Job Creation And Economic Recovery

[slonezp]

Could it be this simple?

First off, I don't claim to have any knowledge about anything. I've been thinking about this for some time now. Maybe I'm missing something, and if I am, please enlighten me. The administration claims gas prices are high because of low demand(end of my political rant, lets try to keep politics out of this). It is my opinion the demand is low because of high gas prices, over $4.00 a gallon here. For the sake of this discussion, let's say oil companies didn't have to go thru so many hoops and regulations and were allowed to drill more, either on land or our offshore territories.

Competition would drive down prices world wide.

Oil companies would hire americans to drill, build refineries and pipelines, operate refineries, transport oil, and the white collar workers to run "the ship"

-For discussions sake, let's say by doing this fuel prices are below $2.00 a gal.

People would drive more, stimulating the auto industry and all the smaller business that contribute to the manufacturing and repairs of these vehicles.

People would travel more, stimulating the entire travel industry. Planes, hotels, theme parks, cruise ships, the list goes on.

The boating and RV industry would be stimulated.

The cost of goods would go down because the cost of shipping them would go down.

Most importantly. If we could put extra money in the pockets of americans thru lower fuel prices, they will be sure to spend it, stimulating manufacturing, and construction, which also creates the white collar jobs, and so on.

More people working means less relying on public assistance.

Am I right? Am I wrong? Am I missing something?

[Glenn]

Ya, you are. One problem to your theory: oil prices are totally dictated by the stock market, not supply and demand or competition. Drilling more oil won't solve that. In fact, America is now exporting oil because we don't consume as much as we're currently making.

Nice thought, though.

[Fishing Rhino]

Crude oil prices are driven by speculators, probably even more than by market demands. Consider home heating oil.

Many dealers, and that includes local dealers, will offer relatively attractive prices to homeowners, if they will pay for their season's heating oil during the summer. The dealer will buy, and pay for it when prices are historically lower, during the summer when there is hardly any demand. The bugaboo is that if the prices that year don't follow the historic trends, The dealer, and those who have "pre-purchased" their season's supply are behind the eight ball.

World events are often used to explain rising prices. Iran, or any country, may do this or do that. If the speculators anticipate that such action will negatively affect oil production/availability, they will pay more for oil in anticipation of rising oil prices. Likewise, if tensions ease, the market price will go down. The price of oil, just like the stock market, is driven more by perceptions than reality. You have a bear and a bull market for both. Optimism and pessimism drives the prices.

[slonezp]

I understand oil is a commodity, but we still import 60% of our oil. If we imported 0% and raised our exports, that would have no impact? Fuel prices in oil producing countries are very low.

http://hereandthere40.wordpress.com/2012/02/24/list-of-countries-with-the-cheapest-gas-prices/

I'm still missing something

[Glenn]

Gosh, I wish it were that easy. Unfortunately it doesn't work that way. I strongly believe Wall Street needs to impose restrictions on speculators before prices stabilize.

[slonezp]

Glenn, I understand it's not easy. I don't know what would have to happen to change things. Seems to me something's got to be better than what's in place now. Speculation drove up prices during the last administration and it's happening again. I have a hard time expressing things without being political or a conspiracy theorist. All that aside. If my theory were true, Do you agree with the outcome I suggested? If not, please explain.

[Marty]

Did the administration really say prices are high because of low demand?

I don't profess to know a lot, but rising demand in such places as China is a factor, as is political stability/instability and amount being produced. As was stated above, we were a net exporter in 2011 so there aren't easy answers.

Finally, internationally, oil is traded in US dollars, so weakening or strengthening of the dollar can affect prices without any changes in demand or other factors.

