There are only two ways to lower oil prices

[BigDaddy44]

Increase supply. Or decrease demand. Its basic economics, and nothing congress or anyone can do will change that.

1.3 Billion Chinese and 1 Billion Indians have started a love affair with the automobile. They're about 80 years behind us in that regard, but they are now catching up very very quickly. Demand will continue to soar.

So lets move to supply. We can drill more. Perhaps. But how much of the stuff is really left? Is it enough? Who knows.

Railing about "Congress getting involved" is laughable. What are they going to do exactly? Windfall tax profits? Guess what; its punitive and makes you feel good but doesn't lower prices. Cut the gas tax? Okay, that knocks the price down a few....cents. Investigate collusion by oil companies? Oil is $125 a barrel on the open market. Is there any wonder gas costs $3.80 a gallon?

Congress can't increase supply unless they start mandating drilling. And they can't decrease supply unless they tax the stuff so heavily that we're all forced to stop driving. Long term solutions (alternative forms of energy, etc.) are certainly going to be part of the solution, but they are 10 years out minimum.

I really can't see any responsible presidential candidate saying anything about lowering prices and retaining his or her credibility.

[dkf]

1. Forget lowering oil prices...how's about transitioning us so that

we can simply run our economy.

[liberal N proud]

2. How about we ween this nation off OIL

Alternative energy is the real answer. It is something America could pioneer and rebuild an industry around. America could lead the world once again in new technology.

But as long as Oil Executives control government, nothing will change.

[AP]

3. Third way: regulate prices. During WWII, Roosevelt had a very effective price control program to

prevent inflation in an economy where the US government's participation in the marketplace threatened to increase demand and reduce supply.

[GoneOffShore]

4. Regulate prices where and how?

The dollar has, yet again this morning, fallen against other currencies.

The price of oil on the international market has reach $125 a barrel and is heading higher.

We are heading for a realistic price for gasoline, finally. Perhaps it's time for us to realize that we are no longer the biggest dog in the neighborhood.

And adjust our attitudes accordingly.

[goddess40]

40. Limit what Exxon can make for a profit

that would be a great place to start

[BigDaddy44]

43. Its not just Exxon

Royal Dutch, British Petroleum....(both non-US companies btw)

[BigDaddy44]

6. How are you going to regulate the price of a world wide commodity?

[AP]

14. Nixon's first job was working for John Kenneth Galbraith at the price control board

sending letters around to gas stations telling them that they were charging too much for tires and if they didn't lower prices, the government would take action.

Gas stations aren't selling gas at a loss. You've seen how oil companies are reporting record profits, right? The government could actually make them charge less money at the pumps so that those profit margins fell, and they could do that if they believed that price inflation was cutting into the wealth of regular citizens, which is what the government did effectively during WWII, and which Nixon actually tried to do as president very ineffectively (I think he only tried to regulate the price of milk, and it was very half-hearted).

[BigDaddy44]

20. Gasoline is made from Oil

Oil is $125 a barrel. THAT is the cause of high prices. Are we also going to send letters to the Saudis telling them their prices are too high, and if they don't lower them we'll take action?

[WillyToad]

24. And their profits multiplying is just a coincidence?

You sound more than a little biased in FAVOR of big oil.

[lastliberalintexas]

26. Some people seem to ignore that part of the equation

Welcome to DU.

[reformedrethug]

52. The price we pay at the pump

today reflects the price of oil TODAY, not the price of oil when they bought it. The reason the price of gas is so high is they now have to pay an increased price for oil to replace the oil used to make the gas we buy today. Each 42 gallon barrel of crude produces about 19.5 gallons of gas along with the diesel and heating oil that is produced. This is another list of what comes out of each barrel of oil:

The most common products from petroleum are energy products: gasoline, heating oil, and diesel fuel. Other petroleum products are: ink, crayons, bubble gum, dishwashing liquids, deodorant, eyeglasses, records, tires, ammonia, and heart valves.

A barrel of oil yields these refined products (percent of barrel):

47% gasoline for use in automobiles
23% heating oil and diesel fuel
18% other products, which includes petrochemical feedstock—products derived from petroleum principally for the manufacturing of chemicals, synthetic rubber and plastics
10% jet fuel
4% propane
3% asphalt
(Percentages equal more than 100 because of an approximately 5% processing gain from refining.)

here is the link I used:
http://tonto.eia.doe.gov/ask/gasoline_faqs.asp

So if you use todays price ($3.79) in my town and mulitply that by 19.6 you come up with a total of 74.28. So that alone is just a little over half of the cost of 1 barrel of oil recouped from the gas produced from it. It takes approximately 3-6 months for the oil to make it from the oil fields to the pumps, now, what was the price of oil lets say 4 months ago? From what I have found it was around 95-99.00 and now it is $25+ higher so they have had to increase the price at the pump proportionaly to be able to purchase oil to replentish their supplies.

