OT: Are we headed towards another major oil correction?

[RPS]

A 10 percent drop in one day is definitely nice, but should we expect much more in near future? The last major correction dropped price nearly in half.

Any ideas on what was really behind the recent decline; oversupply, strong dollar, demand destruction, speculators scaring off, combination of these, etc…? And do you think we’ll see much more over the next few months?

[AngryScientist]

i've been out of the real world loop until this morning, so there was a pretty sharp drop last night, this morning?

[ergott]

A 10 percent drop in one day is definitely nice, but should we expect much more in near future? The last major correction dropped price nearly in half.


Not at the pumps it didn't. That's where I get upset.

[RPS]

Not at the pumps it didn't. That's where I get upset.
Can’t happen fast enough for me either. At $120 a fill up I can go through a lot of cash in a hurry on a long road trip.

If oil prices hold below $100 it should reflect a decrease at the pump once it works through the pipeline. Hopefully, and at a minimum, $100 or lower should prevent gasoline from climbing above $4.00.

[d_man16]

too many variables?
The oil market confuses me to this day the more I learn about it the less I seem to know.....It's a fickle fickle market.....But it's really hard to out pace world demand for the stuff, regardless of price.

I personally hope that it dose correct it's self so that hopefully it may stabilize the demand a little. On the other hand I hope the higher price would get more people out on bikes :beer:

[phcollard]

I hope oil price is going to double or triple in the coming years :cool:

[sg8357]

As soon as Uncle Muammar & family relocates to Lake Geneva oil prices
should go down.

[sg8357]

I hope oil price is going to double or triple in the coming years :cool:

You are a Greenie or a Ford shareholder. :)

[phcollard]

You are a Greenie or a Ford shareholder. :)

LOL! Not really but even without being a Greenie I think our addicition to oil has given us more bad than good and I hope it's going to stop. It's another debate though, no thread hijackin'

[dancinkozmo]

If oil prices hold below $100 it should reflect a decrease at the pump once it works through the pipeline.

..funny how the oil flows so much faster thru the pipeline when the price per barrel is rising :)

[AngryScientist]

At $120 a fill up ...



wow, what is it you drive?

[MattTuck]

All commodities are off big. The 'bubble' was clear to anyone looking for it, especially in silver. I bought some put options on april 28, the SLV $29 July 16, 2011 for $0.17! They're up to $1.49 now!!! :banana: :banana: :banana: :banana: :banana:

almost 700% :cool:


Bad news is, I was expecting to average in over a period of a few weeks, as I thought the top was CLOSE, unfortunately, I nailed the very peak... and only put about $200 into the trade. Lesson learned, when you see an opportunity, man up.

[RPS]

wow, what is it you drive?
Ford van with 35-gallon tank. $4 X 30 = $120 :crap:

And I can go through multiple tanks in one day. :crap: :crap:

[RPS]

I personally hope that it dose correct it's self so that hopefully it may stabilize the demand a little. On the other hand I hope the higher price would get more people out on bikes :beer:
+1

Jim Kramer of CNBC was ranting yesterday that oil prices shouldn’t have been as high as they were in the first place because supply and demand did not justify it. As I understood him, he thinks futures market and speculation has been creating price peaks that shouldn’t be allowed because they are not constructive – they cause more harm than good. I believe he suggested that oil future markets need to be revised for that reason.

My biggest concern with prices coming down too quickly is that it may be in anticipation of a global slowdown.

[zap]

I'm all for free markets but the leverage..............that's another story.

I've been waiting patiently for prices to tumble.....even some of the "green" technology I've been eyeing have fallen over 10% this week alone.

[ergott]

Fill for me is about $40-45 every other week or so.

Love my Civic. Love my bike even more.
:hello:

[Nooch]

i'm just trying to convince myself to be a better bike commuter.. i really need to get into the routine of 5 days a week, rain or shine, getting on the machine and getting to work. it's only a ten mile trip, clears my mind, gets me going in the morning, but for some reason i keep sabotaging myself and trying to stay in bed.

the wife works quite a bit further away, and isn't near the fitness level to do the commute -- i'm trying to convince her to move day care centers to one more local or to man up and start training for commuting. but on the same token, she'd have to leave the house around 4:30am to ride to work where she currently does.

[phcollard]

Fill for me is about $40-45 every other week or so.

Love my Civic. Love my bike even more.
:hello:

:beer:

I fill my deprecated Huyndai once every 4 weeks for 35 bucks. We think we won't buy another car when this one falls apart. Granted we are lucky to live in a city and have everything at walking distance.

I love my newly purchased fenders. Now I can ride to work everyday rain or shine.

[ergott]

i'm just trying to convince myself to be a better bike commuter.. i really need to get into the routine of 5 days a week, rain or shine, getting on the machine and getting to work. it's only a ten mile trip, clears my mind, gets me going in the morning, but for some reason i keep sabotaging myself and trying to stay in bed.

