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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: kodiak_bull who wrote (6645)	2/12/2002 8:10:28 PM
From: cnyndwllr	Respond to of 206209

To El_G and Kodiak. Kodiak, your friend is a very interesting poster and deserves a reply. If I understood his post correctly, he is suggesting we estimate the hidden costs of using fuels now;(ie a combination of their current and FUTURE values for this diminishing resource,) and build some of that into today's price through artificial pricing. It's a great concept since the result would be a use level that would tend to allocate oils to the highest and best use, (sorry SUV users,) and the money could be earmarked for the development of alternative energy sources. The point that it would cushion the inevitable shock of running short of oil by both delaying the shortage and causing a ratcheting series of adjustments as we approach ever increasing shortages, also make sense. The problem is that we are all free riders and we're riding on the backs of future generations when it comes to allocating this essential resource to its best uses over time. It's hard to get people to pay now when someone else can pay later. This is true even if those that pay later have to pay a lot more because we used this limited commodity on silly stuff. Sill, its a good concept but I wouldn't want to bring it up to a politician who is not thinking much beyond his next election and his own retirement plan. The analogy relating the market to the oscillating oven was great, but I think it minimizes the concept that the free market for oil is not governed by the law of physics; there are bettors who are attempting to time the oscillations and who know that the tendencies to overreact exist. A good example is this thread. Some of us are trying to bet that the market is too cool when the fundamentals indicate that the commodity has a lot more cooling ahead. We may be right but if we're not, our money is giving a false signal to the market that the commodity is actually closer to heating up than it actually is. Free markets are supposed to work like that and adjust for the future. I agree that they don't work perfectly but when you see the price low, it may have underswung the pendulum but, on the other hand, it may not have swung to its nadir because a few of us who don't know better are holding it up. g. Who knows? El_G, I read your posts on the possibility that high oil prices would result in an economic slowdown that would decrease oil demand and lead to lower prices. I suppose you are suggesting that this would cycle. I think your theory is correct that there would be a cycling effect but the cycle would be one of ever increasing prices. If you assume that oil is the bottleneck that creates the slowdown as a result of oil shortages initially, those who could use oil most efficently would be able to afford it. When I say efficiently I mean the highest and best uses for it. A simple example might be a taxi driver with a Toyota that gets 30 mpg and another with an old Pontiac that gets 16 mpg. If both can charge the same fare, the Toyota driver will be able to survive with higher oil prices while the Pontiac driver will not. The Pontiac driver will go out of business or buy an economy cab. In either case the demand for oil will decrease but since the supply is limited and the demand was already unfilled, the price can stay high. The price of oil can stay the same because drivers will pay higher prices for oil but use less to do the same job or use less oil in doing less work. The key is that the supply continues to decrease so it doesn't matter if the amount of oil used also decreases. Its the rate of decrease in each that matters. (Another analogy to illustrate this point might be one taxi driver working in New York and one with a route in a town where everyone can walk if they have to.} Its a truism in economics that when a valuable commodity becomes scarce, the price will go up. The limit on pricing where the demand exists, is the creation of more supply of that product at higher costs or, at some level, inventing around the product. There's always another energy source even if its less efficient and we have to shovel horse droppings off the streets again. Buggy's anyone? In that type of scarcity fossil fuel energy would be retained for essential usages, like driving sports cars. g. Your theory will, however, bear out if the decrease in supply and increase in price result in some sort of cataclysmic event that creates a rift in word ecomomies or populations. Maybe a war over oil that goes bang? Having said all that and in the event anyone has read this far -hello, Hello, HELLO- I sold Keg today for a .5 gain and now own only rdc and hoff in the oils. Rdc is finally perfoming better than rig over the last couple of sessions. I wonder if that means anything. Ed