DrumBeat: May 18, 2006
Posted by threadbot on May 18, 2006 - 9:05am
Now for some wise words from the readers of The Oil Drum...
“Government is too big and too important to be left to the politicians.”
—Claire Huchet Bishop
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http://www.mainecommonwealth.com/
Maybe TOD could get an interview with him or something.
Meanwhile, Uruguay limits night sports events due to energy crisis. A drought has affected their hydroelectric dams.
And in Nigeria, a group is protesting the incessant power outages, using the motto Let there be light.
This looks like Richard Duncan's "Olduvai Cliff" beginning. Is it reasonable to imagine this as a syndrome that will creep through the world's impoverished mega-cities in the near term?
Matt, dc
NY Times: Inflation Rising, Markets Tumble
Are Investors Waking Up?
Nothing to see here! These aren't the problems you think they are. Move along! Move along!
(Apologies to George Lucas.)
:)
"Will the coming world order be the American universal empire? It must be that.... The coming world order will mark the last phase in a historical transition and cap the revolutionary epoch of this century. The mission of the American people is to bury the nation states, lead their bereaved peoples into larger unions, and overawe with its might the would-be saboteurs of the new order who have nothing to offer mankind but a putrefying ideology and brute force. It is likely that the accomplishment of this mission will exhaust the energies of America and that, then, the historical center of gravity will shift to another people. But this will matter little, for the opening of new horizons which we now faintly glimpse will usher in a new stage in human history.... For the next 50 years or so the future belongs to America. The American empire and mankind will not be opposites, but merely two names for the universal order under peace and happiness. Novus orbis terrarum."
~Strausz-Hupé, 1955 "The Balance of Tomorrow,"
==AC
The Greatest Economic Crisis in Modern History
http://tinyurl.com/emg2g
So, what we've had, is this kind of speculative system, which is integral to this operation with getting money back into these bankrupt banks, through bundling of Fannie Mae-type and Freddie Mac-type mortgages, this system was going to blow! This is a bubble, this is a classical John Law-style bubble, as John Law from the early 18th Century. You had one in England, you had one in France. South Seas Island bubble, and the Mississippi bubble. Same kind of thing. It's a ponzi scheme. It's a pyramid club scheme--same kind of thing. But a pyramid club scheme betting on a pyramid club scheme, betting on a pyramid club scheme--off into the stratosphere.
Now, the money is being printed, which is generally registered under the category M3. And notice that you can't find out what M3 is, any more. They officially decided to hide the figure! Because, if the figure were published, it would show you how much money is being printed, printing-press money by the Federal Reserve System, and being pumped into the system now, to bail out and fund these financial interests.
Anyone knows this, who knows the system: When you build up this kind of bubble, a super-John Law bubble, layer upon layer--this thing is going to pop. Then, if you're a smart banker, what're you doing? How are you going to get out of the bubble, which you are going to cause to pop? Why aren't you going to go down with the bubble? You have to find a landing place outside the system. What is that landing place? Gold, silver, iron, zinc, copper, petroleum!
These are physical assets, so-called natural materials, these are assets which will be marketable in the future. So what you do, is, you corner the market in possession of these materials. You raise the price to the sky, because you're bidding against each other to grab these materials, and trade them back and forth, day after day. It's all done by this bunch of financiers. That's where you get that curve! So, when you look at the curve of inflation, don't look at the groceries--you will get grocery inflation very rapidly; you're already getting it, as many of you know. It's going to get serious, like housing inflation has been. Hmm? But this inflation, is where the powers of the future intend to be: They will control these assets; they will control the real estate; they will control the water systems; they will control the water. They will control the food. They will own you, and decide which of you lives and which dies.
This is not oil companies trying to "gouge the public"--oh, they do that all the time! But, this is nothing new; that part's nothing new. What they're doing that's new, is, they plan to sink the whole world economy, into a breakdown crisis, from which they will emerge, where governments are bankrupt and powerless, and they will emerge as the owners of everything in sight. And their banking systems will come--not the government!--but they will come, and foreclose on you. And there'll be nothing to protect you. That's the game.
http://tinyurl.com/mxnzb
That doesn't even cover derivatives, assurances and all the other silly debt games the central banks play.