Fenders help a lot. Do you have a bike with full fenders? I have panniers as well, but they aren't as necessary. I have a backpack I use as well.

http://ergottwheels.smugmug.com/Sports/The-bikes/MG4670/1080069761_rUQDz-M.jpg (http://ergottwheels.smugmug.com/Sports/The-bikes/MG4670/1080069761_rUQDz-O.jpg)

[phcollard]

Fenders help a lot. Do you have a bike with full fenders? I have panniers as well, but they aren't as necessary. I have a backpack I use as well.

Nice ride! I like how you matched the paniers and handlebar tape.

Yes full fenders. They came with the Hampsten. No intention to brag here btw. It took me a long time to decide if I should purchase this bike - I even started a thread here - but I'm happy I did and not only because I'm going to save a lot in gas powered transportation, be it individual or public.

[cmg]

the price of gas will stay as close to $4 as long as it can. the price goes up much faster than it comes down. spending close to $32 on gas a week is more than i care too. buy a new car when the honda breaks down, never, just repair till it disappears. it'll take a lot of repairs before i hit the $18k mark.

[mschol17]

Just wait until the world economy recovers. Gas is going to go through the roof.

[slowgoing]

Producers are intentionally keeping production low according to this article.

http://www.latimes.com/business/la-fi-oil-refineries-20110429,0,7502154.story

[thwart]

Thank goodness we're giving those oil companies a tax break. I feel good knowing I'm paying more taxes so they can make a little money...

Sorry about the rant/thread hi-jack. :D

[RPS]

Producers are intentionally keeping production low according to this article.

http://www.latimes.com/business/la-fi-oil-refineries-20110429,0,7502154.story
I can’t entirely follow the gist of that article. They may be overcharging, but how can they be keeping production “low” when we can all buy all the gas we can afford? And inventories are high – too high by some accounts.

People are either driving less and/or using more efficient vehicles, or refineries have more on-line capactiy than before, which means either way refineries don’t need to operate at higher capacity. If they made more gasoline, where would it end up? :confused:

Overcharging is another issue, particularly if they are fixing prices.

[MattTuck]

Surely a sharp fall in the oil price ought to be good news? The surge in petrol prices has acted as a tax increase on western consumers, and this fall will relieve some of the pressure on their wallets. Ole Hansen of Saxo Bank :rolleyes: says the sell-off began when the first quarter GDP numbers from the US were weaker-than-expected; yesterday's higher-than-expected weekly jobless claims exacerbated the trend. However, one of the main bullish arguments for commodities was that emerging market demand was now driving prices; that was why prices had rebounded so quickly even though the developed world recovery was still pretty weak. There is no evidence, as yet, that the Chinese economy is faltering.


http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2011/05/commodities_epic_rout_or_the_n.html

[flydhest]

i'm just trying to convince myself to be a better bike commuter.. i really need to get into the routine of 5 days a week, rain or shine, getting on the machine and getting to work. it's only a ten mile trip, clears my mind, gets me going in the morning, but for some reason i keep sabotaging myself and trying to stay in bed.



You are spot on. For me, it was all about getting in the mindset of "I do this everyday (full stop)." Once you're there, it is easier to stay there. If you pick and choose the day, then rain becomes a convenient reason to drive (or whatever). Wind becomes a convenient reason to drive. Being 10 minutes late becomes a convenient reason to drive.

At least, that is my experience with myself.

[Charles M]

Fill for me is about $40-45 every other week or so.

Love my Civic. Love my bike even more.
:hello:


Same here... 38 mpg (combined city and freeway) can be a lot of fun.

https://fbcdn-sphotos-a.akamaihd.net/hphotos-ak-snc6/181523_1737974123191_1053776644_31982085_3046941_n .jpg


Price wise, it's become a game...

Gas isn't as much about OPEC and supply and demand as it is about a group of middlemen that can now spike prices and make massive money and then let the market and other traders pay the number down again...

I have 2300 vehicles on the road at a given time and the speed by which fuel increases with Oil cost is much faster than it declines.

I like free markets in principal, but I understand why energy is controled in some countries.

Allowing this to be the new "bubble" is a mistake. Maybe it's more like a balloon. it gets super inflated and then deflated. but you can only do that so many times before either the balloon ot the thing it's attached to or the thing required to inflate it gets too much stress and fails...

[AngryScientist]

Same here... 38 mpg can be a lot of fun.



i am actually considering an inexpensive "commuter" moto for the summer. anyone have an idea of how many mpg's the smallest japanese motos get ?

[Charles M]

it's all over the board. you can get REALLY nice scooters that will work in all but freeway conditions that get 50++ you can get something like a suzuki 450 motard that can do basic freeway duty and its 40's. Or you can get something that plasters a grin on your face and get 30-40 (unless you're tracking).

[jr59]

[QUOTE=PezTech]Same here... 38 mpg (combined city and freeway) can be a lot of fun.

https://fbcdn-sphotos-a.akamaihd.net/hphotos-ak-snc6/181523_1737974123191_1053776644_31982085_3046941_n .jpg


Nice duck!

