OPEC though. When established, it wrestled some of the control of the oil prices from the US. While I don't think it is fair to blame the price raise on them, they contribute to the fluctuation. As long as the US had control, prices did fluctuate with the dollar. Now, it fluctuates with any number of currencies, whose fluctuations are not in synch with the USD, and some are also a bit less stable.
  7. adhocrat Member

    Check out this chart. it shows real and nominal costs of oil for the past century. You can see the drop in price as efficiency and supplies came on line, then you can see the sudden shock of OPEC. But OPEC would not have been possible if the US government had not been inflating the dollar in order to pay for the Great Society and the Vietnam War.
    That was why we went off gold, and why OPEC had the leverage to raise prices, because there were many more dollars floating around.
    It's the most insidious of taxes, to inflate the currency.
    And now it has become Bernanke's policy. He is making each dollar less valuable.

    What a guy.
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  8. Random guy Member

    Interesting chart, thanks!

    The real picture then isn't that oil prices are that high, rather than they were uncharacteristically low in a 20 year period from the mid 1980s to mid 2000s. They are now on a "normal level", and I'd say they will continue to rise as demand increases (India, China).
  9. adhocrat Member

    I read that a bit differently. I see a relatively stable but falling price as long as we are on gold. When we go off gold, the the price starts to fluctuate much more.

    The huge variations since then have been due to the unstable dollar (and oil is priced in dollars) and political instability in the oil producing regions.

    It's always instructive to look at the cost of resources priced in silver or gold. It gives a much clearer picture.

    So, in 1964, when silver still circulated in the US, gasoline cost about 30¢, or about 110 grains of silver.
    Now, 110 grains of silver is worth 110/480 = .23 ounces, which cost about $7.36. So if we were on a silver standard, the price of gasoline has dropped by quite a bit.

    Gas at my station is about $4.25. So my same quarter gets me 1.75 gallons of gas, when 50 years ago, it got me 1 gallon.
  10. Random guy Member

    Yeah, perception plays a big part here. If I tried to buy petrol with 1960s money where I am, I'd only get strange looks and no petrol. We've gone through a couple of generations of coins and notes since then. The same weight in coins would buy my a similar amount of petrol though.
  11. adhocrat Member

    Well, the point of the math was to show that commodity based money retains its purchasing power while fiat currency decreases in value.
    Which would you rather have used for money: a piece of paper that constantly loses value or a commodity that constantly gains value?
    Those are the two choices. So why do you suppose both our governments decided to take away commodity based money and replace them with fiat currency?
    Hint, it wasn't for our benefit.
  12. Random guy Member

    Speak for yourself mate. I come from one of those funny places where the government generally seem to want to benefit the people (I'm Scandinavian). The general background inflation helps redistributing wealth in a state where salaries generally are a result of large union/employer agreements and teh state is a major employer. Knowing your political preferences I assume you believe this must be a hellish place, but in general people are quite content and prefer it that way, even the very rich ones.
  13. adhocrat Member

    So you are saying that a government that institutes a hidden tax (inflation) on you is working for your benefit.
    OK, then.

    My political preferences are for the maximum freedom and that includes sound money. Fiat money is by definition not sound, since it can be manipulated. My complaints are about any government that uses its position to kill people. That is evil and needs to stop, and the main reason we can send troops thousands of miles away to kill people who have no chance against us is solely because of fiat currency. With a gold backed money, there are strict limits to how much you can spend on destruction, With fiat currency, there are no limits.

    Inflation is not helpful to any but the ones who issue the money. It may appear, in short term, to help, but all it does is lower the purchasing power of each unit of currency.
  14. Random guy Member

    If it had been hidden, I'd agree with you. It is not though. The big, sweeping salary deals and their effect of inflation is pretty much the main topic of every national election. It's not like people here doesn't know the effect of giving teachers and nurses higher minimal wages.

    It's not a tax though. Taxes are money to the state, inflation hits everyones money, the money in the national money-bin too. We have otherwise no shortage of taxes here in Scandinavia.

    Well, it has helped my nation keep fairly prosperous and stable for the last couple of generations. Sure it lowers the value of money, that's the whole point to it, isn't it? The short term help for suffering economies is not inflation, but devaluation. Though outwardly somewhat similar, they are not the same.

    Look mate, I have no problem with the solutions to running a large federation and super-power necessarily must be different from those to running a small Scandinavian national state. You are not the first 'merican I have discussed this with. My understanding is that the US neither want, nor can use, the Scandinavian solutions. That does not mean the solutions used here are bad in themselves. If we are to believe the UN surveys of what places are nice to live in, we are obviously doing something right.
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  15. adhocrat Member

    tl;dr inflation hurts the poorest at the expense of the rich.
    Not sure I follow you here. Inflation is never done in an open and honest manner, as taxes are ar least discussed and known before hand. I know I will pay a 15% tax or whatever, But with inflation that money is taken from me without representation.

    or perhaps you are saying higher costs mean higher inflation, But that isn't how it works. Inflation is only affected by the money supply and the supply of goods. Same number of goods and more money means inflation.