This is in part why the oil companies have been recording record profits, the price at the pump reflects current oil prices and not what they paid for the raw crude. Now, if for some reason oil prices fell dramatically and they STILL charged these prices THEN you would see astronomical profits and there would be a reason for the outcry for the profits moreso than now.

[AP]

31. In addition to post 24...this is still no different from WW2. Raw material prices went up and

retailers tried to keep their profits very high by, not only, passing costs on to retailers, but by taking advantage of the chaos and fear to get even higher profit margins.

The government decided that big business was always going to do well, but inflation really threatened to kill working people (and America's collective future along with it) so the government controlled retail prices -- which is, essentially, telling big business that they're going to have to carry some of the burden during times of economic trouble by accepting lower retail prices (which forces them, and not just consumers, to find efficiencies and it forces retailers to put pressure on the market for raw materials to lower costs/prices and increase their efficiencies).

I'm not making this up. This is was what FDR's government did during WW2, and they did it extremely well. It's part of the reason that the working and middle class came out of WW2 with enough wealth and political, economic and cultural power so that America could embark on a golden economic era that lasted up until about 1972 when Republicans began to dismantle everything the New Deal accomplished for working people and shifted power back to large corporations.

[GoneOffShore]

34. It's all very well to say that FDR regulated prices,

but that was then. This is now and a different reality maintains. That reality is controlled by corporations and until such time as THEIR power is curtailed the ability of the government to regulate oil prices will be extremely limited.

We don't have the political will to over power the corporations.

[AP]

35. I'm not trying to predict the future. I'm just saying there are more ways than the 2 in the OP to

keep retail prices down, and the US did it effectively in WW2 (and ineffectively during the Nixon administration).

Also, I'm not saying that it does or doesn't make sense now. I'm just saying that it's an option.

[BigDaddy44]

37. You're actually correct

There is another way to lower prices, and that is to implement price controls. However, if you lower prices, demand will go up. If supply does not go up accordingly (and I don't see any new supply showing up anytime soon), then you're dealing with shortages. So yes, you can put in price controls. Get ready to wait an hour to fill your tank. If you can find the gas to fill up with.

Oh, and by the way, before you accuse me of fear mongering....this is just basic economics, and oil is susceptible to it as much as any other commodity. Mandate that the price of a gallon of milk tomorrow is $1. Then tell me in one month how hard it is to find a gallon of milk anywhere.

[AP]

57. I wonder how inelastic demand for gas is. How much have you changed your driving habits

since gas was 1.50 or 2.50 per gallon? Did you start taking public transportation, walking or biking to work? Do you make one shopping trip a month rather than four?

Although artificially reducing prices can increase demand, I'm not really convinced that oil prices are entirely a product of supply and demand right now. I think part of the reason for high prices is political problems and chaos that people think might limit access (if not for the political chaos, prices might be lower) and I think part of it is caused by oil companies trying to see how high they can get their profit margins in a situation where they know demand is relatively inelastic (perhaps with the knowledge that the next 50 years might be the last hurrah for the internal combustion engine). Both, of course, are related to supply, but are not exactly examples of free market price setting where buyers can easily find substitutes if they don't like the price of the good.

If the government is worried about inflation and middle class people being extorted by companies with too great of an ability to reach into their pockets and take as much as the want to take, it might be appropriate to impose price controls, and maybe, the government should take a more active role in promoting competition for oil companies (i.e., supporting technologies like solar or hydrogen so that there is an elastic demand for gas).

[Hidey]

5. How about driving speculators out of the market?

Let them make money on something other than food and fuel.

Perhaps we need to nationalize oil company assets and have a national, taxpayer financed, company do our oil drilling and importation?

Other countries have centralized oil exploration, haven't they?

Ending the war and paying down the deficit couldn't do much but help the dollar's value, either.

[raebrek]

7. I can't think of anything I would trust the government to run n/t

[Hidey]

15. Can you vote the head of Exxon out of office?

I can't think of a reason why I should be happy that big oil is making a 14 billion dollar profit in one quarter by strangling us all to death.

We might try playing nice with Chavez and Iran too.