Monster?

[Ray]

I try not to worry about the short term spikes and dips. The over-riding trend with oil is its getting and is gonna get more expensive. More and more countries are modernizing and demand is going up. The easiest stuff has all been gotten out of the ground, so supply is getting more expensive, if not yet going down. I don't know the reality of the whole "peak" thing and hope its a less precipitous problem than some believe it to be, but the very best case is for slowly rising prices over the coming years and decades. To the extent we, as consumers, keep waiting for the next temporary dip, well, its a nice little vacation, but you can't live like you live on vacation all the time.

So I'm just trying to use as little as possible through various methods. I walk to most stuff living in a walkable town, ride my bike to slightly farther stuff, and drive when I have to. Or when I just feel like it. I don't commute any more, but used to do about 4 days a week by bike. But I sure don't drive much. And I do it in a Fit, which gets pretty good, if not amazing, gas mileage.

-Ray

[Tracer]

i am actually considering an inexpensive "commuter" moto for the summer. anyone have an idea of how many mpg's the smallest japanese motos get ?

Best mileage I got out of my 07 Ninja 250 was 78mpg. I averaged between 60 and 70.

Currently on a BMW 800 twin and can get in the 60's if I'm VERY mellow, but usually in the 50's.

Chris

[jr59]

All commodities are off big.


When they restricted the way people traded silver, it made silver take a dive.
The same people who trade in silver also trade in oil and gold.

[Nooch]

Fenders help a lot. Do you have a bike with full fenders? I have panniers as well, but they aren't as necessary. I have a backpack I use as well.



Unfortunately no -- I have a "less nice" caad9-5 (built with the rival group from my caad9-4) that I use for commuting duty. I've got less money in it so if something were to happen, I'd feel less bad about it vs. my caad9-4 which bought new and complete and upgraded to red.

No fender bosses, though, and I tried the quick ones but they were such a pain to adjust it just didn't seem worth it.

Backpack, check. Dakine commuter pack, holds everything I need and then some, but I try to just leave a bag of clothes at the office. Sure, this dictates the need to drive one day, but I can deal with that. I just don't enjoy riding with the back pack -- i may just not have gotten it positioned right, though. Today, for example, I rode in, but left my clothes for job 2 at home (didn't want to carry the bag). So I'll have to swing by my apartment, get changed, and then ride the three miles to job 2.

That's the other thing -- Job 2. When you need to be somewhere at X time, it becomes more of a hassle, and more of a deterrant. It's just easier to drive when I have to work job 2..

I try to make my morning ride in more of a training ride, also the reason I'm riding the same bike (essentially) as my race rig. I commute in a kit, because I feel it's just more comfortable and makes more sense in the long run.

Now, if I got out of the mentality of trying to make commutes training rides, a bike with racks and paniers and fenders would be fantastic. Heck, even just having paniers would let me not worry about that one day driving in.


sorry for the threadjack!!

[Louis]

Bring back the Hummer!!!

Now I can start driving my Escalade again.

[dixiesdad]

The long term demand for oil is still there (worldwide growth), the "emerging economies" are now producting more in goods and services than the "developed markets, and they need energy. Oil has climbed in the last 3-6 months due to geo political issues, Libya etc., the fact that the gulf of Mexico drilling is very difficult achieve, and those pesky oil vigalantes who are bidding up the price. The recent developments in the mideast, (suez canal not being blocked) have taken a bit of fear from the markets but the long term trend is still higher oil. In France last year we paid over 9 dollars a gallon. alot of this taxes. I recently traded in my euro snob wagen (Volvo) and bought a VW Sportwagen (the peoples) wagen. I am getting 36 mpg while breaking it in in city driving. The Volvo got 21 mph, so my mileage has increased by over 70% We also have enough oil shale in the US to last a long time. just too ,many enviroment and logistics issues that make oil an easy choice.

[RPS]

i am actually considering an inexpensive "commuter" moto for the summer. anyone have an idea of how many mpg's the smallest japanese motos get ?
I was looking at the same issue a while back and found the air cooled Suzuki big thumpers to be rated very high compared to many other bikes. At 63 MPG (not sure what that really means in everyday use) it might be fun to own as a useful toy (and it’s not that much more expensive than a nice bicycle). I like the 380-pound weight because it should make it possible to haul off the back bumper of my Ford van.

For now I can’t really consider such a purchase until my shoulder gets better. I’m finding it hard to ride a bicycle so any motorcycle is out of the question.

http://www.suzukicycles.com/Product%20Lines/Cycles/Products/Boulevard%20S40/2011/S40.aspx#Specs

[RPS]

Bring back the Hummer!!!

Now I can start driving my Escalade again.
Louis, what is it they say about glass houses?

The fill-up on those Boeings ain’t cheap, right? ;)

[54ny77]

when half the price at the pump are taxes, oil prices seem to be almost a secondary thought. thank your state & fed gubmint for pumping you at the pump. :crap:

[buck-50]

Gas prices went from 4.20 last night to 3.99 this morning.