    Sorry, but this is an economic fallacy. Please look up the cantillon effect.The first people to get the money benefit far more than the later people. IOW, the most benefit goes to the banks while the least benefit goes to those on fixed incomes. Not exactly a moral way to run the money, That means that fat cat bankers get benefit while widows on Social security lose through inflated dollars. This is not what i would call a moral way to do business, having rich people stealing from the poor. And remember the people who run the FED know this.
    Imagine, they know they are hurting those people on fixed incomes and yet they still do it.
    Makes ya wonder...

    The time from 1870 to 1910 saw the greatest economic boom in history. There was no central bank and money was pretty much a free market. During those decades the price of goods fell around 1 or 2% a year. That means that each dollar got MORE valuable, not less valuable.Just to nail it home, prices were in a 40 year deflationary trend, yet the economy was the strongest the world has ever seen.

    SInce 1914, our money has decreased in value.
    Makes you wonder...

    And my understanding of Scandinavia is limited. But economic laws are universal, and apply equally to you in Sweden as to me in California. SO when the government inflates the money supply, I know that means hard times for normal people.
    It means that those in favor to the government, such as the too big to fail banks, get the most economic benefit to each new dollar, while those on fixed income are screwed the most.

    That is the true price of inflation, that it hurts the poorest the most. That, IMHO, is an immoral way to run a country.
  16. Random guy Member

    Actually, inflation isn't "done". Inflation is a result of a number of economic factors. The likely inflation resulting from some action can be calculated to some extent though. These estimates, and the economic actions leading to them are openly and honestly discussed in politics in my neck of the woods. If one vote for a party promising increased minimal wages, you also vote for a certain amount of inflation. I don't know if it is general knowledge in the US, but at least it is over here.

    Note that money supply is also influenced by the speed of transactions. A high turnover rate of money means a higher effective money supply. Giving low income households more money to spend means speeding up rate of transactions.

    True, it is quite immoral, hence we have laws limiting this shit over here. It also helps to have the treasury and national money reserve owned by the nation rather than in private hands. It's not like "the feds" (which we don't have here anyway) can decide to act on their own here.

    Here, some (though not all) inflation is driven by rising wages, mostly in the public sector. The people getting higher wages on a scale affecting inflation is the low income groups (e.g kindergarden teachers and nurses). Sure, a high income person then will loose some money through inflation, and they have the choice to protest it by voting for parties that does not want higher wages to low income groups.

    We all know the fat cats will benefit themselves, so no-one really feel sorry for their economic losses due to inflation. What the state does is evening out some of the otherwise ever widening income gaps at the cost of an constantly low level diminishing value of the local currency. Had we stuck to the 19th century gold or silver standard, we could never afford such policies.

    Correlation =/= causation. The same gold/silver standard and lack of a central bank was in function here too, yet the same period saw periods of severe economic hardship and stagnating economy. Obviously, it is not the silver bullet in all cases. It is really not wise to extrapolate from a sample of one.

    Inflation will hurt people with large portions of their wealth tied up in money. It will benefit people with large loans, which are common here as housing is very pricy (with Scandinavian climates, light houses and trailer parks are not an option). Depending on how the society is organized, inflation may benefit or hurt the low income groups.
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  17. anonymous612 Member

    Sweetheart, soldiers still get paid when they aren't deployed.
  18. sell your car and buy a fuel efficient car

    I will take time for you to advise and research the type or model and even brand of car you need.

  19. While we are griping about gas prices, I'd like to complain about the gas itself. When they switch to winter gas, I go from 38 MPG down to 35 MPG. But this winter, I think it's going to be more like 32 MPG. Are we having more eco-friendly gas shoved down our throats? Where can we check this?

    My mileage is getting worse, and I don't like it. My car already meets low-emission standards for its year. The air has gotten much cleaner since the 1970s.

    But I'm stalling my engine more this winter than ever before (manual gearbox). We've already saved the spotted owl, so why do we have to use even wimpier gas? Where do we start to push back and make our voices heard?
  20. Anonymous Member

    Dependent on where you live: The drop could be due to things other than the fuel (air pressure in your tires, oil viscosity changing because of the cold, etc.)