[Root beer]

I understand oil is a commodity, but we still import 60% of our oil. If we imported 0% and raised our exports, that would have no impact? Fuel prices in oil producing countries are very low.

http://hereandthere4...est-gas-prices/

I'm still missing something

First off, those countries have government subsidies, for the most part. The price of crude is priced worldwide. Meaning, our imports and exports doesn't necessary matter, in theory. Oil is traded on the NYMEX index. If we ramped up productions here in the U.S., and price falls which causes demand to increase the price goes right back up, In theory. What most people fail to understand, crude oil is used in many, many industries not just for cars. Oil is refined into gasoline, and other products used in many other industries. For simplicity sake, an exploration company will drill it out of the ground, and sell it to a refinery; the refinery would then refine it into gasoline which then sells it to a distributor or wholesaler who then sells it to the gas station. The product itself exchanges hands a few times before it reaches consumers and each time it exchange hands the price slightly increase so the previous owner can net a profit. Then you add on federal, state, local taxes and there your price of gasoline. The refinery can refine it into other useful products, not just gasoline.

Sunoco has a refinery operation in Mid-Atlantic area and they have lost $3 billion dollars over a 3 year span. Many analyst projections if they cannot sell off that huge refinery, we're going see the price of gas go up...

Now that I got that part out of the way, the U.S. dollars are directly tied to oil, for the most part. As our dollar becomes unstable, if you will, the price of oil will become, uh, unstable… haha. It an imperfect, complex economic society we live in today.

In my opinion, we won’t see oil stabilize until U.S. dollar becomes stable, alternative fuel is available, and/or government subsidies. Plus you have increasing demand in emerging markets, and countries like India and China are turning into modern day United States in term of using gasoline. That doesn’t help the world’s oil price.

[Fishing Rhino]

I understand oil is a commodity, but we still import 60% of our oil. If we imported 0% and raised our exports, that would have no impact? Fuel prices in oil producing countries are very low.

http://hereandthere4...est-gas-prices/

I'm still missing something

Market value is market value. Let's say you bought a house for 50,000 dollars thirty years ago. In today's marketplace similar houses are selling for 150,000 dollars.

Now, you want to sell that house.

Are you going to sell your house for the 50,000 dollars you paid for it? Or are you going to happily accept a hundred thousand dollar windfall profit?

[llPa1nll]

My thoughts go in a 180* direction, lets develop a serious alternative energy. We can all agree that there is only a finite amount of fossil fuels left, eventually we will have to make a switch. I think I heard that some countries in fact have started to switch Brazil I think switched over to a sugar cane bio fuel, and Iceland has a modest hydrogen power. I mean even if we tap into the vast natural gas which would be from this country and use CNG powered cars. I dont think you can buy a CNG powered car anymore.It seems backwards, to me that what they are pushing is the hybrids which still use gasoline and oil. Like others I am by far an expert, I am an expert that it hurts to put gas in my truck and there will be shorter trips for fishing this summer for sure.

[Long Mike]

Sloanzp, the fact the U.S. is currently exporting oil because many of our refineries are in "turnaround" mode. This time of year is when most maintenance is done and when the refineries are changing over to "summer blend" gasoline. The refineries can't handle the influx of the oil at this time of year so they sell it to offset some of their turnaround costs. It's just a short term thing.

Secondly, if the U.S. oil companies had carte blanch to drill anywhere they wanted, they would NEVER discover enough reserves of oil to offset the amount we are importing. BTW, only ten percent of our imports are from the Middle East. The rest comes from South America, Mexico and Canada.

The U.S. consumes over 18 million barrels of oil a day. That's well over twice as much as the second largest consumer, China, and four times as much as the third largest, India. Check this out.

http://www.nationmaster.com/graph/ene_oil_con-energy-oil-consumption

The upshot of the whole deal is that the U.S. is never going to be a net oil exporter until such time as alternative energy sources become viable, e.g. nuclear, natural gas, wind.

Until such time, we, and the rest of the net oil importers, are at the mercy of the wretched speculators. They could care less what happens to the world economy. They are just in it to make money in the short term, and they will use any excuse to drive up the prices. This is a part of our commodities market that desperately needs tight regulation. It's one thing to speculate on the price of orange juice or pork bellies. This type of speculation does not affect the economies of nations.

[slonezp]

Market value is market value. Let's say you bought a house for 50,000 dollars thirty years ago. In today's marketplace similar houses are selling for 150,000 dollars.

Now, you want to sell that house.

Are you going to sell your house for the 50,000 dollars you paid for it? Or are you going to happily accept a hundred thousand dollar windfall profit?