Still means $50 to fill up my car.

I'd commute by bike every day if I could get away with it. Before we had our daughter I pretty much did- Ride the bike or ride the motorcycle, the car would sit in the garage for a week or 2 at a time.

Now, I have to drive more. Taking my daughter to daycare in the morning means the motorcycle is out, also means bike commuting in the winter is out- pulling a trailer through snow is dangerous and difficult.

But she's getting older and I'm finding new ways to drive less. Last time I went 21 days between fill-ups. Still shooting for a month...

[benb]

Motorcycles aren't going to save you any money.. it's pretty gross that they are getting such atrocious mileage these days.

I used to have a Suzuki SV650 years ago that got 55mpg.. my current bike gets 40ish on the street.. kind of pathetic. When you factor in tires and other maintenance it is *way* more expensive to drive then a cheap car... and I do most of the maintenance myself to save money.

Gotta get a 250 for it to be frugal and the cool ones aren't sold here.

[RPS]

I used to have a Suzuki SV650 years ago that got 55mpg.. my current bike gets 40ish on the street.. kind of pathetic. When you factor in tires and other maintenance it is *way* more expensive to drive then a cheap car... and I do most of the maintenance myself to save money.

Thanks for reminder that it's not just about saving gas. Often gas is still a small part of vehicle ownership costs.

[benb]

Thanks for reminder that it's not just about saving gas. Often gas is still a small part of vehicle ownership costs.

Yah let's keep in mind 40mpg is great for a 3000-4000lb car that can carry 1500lbs of people and gear. It's downright pathetic for a vehicle that can only carry 400lbs of people+gear.

Pez doesn't mention his Ducati is going to eat $400 worth of tires every 5,000 miles or less if ridden hard, 10,000 if you get touring tires and ride really slow and/or are exceptionally smooth, or that if you take it in to the dealer it's going to cost more for an oil change then anything but a large luxury car, or that the maintenance schedule is similar to a ferrari. (And this is *NOT* a dig at Ducati, almost all bikes are that bad!)

Practical bikes are out there and not having looked for a few years I'm sure the manufacturers are eventually going to ship them to the US, but 99% of the bikes sold in the US are rolling status symbols that cost a fortune to run if you use them frequently as opposed to using them as rolling garage jewelry.

Most motorcycles are great but they are like $5000 bicycles. Nothing practical about them, you only buy them cause you love them. (And they're less impractical then sports cars & boats)

[phcollard]

Yah let's keep in mind 40mpg is great for a 3000-4000lb car that can carry 1500lbs of people and gear. It's downright pathetic for a vehicle that can only carry 400lbs of people+gear.

I think this is a bit off because more than often both vehicles are used to only carry 180lbs of people. No? :)

[RPS]

Most motorcycles are great but they are like $5000 bicycles. Nothing practical about them, you only buy them cause you love them. (And they're less impractical then sports cars & boats)
Not to change subject, but maybe in time electric scooters/motorcycles may solve some of these cost issues for someone looking to commute just beyond bicycle distance. I know they are not there yet -- too expensive and short range to be really "practical".

[93legendti]

There's oil and gas everywhere: Israel just found 3 different areas; we are paying Columbia and Brazil to bring up; and the stuff we have but refuse to allow anyone to get.

The "easiest stuff" is right here in the USA. We have more than anyone.

http://www.nextenergynews.com/news1/next-energy-news2.13s.html

America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant.

http://www.newsweek.com/2008/07/13/america-s-untapped-oil.html

Royal Dutch Shell, the international oil giant, thinks the solution to America's oil crisis may lie in the heart of Colorado. Since 1981, the company has quietly funded a multi-million dollar research project that many call a quest for energy's Holy Grail. The mission: to discover a way to safely and economically extract fuel from oil shale, a type of sedimentary rock found in Wyoming, Utah, and especially Colorado's Western Slope. The potential windfall is staggering. Studies over the years by industry and government alike estimate that there may be between 800 billion and more than one trillion barrels of oil locked up in these rocks--nearly three times the known reserves in Saudi Arabia. That would be enough oil to supply America for the next 400 years.

http://news.yahoo.com/s/ap/20110209/ap_on_re_us/us_shale_oil

A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.

Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.

This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.

http://en.wikipedia.org/wiki/Oil_shale_reserves

At 301 billion metric tons, the oil shale deposits in the United States are easily the largest in the world. There are two major deposits: the eastern US deposits, in Devonian-Mississippian shales, cover 250,000 square miles (650,000 km2); the western US deposits of the Green River Formation in Colorado, Wyoming, and Utah, are among the richest oil shale deposits in the world.[7] In Canada 19 deposits have been identified. The best-examined deposits are in Nova Scotia and New Brunswick.[2]

I wonder what gas prices in Kuwait, Libya and Saudia Arabia are?

It's pretty sad we are fighting ourselves to use it...