    The best place to check is a trustworthy mechanic who knows the area you are at. Perhaps schedule a tune-up?
  21. adhocrat Member

    I went looking for proof that Sweden had a problem with gold in the 19th century. What i found was that Norway liked Sweden's money so much they wanted to join in.
    And while I agree that correlation is not causation, when there is a good theory to explain the correlation, then it has to be taken seriously, and there are centuries of excellent evidence for a gold standard and there is an excellent theory (marginal value) explaining why commodity money means stability and fiat money means instability.
  22. Random guy Member

    If you care to read the article through, you will see that the "quantum leap" is a description of the monitary system in Norway, not the economy as such. At the end of the 19th century all Scandinavian economies did actually flourish, but that was due to the Industrial revolution and coinage becoming available for trading in the whole area (the economy of Nordic countries were largely based on bartering at the beginning of the century), not due to having the value set to a gold standard as such.

    The Scandinavian economy hit trouble in the early 20th century though, and the monitary union and the gold standard broke down. Coinage thereafter became modern fiat currency. Despite this, the Scandinavian countries have done quite well economically since (and Norway particularly so, being "Scandinavia's Kuwait" with their oil and all), and the modern GDP and standard of living in all countries are much, much higher since WWII than they were in the late 19th century. So no, a gold standard is neither a guarantee nor a prerequisite for a healthy economy.

    That is not to say that a gold standard does not have it's uses. Without it, it would probably have taken a lot longer to get the population to accept a monitary system to begin with. The amount of gold needed to have an operational gold standard needs consideration though (from the same source):

    Considering the US population almost quadrupled during the last century (1), to have an income per capita comparable to 1900 (i.e not too much) the available amount of gold in the US would have to quadruple as well. The countries who would dictate the economy would be the largest gold producers, today (in order) China, followed by Australia, the US, South Africa and Russia (2).

    A return to a gold standard may perhaps be a good thing for an economy in crisis, with rampant inflation and falling production. It is going to be hideously expensive to do though, and while it may save the economy, everyone with a loan is going to have a very, very rough time.

    1 source:
    2 source:
  23. I have spent 30 years in the Exploration end of the business. Oil prices are not controlled by the Majors. They control a tiny fraction of oil supply. Oil price is based first on global supply and demand. It also has a few other important factors such as the "Fear Premium" whenever something rattles the middle east.

    The big question is when Saudi Arabia will reach its production peak. Previously, there has always been excess production capacity to meet world demand. Therefore the ones who control price, had some room to cause a rise in prices by closing the spigot a little. They could also force prices down by flooding the market, as the Saudis did in the eighties. Right now, at these prices, everyone is producing flat out. Are the Saudi's finally producing flat out? Their excess production capacity is a huge question that will define the hydrocarbon society in the years to come. We actually use a small amount of oil from the middle east, however the world market price is set there because the big sellers are there.

    The notion of Peak Oil, when the supply peak is reached and then begins to fall, is interesting, but the shit will hit the fan when the production capacity meets world demand sometime later.

    The only way out of this predicament is to be more efficient and use less.

    Natural Gas is basically a fully domestic market. Right now there is a glut and natural gas prices have fallen to the point that drilling for it has almost stopped. It will pick up again when supply falls again. It is a great transportation fuel that many fleet vehicles switched to long ago. The problem is infrastructure and the inconvenience of having to fill up twice as often.

    If you want to understand oil and its geopolitical importance, as well as its role in determining who has power, then I advise you to read a very thick book called. "The Prize."

    There is so much BS about oil. The real demon is looking at you in the mirror.
    • Winner Winner x 2
  24. I'll add one more thing. The low dollar causes all imports to become more expensive. The dollar value is huge in predicting oil prices, since oil is still traded in dollars.
  25. Random guy Member

    Quoted for truth.
    • Agree Agree x 2
  26. Anonymous Member

  27. You want to bring the cost of oil down? Here's 2 ways. Stop inflation or get the whole world to stop buying gas until the price drops. You've got some work to do because nobody's going to do it for you. The world is not some cozy place. If you want it to be that way then you have to make it that way. Does this look like a place for therapy?

    View attachment images?q=tbn:ANd9GcR-EFz9udB3MMyuKRXljy1l3ayOZ4qlS
    • Funny Funny x 1
  28. AntiVirus Member

    Gas in most cities near me has dropped dramaticaly. It went up a while back to 119.8 a liter. and has been steadily droping and now sits at 108.9

    I agree with:

  29. I paid $2.74/gal. yesterday! woot woot!
  30. Anonymous Member

    Yeah, enjoy it while it lasts.
  31. ItchyScratchy Member

    With Europe entering an almost all out recession and china not "growing" at anything but a baseline pace. It might be here longer then you think.

    I expect the next tirrist attack the second oil becomes too cheap.
  32. Anonymous Member

    Go to Costco. It's always cheaper.
    That is all I know.
    toot toot.
  33. The 'Fiscal Cliff'...IE The massive ammount of $$$$ that the U.S. has 'borrrowed' from the Chinese Govt. Get used to it...the only way is up!

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