No, I wouldn't take a loss unless experiencing the immediate loss would lessen the long term hardships.

40 years ago we went thru the same thing. Was that caused from speculation, or world events? My recollection (I was a child) was world events.

[slonezp]

Long Mike

The Bakken shale fields supposedly have enough oil and natural gas reserves to last my lifetime and then some. Wouldn't it make sense to encourage harvesting of these resources?

Everyone talks about alternative energy. Those fancy batteries aren't made from "clean" energy and disposal is a problem. Nuclear is taboo. Ever seen a wind farm? An eyesore to say the least, and inopperative if there is no wind OR too much wind. I'm all for natural gas, hydrogen, or whatever else works BUT is has to be an inexpensive solution. Instead of punishing cheap energy, why not reward the alternative?

[Fishing Rhino]

My thoughts go in a 180* direction, lets develop a serious alternative energy. We can all agree that there is only a finite amount of fossil fuels left, eventually we will have to make a switch. I think I heard that some countries in fact have started to switch Brazil I think switched over to a sugar cane bio fuel, and Iceland has a modest hydrogen power. I mean even if we tap into the vast natural gas which would be from this country and use CNG powered cars. I dont think you can buy a CNG powered car anymore.It seems backwards, to me that what they are pushing is the hybrids which still use gasoline and oil. Like others I am by far an expert, I am an expert that it hurts to put gas in my truck and there will be shorter trips for fishing this summer for sure.

Easier said than done. It's great to say, "let's develop", but actually doing it is another matter. How long have wind turbines been around? No doubt today's models are more efficient that those of a couple of decades ago, but, from what I've read it costs three times as much to generate electricity vs, coal, oil, nuclear.

Solar panels? They've been around for decades, but still cannot generate a tiny fraction of the electricity. Besides, solar panel block sunlight from reaching the ground. In numbers to make a significant contribution, what effect would their shadows have on the environment?

Ethanol was once touted as a great alternative. Even Al Gore has acknowledged that the ethanol experiment was a failure. Higher cost for fuel, and food, while having chemicals that are harmful to engines and fuel lines.

Hydro electric has been around for decades, and is a great source of energy. But, I wonder if the Hoover and other dams could be built with today's environmental regulations. I doubt the Tennessee Valley Authority would get off the ground today, but that's just my opinion.

The "let's develop" slogan has been around since the 70s and the time of the Arab oil embargo. It would be interesting to know how many billions of dollars have been spent (all sources, public and private) with precious little to show for it. It's been forty years since the days of the oil embargo.

Five dollar per gallon gasoline is quite economical compared to what it would cost to provide another form of energy to move our vehicles, heat our homes, generate electricity, etc., etc., etc.

[slonezp]

Five dollar per gallon gasoline is quite economical compared to what it would cost to provide another form of energy to move our vehicles, heat our homes, generate electricity, etc., etc., etc.

To be fair, should a 2012 Mercedes owner pay more for fuel than a guy driving around in a 1986 Chevette? or a person who owns a $300k house pay more for heating oil than a guy in a $50k house?

I believe in the free market. The class warfare is only being used as an example. $5 a gal., impacts different people differently and IMO will continue to prolong economic recovery.

[Fishing Rhino]

To be fair, should a 2012 Mercedes owner pay more for fuel than a guy driving around in a 1986 Chevette? or a person who owns a $300k house pay more for heating oil than a guy in a $50k house?

I believe in the free market. The class warfare is only being used as an example. $5 a gal., impacts different people differently and IMO will continue to prolong economic recovery.

One price at the pump for all, regardless of station in life.

Life is not fair. Never has been. Never will be.

[slonezp]

Life isn't fair. I agree, as it states in my profile.

Rhino, Would you agree, cheap gas prices will improve economic recovery?

[urp]

As has been stated, future fuels are the answer. Unfortunately they are not on the horizon. Ethanol should just rollover and die. Costs more than it's worth. Only thing keeping it alive is corn-belt politicians. Hydrogen likewise has problems. 1/3 the energy of gasoline and is very difficult to contain. Like ethanol is expensive to make. Wind and solar depend on the weather. That will probably be someday mitigated by better storage. Solar panels are great on dingbats[houses]. What about base-load? How many solar panels would it take to run a blast furnace?