[Charles M]

Thanks for reminder that it's not just about saving gas. Often gas is still a small part of vehicle ownership costs.


We can geek out on Moto's and spend a lot, but that doesnt at all make them all impractical or toys...


Stictly speaking, commuting is a huge percentage of the miles that people put on vehicles... And a massive amount of people need to carry nothing more than themselves and or a light load that is easily dumped in a back pack.


It's no problem at all to find a Motorcycle that gets 40-50+ MPG while costing less than the cars that do the same.

[BdaGhisallo]

Thank goodness we're giving those oil companies a tax break. I feel good knowing I'm paying more taxes so they can make a little money...

Sorry about the rant/thread hi-jack. :D

The US uses about 139.97 billions gallons of gas each year, give or take. Using the $4 billion number that Obama has been trotting out, that equates to about 2.89 cents per gallon. Taking away those tax benefits (which are the same tax breaks available to all companies in all industries) would thus make a big difference, right?

Don't let the huge dollar size of their profits mislead you since ExxonMobil made a profit margin of only 9.53% in the first quarter of 2011. That compares to 28.43% for Google, 14.23% for Proctor & Gamble, 22.36% for Apple, and 14.79% for 3M. Should XOM management get fired for underperforming? Should we be holding Congressional hearings on how Google must be gouging their customers to make those obscene profits or how Apple takes advantage of helpless young people who want their products in order to reap outsized profits?

LOL! Not really but even without being a Greenie I think our addicition to oil has given us more bad than good and I hope it's going to stop. It's another debate though, no thread hijackin'

Think of it not as an addiction to oil, but as an addiction to energy. Wealth is not created without using energy. Is the US and, by extension, the West, addicted to wealth and banishment of poverty? Oil is simply the best and most efficient method, at the moment, for delivering the energy that economies need to support activity and growth and generate wealth.

[Charles M]

*****...

I wish you didn't put that so well...

[MattTuck]

I'll say this also.... if there are places I need to be, $4.00 is really not that bad. There's a hill nearby, that if I walked up, or biked up, I'd be sweating BIG TIME...

When you think about what the value of getting up that hill, and getting to my destination smelling good and looking good, I'd be willing to pay probably $10.

I don't think you should think of it so much as how much it costs to fill up your tank, but rather, each ride you take, is the value you are getting from your car/fuel really worth the price?

[Ahneida Ride]

the word PRICE must be defined.

If PRICE is defined in fed reserve irredeemable non notes (frns).

Then one must also investigate now many frns are being counterfeited outa
thin air via our nations private central bank and the "fractional" non reserve
policy of the commercial banks.

Consider Price defined via Soda Pop. (pop from a soda machine)

1970 ... 3 soda pop = about 1 gallon of gas.

2011 3.25 soda pop = about 1 gallon of gas.

Neither pop nor gas can be created out thin air (counterfeited).
takes work to make pop and gas.

So with all the Brilliant Social and financial engineers out there working
diligently to protect us :rolleyes: ,
the free market still thinks that 3 soda pops = about 1 gallon of gas.

[Louis]

Louis, what is it they say about glass houses?

The fill-up on those Boeings ain’t cheap, right? ;)

True, but the big ones carry more than one person at the time, and the little ones are part of the price we pay for freedom.

[phcollard]

Think of it not as an addiction to oil, but as an addiction to energy. Wealth is not created without using energy. Is the US and, by extension, the West, addicted to wealth and banishment of poverty? Oil is simply the best and most efficient method, at the moment, for delivering the energy that economies need to support activity and growth and generate wealth.

I agree with you. Economical growth requires energy but it's not an excuse to waste it. I am no expert but I have the feeling we could achieve the same level of growth, wealth and especially well-being with much less energy than what we use now. Don't you think?

And back to oil specifically 71% of the oil in the US (or North America?) is used for transportation. Transportation generates wealth? Probably but to which point? I also have the feeling there's a lot of work to do on the matter of transportation, either in general consciousness, or the efficiency of our vehicles, etc.

Again I'm not expert but this is a fascinating subject :)

[RPS]

Pez, I was referring more to gasoline as percent of total ownership cost. As an example, I recently concluded that it no longer made sense to keep my old Ford Ranger as an extra fuel-efficient vehicle because I drove it so little. One year I only drove it a couple hundred miles. Even though it got 25 MPG (not bad for a pickup) which works out to about 15-cents per mile, my total cost including insurance, maintenance, license and inspection was over $2 per mile.

Since I now drive very little other than occasional road trips, for the few times my wife is using our Honda I don’t mind driving the big van instead of the Ranger, even though it only gets 10 city and 15 highway. Gas savings just isn't enough to pay for other costs.

In some ways gas is still too inexpensive.

[RPS]

the word PRICE must be defined.

A few weeks ago a guy on CNBC was talking about how gas in gold equivalent was at or near an all time low of about 10 cents per gallon compared to some period (I forget date -- 40s to 60s).

