Peak Oil is today. What do we do?

[Kidlicious]

Originally posted by Lancer
Btw, when the aliens land and start rounding up humans for brain food, it will likely effect the markets.

No it won't. The markets will adjust.

[Kidlicious]

I think LoA thought that I was talking about what the consumer would do. I was talking about what the govt should do. That's my bad.

[MichaeltheGreat]

Originally posted by Kidicious
I think LoA thought that I was talking about what the consumer would do. I was talking about what the govt should do. That's my bad.

Let the markets work out supply/demand. Any instant financial or tax credit incentives for alternatives won't help quickly enough.

As oil prices up, alterntives out the wazoo become more cost-effective.

Oh, and give the Israelis the green light.

[Kidlicious]

Originally posted by MichaeltheGreat
As oil prices up, alterntives out the wazoo become more cost-effective.

Creating the facitilies for those takes quite a bit of oil though.

[Lawrence of Arabia]

ok guys, im going to have to bust out the microeconomic demand graph that shows government intervention. gimme a coupla minutes to draw it

[Kidlicious]

Originally posted by Lawrence of Arabia
ok guys, im going to have to bust out the microeconomic demand graph that shows government intervention. gimme a coupla minutes to draw it

To show what?

[Lawrence of Arabia]

to show that government intervention is also microeconomic

[Kidlicious]

Originally posted by Lawrence of Arabia
to show that government intervention is also microeconomic

As it affects the individual consumer or the firm sure it is, but not as if affects the whole economy.

[Lawrence of Arabia]

LET:

U(x, y) = x^0.5 y^0.5
I = 100
Px= 1
Py= 1

Where U(x, y) is the equation for the indifference curve
Where I is income
Where Px is price of good x (oil)
Where Py is price of good y

WE CALCULATE:

Maximum utility:

X* = (a/ a+ b) * (I/ Px)
X* = (1/2) * (100/ 1)
X* = 50

Y* = (b/ a+ b) * (I/ Py)
Y* = (1/2) * (100/ 1)
Y* = 50

U* (x, y) = 50^0.5 50^0.5
U* = 50

When Px = 1, Py=1 and I= 100, we have optimal consumption at X* = 50 and Y*=50. This is point A on the graph. This lies along the indifference curve where U = 50

ASSUME:

Px increases by 100%

Px= 2
Py= 1
I= 100

WE CALCULATE:

Maximum Utility:

X** = (a/ a+ b) * (I/ Px)
X** = (1/2) * (100/ 2)
X** = 25

Y** = (b/ a+ b) * (I/ Py)
Y** = (1/2) * (100/ 1)
Y** = 50

U**(x, y) = 25^0.5 50^0.5 = 35.4
U** = 35.4


When Px = 2 and Py = 1, we have a new optimal consumption at X** = 25 and Y** = 50. This is point B on the graph. As you can see, when price of oil increases, you consume less of it. We also see that the consumer derives less utility, as it has decreased from 50 to 35.4.

WE CALCULATE:

Minimum Expenditures:

X*** = (VPy^0.5) / Px^0.5
X*** = 50/ 2^0.5
X*** = 35.4

Y*** = (VPx^0.5) / Py^0.5
Y*** = 50 2^0.5/ 1
Y*** = 70. 7

The minimized expenditure gives us point A’, which is where the consumer will buy 35.4 units of oil and 70.7 units of y. At A’, we have U* = 50, Px = 2 and Py = 1. V = indirect utility. In this case, it is U which we are holding constant at U = 50

Lets say the price goes to $2 for oil. The government decides to subsidize oil. The price of oil then falls to $1. The government pays $50 and the consumers pay $50.

Lets say the price goes to $2 for oil. The government decides to give the consumers cash. This increases their income, and they now buy at point A’, which gives them more of both goods then before. This costs the government just over $20.

It is cheaper to just give them the cash in this case.

[Boris Godunov]

Originally posted by Space05us
I can walk everywhere I need to go. So its not a big deal to me.

You do realize more than gas prices would be effected, right?

[Imran Siddiqui]

Originally posted by Lancer
You can post in this thread or my skull sucking locust aliens thread, which is more realistic. Btw, when the aliens land and start rounding up humans for brain food, it will likely effect the markets.

I want to be perfectly clear on that.

[Dracon II]

I assume that there will be stagflation. The market will respond.... by increasing prices and contracting at the same time.

All this talk about cars ignores the fact that Oil affects just about everything we produce... petrochemicals, anyone? plastics? Big, big things....

[Kidlicious]

LoA,

What about the effect on the economy?

[Lawrence of Arabia]

True, but the issue is macroeconomic, because it concerns the effect on the whole economy, and what govt action would, or wouldn't, be appropriate.

the issue is also microeconomic - i just showed you what government action would or wouldnt be appropriate. the total effect is of course macroeconomic, but we can also look at this issue from a micro standpoint as i did.

[mrmitchell]

If oil consumption drops--you have to consider the entire range of jobs effected.

1) Rich middle eastern *******s
2) Poor middle eastern well workers
3) Rich American *******s
4) American well workers
5) Tankers + crew
6) Gas station operators

Consider the effect on the economies of Texas, South AR, and the other oil producing parts of the US (and Europe) when their product falls in demand. It isn't just a middle east problem.

And what happens when the ME is no longer economically worthwhile to keep screwing up? Do we just abandon those peoples to dictatorships and destruction like we have with other economically worthless areas? (Africa, for example)

And don't get me started about how much else oil is needed for. Plastics, chemicals...people talk about getting rid of the oil dependency but it is a hell of a lot easier thought up than risked. When we move away from gasoline cars we need to consider every angle to such a monumental economy ****.

EDIT; *shift