[Glenn]

Also take into consideration that the U.S. is drilling more oil than it was during the previous administration. So how has that helped prices? How is that working for you?

Ya....more drilling is NOT the answer. That's been proven.

Mike nailed it:

This is a part of our commodities market that desperately needs tight regulation.

[urp]

I might add that space-based solar could provide endless power for everything on earth. We have the technology. Unfortunately, we lack the dollars to develop and lift it.

[Long Mike]

Sloanzp, don't get me wrong. I'm a fervent supporter of the U.S. developing its own resources, and the Bakken is a hell-of-a-resource, as is potentially, the Alaskan Wildlife Preserve. If you are not aware of it, I grew up in the oil patch and spent the majority of my career in it. To begin with, one has to get all of that oil out of the ground, to the tune of 18 million barrels a day to offset our imports. Since it is as difficult these days to get approval to build a refinery as it is to build a nuclear reactor (no one wants it in their back yard) we will have to build the infrastructure to ship all that oil to Houston or California or several other places for refining. With the environmentalists banging their drums none of this is attainable in the short term. Remember the Freedom pipeline debacle? My best guess is about twenty years. In the meantime, we are at the whims of the speculators.

[Raider Nation Fisher]

Could nuclear be conceivable for automobile use? As in a mini reactor or something along those lines? I had some other ideas, but am drawing a blank now.

This idea would probably not work for automobiles, but hows about using gravity to generate electricity? I realize it is similar in theory to hydro generation, but would it be possible to use other substances? I realize also that in order for energy to be created it requires the use of energy. So what could get us the biggest bang for our buck?

It's been a while since I've thought about this, and am now gonna be mulling it over all night.

Oh, and yes I agree with you that a lower fuel price would help stimulate the economy. Seeing as how most things are directly tied to the price of fuel, lowering the price would speed the recovery up some.

[SirSnookalot]

What goes up always comes down, and gas will, when I don't know. Speculation, oil being sold on the world market, unrest in the middle east, China, Brazil, India's robust thirst for oil, all contribute to higher prices. In Europe you would be paying twice the price as we do here, although a good portion of their gas taxes go for education and healthcare. We pay less for gas but more for education and health so maybe in total dollars it's a wash.

Cars today get twice the mileage, adjusted for inflation we probably pay less to drive a mile than in years past. In 1970 cars got about 8-10 mpg, income was about $7500 year, gas was around .40 a gallon. A dollar bought 2 gallons and 20 miles, today inflation adjusted $10 dollars buys 2 gallons and gets you over 40 miles. The first commercial trucks I owned got 2-4 mpg, once fuel injection was introduced the same sized trucks were getting 6-8 mpg.

I don't think there is any doubt that lower pump prices will give the average person more disposable income that will be filtered into the economy. This has been a sluggish recovery, considering how bad it was I'm not surprised it's taking this long, but it has improved and will continue to do so. Look at how long the Great Depression lasted, we could have been there again.

[Fishing Rhino]

Life isn't fair. I agree, as it states in my profile.

Rhino, Would you agree, cheap gas prices will improve economic recovery?

Sure. Higher prices for fuel mean less money to spend elsewhere.

[Lund Explorer]

If you are tired of spending so much money for fuel, just use less of it.

Nobody here has the ability to change the price of oil, but all of us have the ability to change how much of it we use. We, the citizens of this country, have brought this on ourselves. We live in the suburbs and commute to our jobs way farther than people in other countries do. Many completely ignore mass transit. We drive to work all alone in the gas guzzler we use on the weekends to tow our gas guzzling boats to far away lakes. Our wives drive their own vehicles to their jobs, and when the kids get old enough, they drive to school as well. Though most of us drive right past the grocery store on Friday, we drive right back there on Saturday to shop. Cars/Trucks might get better mileage than they did 40 years ago, but we drive many more miles now. Until we see a change in our addiction to this habit, we will continue to see others profit off of it.