It's a common belief that high oil prices == a lose. Perhaps a more accurate question would be a lose to whom? Extra money spent buying more expensive oil doesn't fall into a black hole. Somebody gets paid...and in this case it's the oil exporting nations. With that said the rise in oil prices can more accurately be viewed as a transfer of wealth rather then a net lose.....so long as it doesn't get so high that demand destruction sets in.
I doubt that's any comfort to many people here since I'm assuming most of us are from oil importing, not exporting nations. But where does the extra money go? OPEC does not manufacture consumer products like T-shirts, cars, and computers. They import it. In other words, oil exporting nations import just about all of their consumer products from oil importing nations.
However there is one nation that is in a very specially advantageous position....the USA. Oil is sold in US dollars. So the more expensive oil gets the greater the demand for US dollars will be. This will allow the US to keep interest rates low and to continue the super easy credit bubble.
In the short run high oil prices will be good for the US because it keeps intrest rates low and therefore it delays the housing bubble from popping.
But of course as we know the longer a buble is sustained the greater the fallout when it finally does pop.
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$$ oil == bad?
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$$ oil == bad?
by cube » Wed 29 Jun 2005, 23:00:07
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by Eli » Thu 30 Jun 2005, 00:26:18
I think that PO is more accurately described this way.
It is not high oil prices that is the problem with PO it is
not enough oil for demand = decline
In the short term high oil prices will mean a transfer of wealth. But demand destruction in this case does not merely mean people do not buy as much gas. It means the economic system that allows the people to buy the gas is destroyed as well.
It is not high oil prices that is the problem with PO it is
not enough oil for demand = decline
In the short term high oil prices will mean a transfer of wealth. But demand destruction in this case does not merely mean people do not buy as much gas. It means the economic system that allows the people to buy the gas is destroyed as well.
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by MicroHydro » Thu 30 Jun 2005, 01:31:41
Even better would be very high taxes on fossil fuels, with the proceeds spent domestically. to build a post carbon infrastructure
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by Raxozanne » Thu 30 Jun 2005, 03:09:39
Everytime oil prices go up it is reported that stock indicators fall (or something along those lines) I'm not sure what it means but the economists go on about it like it's a bad thing.
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by energyaddict » Thu 30 Jun 2005, 04:15:49
MicorHydro wrote: $this->bbcode_second_pass_quote('', 'E')ven better would be very high taxes on fossil fuels, with the proceeds spent domestically. to build a post carbon infrastructure
That is exactly what European Gouvernments are doing for years now. There allways was and is a lot of moaning in the public, but I think in the long run Europe is better off. People getting used to high fuel prices and there have been conservation efforts over decades now. Europe today has a far less per capita energy comsumption as the US of A with comparable wealth. The impact of the comming prices spikes therefore will hit Europe not that hard.
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Re: $$ oil == bad?
by Doly » Thu 30 Jun 2005, 04:35:26
I understand little of economy, but enough to realise that your reasoning is faulty on several points.
$this->bbcode_second_pass_quote('cube', 'W')ith that said the rise in oil prices can more accurately be viewed as a transfer of wealth rather then a net lose.....so long as it doesn't get so high that demand destruction sets in.
$this->bbcode_second_pass_quote('cube', 'W')ith that said the rise in oil prices can more accurately be viewed as a transfer of wealth rather then a net lose.....so long as it doesn't get so high that demand destruction sets in.
There is demand destruction every time the oil goes higher. A price is set when the number of people willing to buy at that price equals the number of people willing to sell at that price. When prices go higher, the poorest people stop buying at that price. You may not have noticed any demand destruction in rich countries, but there certainly has been in poor countries.
$this->bbcode_second_pass_quote('cube', '
')But where does the extra money go? OPEC does not manufacture consumer products like T-shirts, cars, and computers. They import it. In other words, oil exporting nations import just about all of their consumer products from oil importing nations.
But they'll be importing more from some countries than others, and not necessarily the ones that buy more oil will get the most demand from the OPEC. They'll be buying stuff from China, for example. Again, it's redistribution of wealth, but maybe not in directions you are happy about.
$this->bbcode_second_pass_quote('cube', '
')However there is one nation that is in a very specially advantageous position....the USA. Oil is sold in US dollars. So the more expensive oil gets the greater the demand for US dollars will be. This will allow the US to keep interest rates low and to continue the super easy credit bubble.
That has been US policy so far. But dollars are becoming less and less desirable since the dollar is falling. There has been a lot of talk of changing this situation of trading oil only in dollars. Iraq, in fact, was the first country to sell oil in euros. And Russia keeps talking about trading in euros.
$this->bbcode_second_pass_quote('cube', '
')But of course as we know the longer a buble is sustained the greater the fallout when it finally does pop.
That's the point, and now you understand the situation is far from good and the bubble could burst anytime soon.
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