Our idiot president and his warmongering is playing a role here also.

[madinmaryland]

23. You trust Exxon/Enron to run the government??

As is being done now?

[raebrek]

51. I don't think that Exon/Enron run the government now.

If they do then the only way to get around that is to change every person elected into office this time around in the hopes of electing someone with integrity.

Raebrek!!!

[BigDaddy44]

9. If they make money on food...

Do you propose nationalizing food production also? Confiscating family farms?

[Hidey]

13. Do you really want a "food bubble"

Look, price gouging and speculative run up is what got us into the last mess. I can live without a new McMansion, I can't live if I can't eat.

Run the speculators out. Tax them, do it by statute, whatever.. I don't care.

Then if we see collusion and monopolistic business practices, yes. I might support that.

I read somewhere (No I don't have a link) that during the "housing bubble" 1/4 to 1/3 of houses built weren't built to live in, they were built by speculators.

Let them speculate on something else. We don't have a viable replacement, right now at this second, for oil. We for sure don't have one for food.

Let them create a gigantic mess in some other area of the market. Keep them out of food and fuel.

[BigDaddy44]

16. What is it that makes you think the speculators are in the US only?

This is a world wide market. How is the US Congress going to "run the speculators out?" Especially if they're in Germany. Or Japan. Or South Africa.

The WORLD sets the price of oil. Not the US.

[Hidey]

19. Competition

After we nationalize US assets, we compete with them abroad.

Like I said, I don't care what happens to big oil. AFAIAC, they had their chance and squandered it.

14 billion in a quarter? And I'm supposed to pity them?

As if..

[BigDaddy44]

22. So there's not enough oil to go around...

Yet the government will take over the assets, run it more efficiently, lower the price (of an increasingly scarce commodity), and drive down world prices. Because of course monopolies (which the government would have of course) always result in lower prices....

[Hidey]

Like I said..

Can you vote the head of exxon out of office?

Remember what price speculation did to housing?

There was no lack of supply there, just as oil didn't get scarce overnight.

For someone who doesn't trust government, you sure put allot of faith in companies who raked in 14B last quarter and hand out 100 million dollar retirement packages to their executives.

In my eyes, any good will they had has vanished. I don't care if you sell their houses and throw them into the street.

Let them live in tents made from $100 bills for all the pity you'll see here.

Nationalize the whole thing. Let the speculators create their next mess somewhere else.

[zeemike]

29. I am with you and welcome to DU

Before there is a solution to a problem you must identify the problem and you have done that.

[Hidey]

30. thanks..

That's very kind of you!

:)

[lastliberalintexas]

28. Vive la Norway

Nationalize indeed. :)

[aint_no_life_nowhere]

54. How about forcing speculators to actually take possession of certain selected commodities?

If they actually had to take possession of that barrel of oil or that bushel of wheat, I think it would stop the speculation in some areas. Stop the paper investments and force the buyers to actually physically buy what they buy. We don't have to do this across the board, but only in certain cases where the national interest trumps the interest of the free market.

[WillyToad]

8. Force oil execs to testify UNDER OATH in hearings into PRICE GOUGING

I bet the prices magically drop

[BigDaddy44]

10. They do that all the time

http://www.msnbc.msn.com/id/23901712/

[WillyToad]

17. The problem is they never put them UNDER OATH

So they can lie through their teeth with no threat of prosecution.

[flashl]

11. And knowing that ...

the true culprit of high gas prices is...

In fact, the global market system, wherein commodities traders bid the price of oil higher and higher, is the true culprit. OPEC does not dictate the price. The price of oil has been driven to heights that OPEC never would have dared to ask or expect. The panic and greed of oil traders affects the market price more than any actions by OPEC, which supplies as much oil as our refineries can process. ... When we change the system by which oil and other energy products are priced, the cost will more closely track the realities of supply and demand, as opposed to the current principles of panic and speculation.

[Hidey]

41. Exactly..

When we change the system by which oil and other energy products are priced, the cost will more closely track the realities of supply and demand..

Exactly..


It's like saying the housing bubble was caused by "peak house" and rampant speculation played no role in the price inflation at all.

Supply & demand are one thing, greed (speculative or otherwise) is a different matter and we can deal with it differently.

In my mind, 14 billion a quarter in profit in our current situation is analogous to raising the price of tire chains during a blizzard.