I thought of your frequent posts on this issue, and wondered if that was you being interviewed. :)

[93legendti]

*****...

I wish you didn't put that so well...
+1

[BdaGhisallo]

I agree with you. Economical growth requires energy but it's not an excuse to waste it. I am no expert but I have the feeling we could achieve the same level of growth, wealth and especially well-being with much less energy than what we use now. Don't you think?

And back to oil specifically 71% of the oil in the US (or North America?) is used for transportation. Transportation generates wealth? Probably but to which point? I also have the feeling there's a lot of work to do on the matter of transportation, either in general consciousness, or the efficiency of our vehicles, etc.

Again I'm not expert but this is a fascinating subject :)

What you are getting at is energy density or how much energy is required to produce a given gdp amount. The US has been getting more efficient at this over the years.

The metric used is Energy use (kg oil equivalent) per $1,000 GDP and in 1990, the US consumed 240 kgOE per $1K of GDP. In the 2005, that amount decreased to 180 kgOE. Check out the table at this link to see the progression for the US and most other major economies. The US is certainly not as efficient as some other countries for various reasons, but it is definitely on the right path.

http://unstats.un.org/unsd/mdg/SeriesDetail.aspx?srid=648

And, yes, transportation is pretty key to economic activity. Think about how things get moved. Trains, planes and .... trucks. The movement of goods and services (think people) cheaply over great distance allows the wonder of comparitive advantage to be fully realized. Movement facilitates trade and trade begets wealth creation.

As far as making transport more efficient, there's not too much futher to go without encountering some major tradeoffs. Cars using internal combustion engines won't get too much more efficient. Sure cars can get lighter and more efficient that way, but you sacrifice safety in doing so. You can get into alternative propulsive systems for cars and trucks, but at what cost? Sure hybrids and solar power cars can move you but for what distance and at what cost.

The US already has the most efficient goods transportation network in the world due to the fact that, unlike Europe for instance, most of the traffic on US railways is freight and not people.

Keep in mind that industry is always seeking to minimize costs to facilitate profit maximization. Reducing energy and transport costs are certainly on the radar and, if you leave it to the market it will happen eventually, most likely in the most efficient and cost effective way.

[BdaGhisallo]

One other thing to keep in mind and appreciate is the utility of a gallon of gas. For $4.00, or less than half an hour's labor for someone at the lowerst end of the pay ladder, you can travel for up to 35 miles. One hundred years ago, how long did the average worker have to labor to earn enough to afford a trip of that length? I'll bet it was a lot longer than half an hour. And two or three hundred years ago...it doesn't bear considering!

[1centaur]

Keep in mind that industry is always seeking to minimize costs to facilitate profit maximization. Reducing energy and transport costs are certainly on the radar and, if you leave it to the market it will happen eventually, most likely in the most efficient and cost effective way.

I was going to make this point but you beat me to it. For-profit enterprises don't waste energy because they're indifferent, they waste energy because they think the cost of doing otherwise is too great (upfront costs; inefficiencies elsewhere in the profit chain). Give a capitalist a way to cut costs with a sufficient return on investment and he will take it. It's relatively easy for government to conceptualize around raising costs to create that incentive (unintended consequences to follow), but I wonder if there's a productive role for government/academia in devising ways to save energy that have not been considered or that work great in cooperation with other companies but not alone. Conservation need not be just shutting lights down and insulating buildings, it can be finding new ways to achieve the same endpoints with less energy used through the whole profit chain. Business would LOVE to have a win/win on global warming; that path would be far faster (it would not be resisted; it would be accelerated) and better for the economy than some alternatives. I think it's a rare skill to be able to analyze a firm's energy use throughout its process and know what can be improved without disrupting the business model. Most companies would never have that skill in house.

As to the OP question: we can't predict (better than CNBC talking heads) market moves in the short term but I have to say we've seen two spikes in 3 years when supply/demand was not supportive of the moves. For all the denials of the impact of speculators/derivatives, I think that's the element that deserves government focus, not windfall profits. There are greater numbers of buyers who buy investible things in this world today for reasons other than that they have good value. They buy because the graph looks a certain way or as an ETF they must buy to match an index that is being replicated (and then the ETF's graph looks a certain way, etc.). Sure fundamentals will win in the end, but spikes in commodities and stocks have real costs to the economy on the way up and on the way down. We want markets that value things correctly so we can deploy resources efficiently. Imagine being a bike maker if the price of a Meivici went from $500 to $10,000 and back again every few years, but unpredictably. Every time it went to $500 you'd want to shut down the factory and every time it went to $10,000 you'd want to work three shifts but people would say you were profiteering and you'd know you'd have to lay off two shifts within a year. Not treating markets like a game would be good for us.

[Karin Kirk]

I was going to make this point but you beat me to it. For-profit enterprises don't waste energy because they're indifferent, they waste energy because they think the cost of doing otherwise is too great (upfront costs; inefficiencies elsewhere in the profit chain). Give a capitalist a way to cut costs with a sufficient return on investment and he will take it.