They have reached a point where they have to monetize debt to cover their obligations. There is no way out. Hyper inflation is just around the corner...
==AC
I meant "expand", or contract...
==AC
I think the point to this is that the Fed is monetizing debt at a large rate! They buy securities - that is debt, and in turn put it down on the books as an asset. Problem is this "asset" is in turn a liability against the American People. Once this fake cash starts being spent by our fair govt, it is deposited into banks and a small part is held as reserves and the rest is loaned out and it goes to another bank and the process repeats itself.
The "assets" are already an obligation to somebody. If the Fed buys those assets, thereby giving money to a financial entity, that financial entity might then cover their eurodollar contracts -- no need for the liquidity if the related transaction has been transferred to the Fed, right?
When the FED buys the debt they are giving fake "cash" for a piece of paper. So the FED gives money for a piece of paper, so they are increasing money in the system, not decreasing.
You also must keep in mind that they are buying debt. They buy 10 year T bills, which are debts of the people of the US. Then they take this DEBT and on paper change it into an asset of the bank. Now do you understand that our lender of last resort (the biggest bank in the world), is using the US debt as a basis to expand the money supply.
The only assets I am talking about are repurchase agreements, repo's, and those are done with other governments or our government.
T-Bill's not sold to public ---> Congress takes these to the FED and the FED writes a check ---> On the FED balance sheets, this debt is now a securities asset ---> the government deposits the money into commercial banks through issuing checks to various people agencies, etc. ---> those banks receiving the money only needs to hold a fraction of what was deposited so this orignal govt money has been re deposited up to nine times and up to 9 banks lend of 80-90% of whatever was deposited ---. so they loan out the rest and it cycles.
The world didn't want to take on the debt of the US, but when the FED assumes the debt (enters in a repo agreement with the govt) it is in effect, creating money from debt. Thinking only in terms of off setting debits and credits in accounting terms won't let you see the bigger picture.
"One of the trademarks of perma-bears is to blame all the World's ills on a hyper-active Fed whose policy shifts endanger the state of our economies and the value of financial assets. But is this a fair indictment? Judging Fed policy by the growth rate of the US monetary base, we find that the US monetary base has been growing fairly steadily and in line with US GDP growth.
In fact, if one wants to blame a central bank for volatility in global monetary aggregates, one should instead turn to Japan. Looking at the past thirty five years, we find that the Japanese monetary base has been allowed to double over short periods (i.e.: less than three years) three times.
Another interesting fact is that, following the large 2001-2004 expansion in the Japanese monetary base, the Japanese monetary base is now larger than the US'. That is quite impressive for an economy less than half the size."
Think about it....money was "created", so of course it is reported within GPD growth, in much the same way as your pay is reported on your paycheck.
That is why they are in line with one another (and growing fairly steadily, I might add, or was until fairly recently).
GDP can grow above and beyond the inflationary amount, but in order for that to happen more goods and services have to be 'created' than money/credit/debt is created. Very little of that has happened. The US does not actually "make" much of anything anymore, after all.
The US Federal Reserve has created more money, via the issuance of more debt, since 2000, than was in the system total prior to that year. Our debt load more than doubled in that time. As mentioned before, inflation is the result. A $1USD today buys only a fraction of what it did a few years ago.
Japan is a totally different case, one of a slow deflationary collapse over a nearly 20 year period that has been carefully controlled by the Japanese.
Prior Fiscal
Years National Debt
09/30/2006? $est 8.5T
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/28/2001 $5,807,463,412,200.06
09/29/2000 $5,674,178,209,886.86
OUCH! This will be interesting to see how this spirals...
http://www.timesonline.co.uk/article/0,,3-2170099,00.html
Ya that might make sense if the GDP numbers, make that any official economic numbers, the government reports were REAL. The numbers are a joke so judging anything based on the economic numbers is a joke. Here is a mainstream article pointing out the lies. It is probably worse than this:
The numbers behind the lies
http://tinyurl.com/rqzje
It is worth reading the PDF report referenced in the article
:
http://tinyurl.com/meq6s
==AC
The "assets" are already an obligation to somebody. If the Fed buys those assets, thereby giving money to a financial entity, that financial entity might then cover their eurodollar contracts -- no need for the liquidity if the related transaction has been transferred to the Fed, right?"
