Record Profits For Exxon 10.7 B

[KrazyHorse]

Originally posted by Spiffor

I'm not trying to confuse the two. I only consider the latter meaning to have any sense. The purely economic meaning of "shortage" is absurd IMO, as it doesn't consider a "shortage" the fact that some people don't get the resources they need (because they can't afford them).

Hence, I did no wordplay. I was positioning myself out of the free-market paradigma, precisely because I think market mechanisms are a failure here.

There's a very real difference between an expensve commodity and a commodity in shortage. For a commodity in shortage no amount of money will buy you enough. It's a hard limit on usage, which tends to lead to real-world inefficiencies and slowdowns.

I don't think that the free market manages to allocate resources perfectly, but it does better than a badly-designed hard cap system.

Which is why, in the current global economic climate, the idea of "fixing" oil is ridiculous. There's no way to socialise a single, fungible commodity without socialising the rest of the economy as well. It's possible to break off many individual services in that way (to create the modern welfare state), but when you're talking about goods which are easily bought and sold the existence of a black market will lead almost immediately to everybody grabbing as much on the official market as they can, only to turn around and resell to those who need it more. Which leads, as I've already pointed out, to even higher "real" prices, and a movement of the profit from those doing the exploration and refining to black marketeers who don't even have the excuse of running a value-added business.

[KrazyHorse]

Originally posted by Spiffor

Black market is much less convenient for everybody involved than white market. A black market can lead to high profits for some individuals, but most of the resource-allocation will still be out of the market mechanisms. Especially if the shortage isn't catastrophic.

The fact that you've limited total supply by limiting the price paid to the people doing the drilling means that the black market price will be higher than the current market price.

Exxon might not deserve 10.7 billion dollars for what it's done this quarter, but they sure as hell deserve it more (and will use it for more beneficial things) than will some ******* black marketeer who's taking advantage of the system.

[KrazyHorse]

Personally, I think the price of oil isn't high enough.

There needs to be higher taxes on every barrel used.

That will do its own part to reduce demand, and will make conservation and alternatives more attractive, and will slow the runup in oil prices in exchange for some short-term pain.

[Imran Siddiqui]

Originally posted by KrazyHorse
Personally, I think the price of oil isn't high enough.

There needs to be higher taxes on every barrel used.

That will do its own part to reduce demand, and will make conservation and alternatives more attractive, and will slow the runup in oil prices in exchange for some short-term pain.

I agree with this. The reason, especially in the US, that alternatives have not been considered for so long is the fact that oil has been cheap. What did it matter when you could get gas for $1 a gallon? Now it's over $2/gal more and more people are buying smaller cars with better gas milages, driving the hybrid craze, and making alternative sources or alternative ways to get at oil become economically feasible.

[Kidlicious]

You guys are nuts. We can't afford to pay a higher price. We'll be lucky to stay out of a recession with the prices they way they are now.

[Imran Siddiqui]

Maybe a recession will just be the price we have to pay for greater benefits down the road. I mean, we can't just ask global warming if it can wait a few more years. We have to act through conservation and research into alternatives. The government isn't interested (no matter what Bush says in his SotU), so we'll have to go the market route.

[Kidlicious]

Originally posted by Imran Siddiqui
Maybe a recession will just be the price we have to pay for greater benefits down the road. I mean, we can't just ask global warming if it can wait a few more years. We have to act through conservation and research into alternatives. The government isn't interested (no matter what Bush says in his SotU), so we'll have to go the market route.

You are so predictable. A recession is going to cause the price of oil to fall again. You never, ever want a recession. They're never good.

[Imran Siddiqui]

To make an omelet, you have to break some eggs
- Lenin

A recession will only cause the price of oil to fall if people, when faced with less money, buy less gas guzzling cars, which is the point. Demand won't fall because it is relatively inelastic in the short run.

And you can't tell me that the forced recession in the early 1980s, when Volker was getting inflation under control wasn't a good thing in the long run.

[KrazyHorse]

Demand won't fall because it is relatively inelastic in the short run

Wrong. Demand for oil in a recession does fall. Demand relative to price is inelastic in the short run, which is why the price during a recession falls very quickly.

[Kidlicious]

Originally posted by Imran Siddiqui
A recession will only cause the price of oil to fall if people, when faced with less money, buy less gas guzzling cars, which is the point. Demand won't fall because it is relatively inelastic in the short run.

The demand certainly would fall for oil, and not because people will be buying more cars (they don't in a recession), it's because the demand for oil decreases with decreases in income (not price). That's pretty much historical fact. No sense in arguing it.

And you can't tell me that the forced recession in the early 1980s, when Volker was getting inflation under control wasn't a good thing in the long run.

I think that the problem in 1979 was high oil prices. Generally, high oil prices cause big economic problems. They can be too low also, but when they are too high it's a real drag on the economy. Right now we definitely need lower prices, not higher.

[Imran Siddiqui]

I misspoke. What I meant to say that (because of the growth of the SUV and other low mpg vehicles in the US auto fleet) demand for oil won't fall so far to undo work in conservation and alternatives. As I think Kid alluded to, $2/gal, I think is the new standard (or equilibrium) and prices won't dip far below that, even in a recession.

[Kidlicious]

Originally posted by Imran Siddiqui
As I think Kid alluded to, $2/gal, I think is the new standard (or equilibrium) and prices won't dip far below that, even in a recession.

Well, by definition you don't have an equilibrium in a recession. You have surpluses.

[Imran Siddiqui]

The oil market is a bit different in the fact that even if the US is in recession, I don't think that'll drag China and India into one, and they are going to take any surplus.

[Kidlicious]

Originally posted by Imran Siddiqui
The oil market is a bit different in the fact that even if the US is in recession, I don't think that'll drag China and India into one, and they are going to take any surplus.

You could be right about that one. China seems to be pushing full speed dispite danger of inflation. If we pull back they might just take up the slack. I think oil is the limit to world capacity of production. Whoever can get the most will grow the most.

[Az]

[q=Imran]To make an omelet, you have to break some eggs
- Lenin[/q]

Can I quote you quoting this on other occasions?