I guess this is what makes me think that energy, particularly electricity, is too cheap, because we are still putting the other factors in front of energy savings. There are many ways of saving energy and money that are right in front of us, but we're not taking the path. Want a great example of cutting costs and saving energy at the same time? CFLs. But they are met with great resistance because they are not exactly like the product they replace. So, we buy the inefficient version instead. Or, we buy CFLs and then complain about them a lot. :)

One could make the same argument for cars that get better mileage. Why is it that 24 mpg is considered to be good mileage for a car these days? There are plenty of high-mileage choices out there but consumers snub them even though it would save them money.

Our culture wastes energy shamefully. I agree that industry is well served by being efficient, but meanwhile it pays to crank out inefficient products for wasteful consumers (bottled water, anyone?). I can only conclude that energy is too cheap, otherwise we'd be more careful about it.

So I'm OK with $4 gas. Even though I already don't drive much I can still feel the added motivation of $4 gas make me change my behavior even more. Plus, I agree that oil prices are going nowhere but up in the long term so we own plenty of oil-n-gas stocks. Might as well make some hay out of the price increase.

[1centaur]

Hey don't get me going on my bottled water again :)

But CFLs and high MPG cars are good examples of the difference between businesses and consumers. CFLs cost more to buy, turn on slowly and cast light that many people don't like (and of course are an environmental hazard). That's not getting to the same endpoint while saving money, that's saving money in the long run while accepting a different endpoint that many view as inferior. But fluorescents in business? Tough luck aesthetes, they're cheaper. So we live with them at work and choose not to have them at home.

And of course high mileage cars are a different endpoint that many people don't like, but businesses force their workers into them when possible. Business is an easier nut to crack than consumers because business's endpoint is simpler. With consumers, the attempt is to change their taste/preference through guilt/social pressure and sometimes tons of upfront cash for a long and vague payoff in cash. It should be no surprise that does not work well. Give people a cool looking fast electric car with quick and convenient charging and they'll be happy as clams (well, not the manual transmission guys), but that's a lot more to deliver than telling businesses how they can save money.

[BdaGhisallo]

Another aspect with high mileage cars is that they are usually on the smaller end of the spectrum, meaning you can't carry much. Folks who have big families or want to cart a lot of stuff around with them prefer bigger cars, suv's and trucks. Afterall two trips in a 35mpg vehilcle will use more fuel than one in a 20 or 25mpg one.

And how can something be too cheap? Surely that is not possible? Isn't it better when a resource is a cheap as possible. The idea is to seek out alternatives that are cheaper than what's currently available. We don't want to be artificially inflating the costs of anything. Afterall, our incomes are a resource too, and it would be foolish to expend more of them on a resource than need be. We should seek to be more efficient with all resources, and seeking out the lowest price for something is a part of that.

Electric vehicles may be the future (they were certainly a large part of the past - in 1910, there were a lot more electric car options than there are today) but techology will have to improve or folks demands will have to moderate. It's a fact that society has evolved its expectation of transportation based upon the physics and potential of oil based fuels, and that has allowed a lot of development. Alternatives have a very high bar to reach.

[Climb01742]

Not treating markets like a game would be good for us.

any idea, oh wise sage, how we could do this? my peanut gallery view is that 'transactional' trading vs 'fundamental' trading, in many financial markets, causes many non-beneficial consequences. if markets were once (ideally) a way to allocate resources, they now seem more like casinos; ways to make very little of true value or use except short-term profits; benefiting only the trader, not the economy or society. is there a way(s) to mitigate this behavior?

[1centaur]

Serious thread drift but it will probably be quick.

It has to be regulatory, and it has to involve making the consequences of being wrong larger. The talk of separating speculative use of derivatives from true hedging use was on the right track. What separates the speculation that created liquidity that benefits the needs of true hedgers from the speculation of today is the time factor. There is much greater mismatch today between the time horizon of speculators and the time horizon of hedgers. Speculators may think in terms of minutes/hours while hedgers are thinking in terms of weeks/months; the fundamental push back on mis-priced speculation does not occur quickly - witness silver and oil. No farmer or user of oil needs to hedge exposure over a few days - they are planning real business moves and those take real time. If speculators were not allowed to unwind their positions for at least, say, 60 days than far fewer would be jumping in and out of trades because the graph looks a certain way. Fast, cheap transaction costs encourage less intelligent market participation, IMO. If there's an implied increased cost to hedging from this I think it might be a lower cost than the spike/unwind of momentum trading by idiots (indifferent button pushers).

ETFs on narrow market segments should probably be banned. I understand why people think they like them but in the end I think they distort value and that's worse for the rest of us.

At the 10,000 foot level, if I were at the SEC I'd be looking at any form of buying/selling that does not reflect a view about real value (what's it worth, not "where should it trade"). That would require a determination that markets can't be whatever they happen to be, they serve a public purpose and have public implications. I don't sound like a capitalist when I say this and I know there'd be howls of protest from the sell side and hedge funds (we'd need global coordination too), but these are my best guesses.