Does this answer your question?
"Because the Federal Reserve can be counted on to "monetize" (convert into money) virtually any amount of government debt, and because this process of expanding the money supply is the primary cause of inflation, it is tempting to jump to the conclusion that federal debt and inflation are but two aspects of the same phenomenon. This, however, is not necessarily true. It is quite possible to have either one without the other.
The banking cartel holds a monopoly in the manufacture of money. Consequently, money is created only when IOUs are "monetized" by the Fed or by commercial banks. When private individuals, corporations, or institutions purchase government bonds, they must use money they have previously earned and saved. In other words, no new money is created, because they are using funds that are already in existence. Therefore, the sale of government bonds to the banking system is inflationary, but when sold to the private sector, it is not. That is the primary reason the United States avoided massive inflation during the 1980s when the federal government was going into debt at a greater rate than ever before in its history. By keeping interest rates high, these bonds became attractive to private investors, including those in other countries. Very little new money was created, because most of the bonds were purchased with American dollars already in existence. This, of course, was a temporary fix at best.
Today, those bonds are continually maturing and are being replaced by still more bonds to include the original debt plus accumulated interest. Eventually this process must come to an end and, when it does, the Fed will have no choice but to literally buy back all the debt of the '80s -- that is, to replace all of the formerly invested private money with newly manufactured fiat money -- plus a great deal more to cover the interest. Then we will understand the meaning of inflation."
This may be the reason the Fed suspended the M3 because they are beginning the process to "buy back" all the private debt plus interest from the 80s and early 90's. The ponzi scheme is coming to an end, there is no way out. It was fun while it lasted...
==AC
The FED is quoted as saying they will take unconvential means to maintain the dollar. It pointed out that our trade deficit was like 55B in APR 05, yet Net Foreign Investment was only 45B. So who are we getting the other 10B from? I say we're printing money, though not with any presses, unless it's the press of a button.
Did you ever here of The Bank for International Settlements?
A banker's bank, the BIS does no direct business with individuals, governments, or corporate entities. Instead, it deals solely with member nations' central banks (most of which are privately owned). There are 55 of them at present, and the list includes every central bank of consequence in the world.
All members are owners and have voting privileges, in proportion to the number of shares they have. (Private citizen ownership was originally allowed, and comprised about 14% of shares outstanding, but in 2001 all of those were bought out by the central banks.) We were unable to pin down the exact present share structure, but it can be assumed that the founding members have the most clout.
The founders were the central banks of Belgium, France, Germany, Italy, Japan and the U.K., all of which got an identical number of shares. The U.S. Federal Reserve was not an original shareholder; however, three American banks (J. P. Morgan, First Bank of New York, First Bank of Chicago) each got the same number, giving the U.S. three times the voting power from the outset.
Management's inner circle is of course the Board of Directors. There are six ex officio (i.e., permanent) members, the central bank governors of Belgium, France, Germany, Italy, and the U.K., plus the chairman of the Fed. These six appoint six others of their own nationality, and then there can be up to nine more elected members (there are five at the moment, representing Canada, Japan, the Netherlands, Sweden and Switzerland). Ben Bernanke has thus just replaced Alan Greenspan as the U.S.'s ex officio rep, and his appointed American sidekick is New York Bank President Timothy Geithner.
So, what does the BIS do these days? According to the bank's website, "BIS . . . fosters international monetary and financial cooperation and serves as a bank for central banks . . . by acting as: a forum for discussion and decision-making among central banks and within the international financial and supervisory community; a centre for economic and monetary research; a prime counterparty for central banks in their financial transactions; and agent or trustee in connection with international financial operations."
http://tinyurl.com/epa8d
==AC
Knowledge comes from understanding.