[KharmaTrain]

12. Mandates For Alternatie Energy Sources

I don't see this happening under the current regime, but it will soon become imperative that new energy sources are developed and brought online. There's no one answer to this situation...and there shouldn't be one. The government can help, in the long run, in giving tax incentives and loans to businesses in developing the infrastructure and materials that can replace fossil fuels as a major energy source. Fuel cells and bio-fuels for cars, hydro, solar and wind power for homes and businesses and other new technologies that can be spurred along like a Manhattan project.

The best way to lower prices is to make the dollar stronger...reducing defecit spending by ending the squandering of billions to Iraq and the corporate welfare system that the GOOP has cultivated over the years. The demand in Asia has begun to peak as rising prices in China and India have outstripped the new wealth being created. As we've seen with other Asian economies...Japan, Taiwan and South Korea, the boom eventually has a ceiling and with it the market stabilizes and readjusts.

How ironic as I remember a lot of economics...including many so-called "conservatives" who preached about opening the Chinese, Russian and Asian markets in the 70s and 80s and how this would be such a boon to American companies. Milton Friedman flunks again.

[Canuckistanian]

18. "supply", "demand"

Stop it, you're killing me.....
:rofl:

[zeemike]

21. In a perfect world you might be right

That supply and demand set the price but this world is far from perfect.
We have a business community that is predatory as has been shown over the last 40 years or so, where students are taught in business school that their duty is to increase profits for the corporation they work for.

Let us face the facts that we have a moral problem with our business people. (Remember the "get shorty" strategies of Enron in the energy trading in California and the devious bookkeeping that brought down the company)

The only solution is to greatly reduce the need for oil and to bring back the moral compass that the business man once had.

[lastliberalintexas]

25. Record profits = Windfall profits tax

I can't believe I am seeing people here argue against a windfall profits tax on energy companies. ExxonMobil, Valero, BP, etc are reporting record or increasing profits every single quarter. A few billion could be recouped from the oil companies every quarter with very little impact on their ability to make a profit. Unlike what Bush and his friends will tell you, capitalism abors unreasonable profits.


You are correct in that we have a finite, dwindling supply of a product with increasing demand. That alone is going to increase price, and short of price controls which I favor, the government can do little about that. The problem comes in when you discuss the profits being made. If the oil companies' profits had remained stable, then we could discount the price increases as merely increases in the costs of production. Instead, profits have soared, telling us there is more to this than just increasing costs of production. A windfall profits tax would bring much needed money into the treasury and encourage oil companies to lower their prices to levels which allow them a reasonable profit only. Econ 101.

[taterguy]

27. What steps should we take to decrease demand?

I'd love to hear your ideas

[BigDaddy44]

32. I only see 2 options, one short term and one long term

Short term option -- tax the hell out of it. Make the product so expensive that people are forced to cut back. (I don't think we SHOULD, its just the only option I see).

Long term option -- provide alternatives (hydrogen, wind, solar, etc.) This is promising, and hopefully will happen, but again, its long term. I'm overlooking a highway as we speak. Thousands of cars whizzing by. We aren't going to turn them all into solar or hydrogen powered cars overnight.

[taterguy]

38. How will people get around when gas is taxed heavily?

[BigDaddy44]

44. I didn't say it was a GOOD option

Any option that decreases demand (in the short term) will hurt people's ability to "get around"

[zeemike]

33. I can give you one big one

Make available an plug in electric car priced so the average person could afford it and increase production of solar wind and other forms of energy that does not require combustion.

[maui9002]

47. A few thoughts

1. Create and support a national initiative to increase average mpg for all vehicles in U.S. from current low 20s to 100 mpg by 2018; it can be done, with hybrids, electric cars, and cars/trucks that run on biofuels), but it would require the political will to do so and support from the general public (which tends to happen when a gallon of gas is $3.50).

2. Educate/Persuade (we need a better leader) the public on more efficient use of a dwindling resource. Most individuals can reduce their expenditures on energy by being more conservative about use: from buying more fuel efficient cars, changing their driving habits, carpooling, using public transportation, even once a week, buying smaller, more energy efficient homes closer to work, telecommuting more often, taking trips that are closer to home--in short, lots of things most of us can do, but don't if oil prices are relatively low. If enough of the general public really cuts back on energy use, I think you'll see prices fall.

3. Finally, it won't happen soon, but I honestly believe that during my lifetime (I'm 53) someone will develop an alternative technology that will make the gasoline engine obsolete; I don't know how much our government is encouraging and supporting this effort, but it's clear that the current dynamic cannot continue: oil is a dwindling resource and the costs of not finding an alternative are so catastrophic that we have to find another solution. I look forward to that day.