We won't/can't pay the foreigners back at fair value. So what if the Chinese cancelled our debt in exchange for us relaxing our policy on the defense of Taiwan? And the Japanese cancelled our debt in exchange for grain export guarantees after peak oil? Or a bunch of nukes for their new army? Or both of them on some other political deal? We can't pay them back, and as Bob Dole would say, "You know it, I know it, they know it, we all know it.".
Not that many people? I'm trying to believe you. I guess it should be obvious to me that not that many agree on this, given the DJIA runup (until recently).
http://www.thomaspmbarnett.com/images/pentagons_new_map.jpg
are all working together towards a common goal. Through central banking they have gained control of governments and are in the process of redistributing the wealth around the globe. When this process is completed the will pull the plug on the current finacial paradigm and bring about a high-tech global feudalism under the guise of a New World Order. If I was at the top of the pyramid it is what I would do. We must die so they may live.
==AC
Dogs of war and men of hate
With no cause, we don't discriminate
Discovery is to be disowned
Our currency is flesh and bone
Hell opened up and put on sale
Gather round and haggle
For hard cash, we will lie and deceive
Even our masters don't know the webs we weave
On world, it's a battleground
One world and they smash it down
One world...one world
Invisible transfers, long distance calls
Hollow laughter in marble halls
Steps have been taken, a silent uproar
Has unleashed, the dogs of war
You can't stop what has begun
Signed, sealed, they deliver oblivion
We all have a dark side, to say the least
And dealing in death is the nature of the beast
On world, it's a battleground
One world and they smash it down
One world...one world
The Dogs of War don't negotiate
The Dogs of War won't capitulate
They will take and you will give
And you must die so that they may live
You can knock at any door
But wherever you go, you know they've been there before
Well winners can lose and things can get strained
But whatever you change, you know the dogs remain
On world, it's a battleground
One world and we're going to smash it down
One world...one world
~Pink Floyd
http://news.ft.com/cms/s/8d68b2c0-e5a2-11da-b309-0000779e2340.html
The ECB is expected to raise its main interest rate in June from 2.5 per cent, possibly by half a percentage point.
It became clear on Wednesday that the Bank of England's interest rate-setting body had a three-way split at its meeting this month, pointing to mounting concerns about inflationary pressures and increasing the chances that the UK would also raise borrowing costs this year.
Michael Dicks, economist at Lehman Brothers, said central bankers were "talking the same language" about inflation risks.
"It is almost as if they are looking at each others spread-sheets, and looking at the world in the same way," he added."
I love how the media portrays central banking. Central banks don't "FEAR INFLATION", they intentionally create it to tax the hapless citizens and confiscate their wealth. When is the US public going to wake up and realize they have paid for every war since the turn of the 20th century and funded the hemorrhaging wealth transfers to third world countries and supposed "enemies", Russia and China, through INFLATION? That is a rhetorical question because we know the answer is never with the complicate, elite owned media. The entire system is a sham built on ignorance!!!
Even those who once spoke out against "The Creature" CAN NOT escape its seductive powers...
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
~Alan Greenspan, "Gold and Economic Freedom", 1966
==AC
Someone posted this recently http://www.ipsnews.net/news.asp?idnews=33268
" "The food production system is designed to generate profits, not produce food or nutrition for people," Qualman told IPS. "
Someone posted this recently http://www.ipsnews.net/news.asp?idnews=33268
" "The food production system is designed to generate profits, not produce food or nutrition for people," Qualman told IPS. "
========How could it be otherwise?
"When plunder has become a way of life for a group of people living together in society, they create for themselves in the course of time a legal system that authorizes it, and a moral code that glorifies it."
~Frederic Bastiat
==AC
http://tinyurl.com/17a
Then check this out:
June 2006 -
Beginning of phase 2 of the global systemic crisis: the phase of acceleration
http://tinyurl.com/zedg9
==AC
I've followed the debate about bioethanol here with interest. Eventually I'd like to write about it in an Australian context at my blog Energy Futura, but at the moment I'm still just sponging information.
Australia is the world's 4th largest sugar producer and my understanding is the industry is not subsidised in Australia:
With 80% of Australian sugar for export thats a lot of potential domestic bioethanol production. What is people's take on the economics of sugar for ethanol, and can anyone direct me to some links?
The afternoon radio show will be on alternative energy and a local business person who has been in the business for well over a decade will by my guest. I will also be beating up on PG&E for its latest action on solar credits in California, among other items.
It is the best time slot on this local AM station.
The station is supposed to start streaming this week so it may be available to the TOD. For a laugh, go to:
http://www.920kvec.com/main.html
What??? 716 Billion barrels of discovered resources... is that total oil/gas/other? You say just above 260 billion barrels of discovered oil resources... What is the 456 Billion other?
Oh yes and...
WTF? Seriously...
so the 456B additional resources they speak of are discoveries that might be economically producible?
I like driving in my car
Basically about how urban America went from compact cities with efficient electric tram and train systems to the horrendous sprall of today.
Suspiciously similar to a piece in Heinberg's book "The Party's Over".
The Satya Interview with Adam Weissman
May 6 2006
http://www.satyamag.com/may06/weissman.html
(i'll look at it more later ;-)
i did see a tv segment on a dumperster diver guy. he at least brought home garbage food to feed his chickens, and did not "dine" himself.
He's a story from MSN and I can't verify their numbers with any other publication so I'll take these.
Bankruptcies are on the rise after the new law has taken affect. As those ARM's become pricier I think this gets worse and as gas gets more expensive it only compounds the problem. Too many people have homes that shouldn't and now they will be giving them back.
http://moneycentral.msn.com/content/Banking/bankruptcyguide/P143823.asp
If you listen you can hear the creaking backbones of the US consumer, as he/she nears maximum debt load.
All the new law did was create jobs for credit counselors, and the lenders will take their bath anyways. The post-law lull was preceded by the pre-law pulse. Once the average settles back out, the bankruptcy rate will accellerate back to normal plus interest!
Now for the kicker - or more like the booster rocket: With an ageing obese population and the failure of the healthcare due to layoffs, debt from healthcare bills will take off and bankruptcies will soar like a rocket plane on steroids.
Do I feel sorry for creditors? Is Osama bin Laden Catholic?
I can handle/learn all the technical stuff you can throw at me, as I have a small background in engineering, comp sci and astronomy.
What I guess I am asking for is a primer on the economy of oil. How do spot prices get set? Why are there more barrels represented in futures than actually exist? Where do I find month by month historical data on prices?
It would also be great if someone could steer me in the direction of more knowledge on the business of gasoline, refining, etc.
I can follow most of the action on the site but I am relegated to a wait-and-see role without being brought up to speed. The FAQs on the site, and on the web, really don't give enough info. Any help would be appreciated.
When it comes specifically to oil, I'm sure there are many who can skip steps and tell you, but without a firm understanding of financial and econ principles it may be hard to grasp all the different angles.
Because I already read the Wikipedia "futures market" and "oil" entries and they don't provide the kind of detail I am looking for.....but if you are saying that I need to stop trying to build a house starting on the 2nd floor, I guess I will go back and research Econ in general (its good advice, thanks), but I am still going to eventually need the oil specific info that I can't seem to get anywhere else........
@ wikipedia look for econ info on aggregate supply and Aggregate demand curves. That is the easy way to understand the macroeconomic basics and you could apply all of the various factors that influence the supply and demand curves to the oil market. The great thing about econ is that once you understand the basic tools, everything is an extension of a few concepts.
http://drumbeat.theoildrum.com/comments/2006/5/17/0758/80790/100#100
Used hybrid and compact cars are selling for insane prices, due to the high cost of gasoline.
I made a few bids on the single one but a few of the city people really wanted that 5 pronger and I dropped out of the bidding when it got to as much as a new one. The big lot was purchased by an Amish guy. I went up to him after the auction and asked him how much he wanted for the 5 pronger. The price was about in the range I had planned on paying and saved me a bunch of money had I stayed in the bidding.