[reformedrethug]

56. I agree with your first point

up to a point. With all of the hype with hybrids are they REALLY all that?? If you do mostly highway driving how much will you actually gain in mpg's? In the city I can see where they would make a decent difference since most of the in city commute is sitting at traffic lights. Also, what about the cost of battery replacement in the hybrids? How long do the batteries last and what is the cost to replace them, and what about the used ones? Do we have the infastructure in place to recycle the huge amount of batteries we are talking about here? I dont know much about biofuels other than ethanol and I am NOT impressed at all with that fiasco. From what I have read/heard ethanol actually lowers your miles per gallon and if your vehicle is not made specifically to run on ethanol it can damage the engine. I may be wrong on that but I think I remember it correctly.

Number 2, right now many people cannot afford to buy a vehicle and thus are stuck with what they own. In my case we have an 04 Accord that gets about 30 mpg, a Durango which gets gallons per mile LMAO (Its not that bad but its only in the mid teens for mpg) and a motorcycle. I ride the motorcycle when I can so that helps but otherwise I am stuck with the truck as my wife drives the accord to work. As far as us changing our driving habits, I allready stop at the store on the way home from work since it is on my way, we have cut way back on our trips out of town for any reason, and when we do go out of town we try to do all of our running in one trip. Public transportation is not an option as there is none where we live, as far as living close to work, Monday I have an interview with a place that if I get it we WILL be moving as my wife already works in the town where this job is for me, this would cut our drives down considerable. We now drive 34 miles one way to work, her south, me west and if I get this job our drives will be cut down to MAYBE 10 depending on where we move to. Telecomuting is not an option for either one of us as she works in a factory and while I am in the IT field my job requires hands on to do my job 95% of the time.

Number 3 I agree with, I know that several car mfgrs are working on some sort of hydrogen alternative so hopefully those will make it to the market soon.

Finally, we as a society have to change our habits and we all know that most people do NOT like change, but I feel that we are being forced to change and in this case change is good, and change is needed. (hmm I sound like Obama)

[moondust]

36. How about imprisoning market manipulators/refinery closers?

That should help some.

We need a Manhattan Project, possibly international, to develop alternative fuel technologies. Fast. Starting about 30 years ago.

[SlingBlade]

39. Yes, But we need to START someplace

Conservation and investment in alternative energy

If our leaders put the resources and expertize of the moon landings
or the Manhattan project into practice this could be realized.

It's also a fact that if the amount spent on weapons research and development
could be transfered to this problem we would see huge progress within a relatively short period of time.

OK, Now back to reality :(

[The2ndWheel]

42. Conservation and investment?

"If our leaders put the resources and expertize of the moon landings
or the Manhattan project into practice this could be realized."

Those conserved energy how?

You either get conservation or investment. If anyone is investing in increasing our ability to harness and extract more energy from the environment, then conservation is a loser's game. Conservation, on any meaningful scale, isn't even part of the equation.

Why would anyone invest in alternative energy? To give us the ability to increase our energy use. Nobody invests in something to get less of anything. An increase in energy use is an increase in our impact on the habitat we exist in.

[ladjf]

49. Good thinking! Keep pounding away. Maybe someone in

power will hear you (and the rest of us).

[sandnsea]

45. Create stability, secure the dollar

We have got to stop putting everything in supply/demand terms. The world is more complicated than that and always has been.

[aint_no_life_nowhere]

53. Is it just coincidence that the dollar has lost half its value and oil has tripled in price

in the last few years under the ChimpCo administration? I think the Fed should be raising interest rates and we should be balancing the budget instead of squadering a trillion dollars on elective wars and occupations. Bush seems to have done everything in his power to promote a weaker dollar.

[Greyhound]

46. BS, This global economic disaster has been caused by speculation in the commodities

market and has nothing to do with supply & demand. The supply has increased and there are no shortages, this inflation is due to the fact that only 5 companies control the industry and know that collusion is far more profitable than competition.

[ladjf]

48. The alternate energy initiatives could be accelerated if the Feds

chose to do so, which they won't. The fossil energy and nuclear interests will continue to control policy.

[blindpig]

50. Nationalize

Fuck those people, they've been sucking our blood for too long. Cutting the profits will certainly lower the price more than defacing ANWR.

[ColbertWatcher]

55. You forgot one: stop allowing industry to manipulate it. n/t

[Edweird]

58. I think you're wrong. I believe out of control speculation

is the cause of our current high prices.