My point is that only idiots would pay extra for a Prius when there are a ton of other fuel efficient used cars out there for less money, muchless money. Plus they forget it takes high priced low rolling resistance tires and the battery may die at 10 years for another 3 grand in expense if they keep the car. Argh!
the average tire sold in 2005 cost $76
http://blogs.zdnet.com/ITFacts/?p=9807
not a big difference.
and it is sad that consumer reports, in their 'are hybrids worth it' calculations, insist tht prius have high depreciation.
Texas close to OK'ing 80 m.p.h.
Let me add three other totally stupid little observations, made during my trip home from work yesterday afternoon.
- Fake mulch. This stuff is all the rage with homeowners around here. Shredded up plastic and tire rubber, it is then dyed and sold for a substantial premium over "real" (wood-based) mulch and is in high demand. So much for using natural composting materials to add biomass and tilth to your flowerbeds, now you can treat them to petroleum-based runoff instead!
- I passed one of our multiple "Admobiles", a small cargo truck with changing billboards on the sides and rear.
Yep, these destinationless panel vans ride around town, burning gas, slowing in intersections, attempting to get drivers to see the advertising on the sides/rear. Pointless waste.3) The ad on the back of the Admobile in front of me, showing a new particleboard and plastic construction "spec" home (a residential structure build by a homebuilder without a buyer, speculative construction) in one of the new surburban neighborhoods, with the text: "BUY TODAY, INSTANT EQUITY!". Implying that, for some reason, the house is can be purchased for less than it is worth, if only you buy now.
And you wonder why I think Americans are doomed.
Speaking of hybrids, we all know that people add batteries and plug it in to get extra gas mileage. Here's an idea. While solar panels on the top surfaces can't power it in real time, as it sits in a workplace parking lot, it can add some charge to the batteries.
http://www.azcentral.com/news/articles/0518carrier0518.html
I recommend William Langewiesche's 'The Outlaw Sea.' Great book by a great writer.
A new twist on the old pump and run. Ingenious, those Germans. ;-)
The average retail price of gasoline in the United States is currently about $2.95.
Over the last two and a half months, we have seen gasoline demand exactly flat versus the same period last year. While given weeks and months often show flat or even negative demand growth, flat demand over a 10 week period is rare. Is this real demand destruction? Is the high price of energy finally cutting into Americans' discretionary spending?
Just this week we saw the release of inflation numbers which had quite a significant effect on the stock market. Monday morning all the talk was of Dow 13,000 on CNBC. By Wednesday evening the majority voted for "beginning of the end" in a poll conducted by Larry Kudlow.
Rising energy costs, mainly oil and gasoline, are blamed for both inflation and sagging consumer confidence. But will the effect last? What happens if gasoline stays around $3 a gallon? Will Americans drive any less? I doubt it. They will probably get used to the price and continue to drive more, expanding gasoline usage by 1 or 2% per year.
A year ago, I was of the opinion that we would not change our behavior until gasoline reached $3.50. I still think that is largely true. However, what if it takes another year or two to get to $3.50? Will we be so acclimated to the price by then, that it will take $5 gasoline to make an impression. I think it is all about the timeframe - how fast the price rises, more than the price itself.
For gasoline to be $3.50, oil needs to be about $110. $5 requires at least $160 oil. We still have a long way to go. The fact is that if we start in 1996, gasoline has only increased, in inflation adjusted terms, by 7% per year. The huge run-up since early 2004 masks a relatively low, stable price for all of the previous two decades.
As far as inflation goes, if a 50% increase in the price of gasoline in the last two years has contributed a few percentage points to an overall rise in the cost of living, then for it to continue to have that effect, gasoline has to continue to rise at the rate of a dollar per year. I don't think that will happen. No dollar rise, no inflation.
I remain unconvinced by anecdotal horror stories of gasoline use aired with increasing frequency everyday by the mainstream press. The EIA releases its weekly gasoline demand numbers every Wednesday at 1pm. I will continue to pay attention to these figures.
Support a robust gas tax now!
Oil CEO
There is one of two things happening. Either the paradigm of the relationship between oil and gas prices has changed, or gasoline prices are too high relative to oil prices for a variety of reasons.
This is why the debate over price-gouging exists. Six months ago I was using $120 as a price for $3.50. I arbitrarily revised it down to $110 solely for this post since it just seemed absurd given the current situation. $90 might be more like it. We'll have to see if things ever get back to "normal" or if this is the new deal.
The remaining portions of the cost, refining costs, transportation, and especially taxes, are not as responsive in terms of percentage change. At $3.50/gal average, crude price is almost 65% of the total cost, so crude price does not have to increase as much to have a more pronounced effect at the pump.
I'm hoping for $5 this summer. I just hope the extra $$ is for new taxes that fund solar power and rail lines, and not money going into the "Free" global oil market, which we all know funds terrorism on one end and the war machine on the other.
You cannot compare gasoline prices adjusted for inflation. Higher gasoline prices ARE A MAJOR PART OF that same inflation!
In effect, you are saying "higher gasoline prices are not that high, adjusted for higher gasoline prices." Circular logic.
Oil CEO, when you talk about the relationship of crude barrel prices and gas prices there have to be math errors. It makes far more sense that the barrel/gas relationship is feeding itself and putting these normal parameters out of context.
When oil in and of itself feeds the same inflation that is going to skew the numbers and over time that problem gets compounded and inaccurate.
What's the average # of gal of 87 octane per 42 gal barrel of crude? If we get say 25 gal of 87 octane out of 42 gal then it's like 25/42 or roughly 59%. So if oil is trading at $70 a barrel you would think that the gas cost is somewhere around $70*59%=$41.3 is Total Cost of 87 octane. Per gal it would be $41.3/25 or $1.65/gal. Now we pay $1.30 on top of that in taxes and profits.
This doesn't answer your question. In this case crude prices would reflect only 55% of the price at the pump. I suppose it is higher though.
However, as you correctly cite the value of a dollar has declined significantly in recent years, thanks not only to inflation, but to monetary policies, debt loading, falling confidence in the currency, newly created credit and debt, foreign borrowing, and the like.
It is not my assertion that gasoline prices are out of line with other costs, adjusted for inflation, I agree with that completely.
Rather, I assert that that higher energy costs have, to a sizeable degree, contributed significantly to that same inflation. High inflation and high gas prices have, historically, gone hand in hand.
Using the old fashioned GDP deflator, rather than the bogus chained conumer price index as an inflationary measurement, you get a different graph:
I'm not criticizing your efforts, Oil CEO. There is no easy answer. But it is extremely difficult to get a "fair" comparison of something so fundamentally critical to all economic activity as energy, past vs. present, when the 'ruler' itself changes size.
Note that at US minimum wage, in 1996 I would receive 4.2 gallons ($4.75/national average of $1.25/gal) for my hour's worth of work, while today I would receive only 1.78 gallons ($5.25/$2.95/gal).
Is an hour of your time 2.3 times less valuable today than it was a decade ago? I'm betting not.
The EPA is offering a research grant opportunity that I believe is a perfect fit for this idea. I have sent an e-mail to a hand picked list of university professors who have experience with government research projects. I'm looking to form a research team to apply for the EPA grant, conduct a social-economic experiment and surveys to determine to what extent the American public will support it, project the economic potential of WPH, and identify logistical, social and political obstacles as well as opportunities.
All government grants are awarded based on merit of the proposed research. I believe WPH has merit but your help is needed to verify it. You can help by posting your feedback. Let the professors and the EPA know what you think about WPH. Do you think this idea is worth pursuing? We need to know if Americans will support a plan like this.
Do you have any ideas to improve the plan?
Share any and all of your thoughts.
Tell your friends and family about this Blog post and ask them to post their thoughts on WPH
http://wepayhalf.org
Thank you
Craig
What is lacking is political courage to ask people to make sacrifices for the common good.
You don't lead people primarily by asking their opinion, you listen to them, yes, but you set a direction and ask them to follow you.
Such is the nature of politics at the current time. But any of the great leaders of American (or British) history decided what should be done, and then worked towards persuading the public. This is true of Lloyd George, Churchill, Thatcher, FDR even Lyndon Johnson (he failed over Vietnam, but his Great Society and Civil Rights record has never been equalled).
They did not simply poll the public to find out what the public thought should be done.