[RPS]

...snipped...

And how can something be too cheap? Surely that is not possible? Isn't it better when a resource is a cheap as possible. The idea is to seek out alternatives that are cheaper than what's currently available. We don't want to be artificially inflating the costs of anything. Afterall, our incomes are a resource too, and it would be foolish to expend more of them on a resource than need be. We should seek to be more efficient with all resources, and seeking out the lowest price for something is a part of that.

...snipped....

So gas and electricity is not too cheap, everything else is just too expensive. I’ll buy that. :)

Slight drift here, but can’t “too cheap” occur when the price isn’t fully burdened? Only a guess on my part, but that’s probably the issue for some.

I think that when the few that say things like gas at $4 is too cheap, what they really want is for other alternatives they consider superior for whatever reason to be cheaper by comparison in order to force change. And since they can’t get “solar” or whatever environmentally-friendly renewable energy source to become cheaper fast enough the easier path is raising the price of all other alternatives.

I think the fundamental difference between the two groups is that neither one sees the unintended consequences in the same light. Pure capitalists tend to see increasing prices artificially by some form of taxation as harmful to the economy and hence our collective standard of living, and environmentalists tend to see present-day cheap energy supplies as harmful to the planet which ultimately also affects our standard of living – just in a different way. More importantly they seem to resent that cheap energy isn’t fully burdened with costs for the harm they bring about.

Although I can relate to both sides, I don’t see a simple solution to bridge the gap in ideology. The one thing I know for certain is that our collective opinion changes with the price of oil and the pain it causes.

[RPS]

Serious thread drift but it will probably be quick.

It has to be regulatory, and it has to involve making the consequences of being wrong larger.

...snipped....
Please continue, it's excellent information and insight.

By the way, I thought I heard that some transactions require as little as 3 percent skin in the game. Can that be correct? And if so, would raising the margin to something like 20 percent make much difference?

[flydhest]

At the 10,000 foot level, if I were at the SEC I'd be looking at any form of buying/selling that does not reflect a view about real value (what's it worth, not "where should it trade"). That would require a determination that markets can't be whatever they happen to be, they serve a public purpose and have public implications. I don't sound like a capitalist when I say this and I know there'd be howls of protest from the sell side and hedge funds (we'd need global coordination too), but these are my best guesses.

It is easy to take pot shots, so I don't want to seem like I am sniping unfairly, but how is this even remotely possible in practice? What does it mean to be able to tell what the real value is? Someone's choice of what to buy has to serve a public purpose? Seriously, not to be flip, but do we also get to tell people what investments to put in their retirement accounts? In their investment accounts? What about "gold bugs" who believe that buying and owning gold is a good investment? There are others who think that these people are complete idiots. (I am not taking sides, to listen to the debates, it seems that both sides think the other is devoid of reason.) Do we outlaw people buying gold as an investment? What about Ahneida Ride? If he is right, then Federal Reserve notes are worthless. That may seem like I am being unnecessarily extreme, but the chair of the Banking Committee seems to agree with him.

I don't see how one takes your thought and makes it reasonable. "Value" is not something that is knowable, in my view.

That said, your point about making the consequences of being wrong more costly has merit, but how one does it in practice is another question. Here, I think there are ways of making it practical, but, given how the Dodd-Frank Act turned out, the political process gets in the way. What a waste of a financial crisis if no real reforms get done. My views alone, for those of you who know me.

[Karin Kirk]

Another aspect with high mileage cars is that they are usually on the smaller end of the spectrum, meaning you can't carry much. Folks who have big families or want to cart a lot of stuff around with them prefer bigger cars, suv's and trucks. Afterall two trips in a 35mpg vehilcle will use more fuel than one in a 20 or 25mpg one.

I think this comes down to preference vs actual need. How often are those big SUVs actually carrying more than a station wagon can carry? Why do Subaru Outbacks (24 mpg) outsell VW Passats (32 mpg)? They are the same size. So the perception that one needs extra space, 4WD, DVD players, etc rises above the penalty of the extra fuel cost. I just don't buy the "need" for a huge car. If gas were more expensive, people would re-evaluate their needs.


And how can something be too cheap? Surely that is not possible? Isn't it better when a resource is a cheap as possible. The idea is to seek out alternatives that are cheaper than what's currently available. We don't want to be artificially inflating the costs of anything. Afterall, our incomes are a resource too, and it would be foolish to expend more of them on a resource than need be. We should seek to be more efficient with all resources, and seeking out the lowest price for something is a part of that.

I think about this question a lot. I work with lots of people in the energy and climate fields, and I ask everyone some version of this same question. I have learned a lot from their answers. Here's my answer:

If something is too cheap, then it promotes wasteful use. With a finite resource that has lots of consequences associated with its use, that is a valid concern. A confounding factor with energy resources is the cost associated with its use that we do not pay for. Even at $4/gal, the price of gasoline in no way accounts for the environmental consequences. If the cost of fossil fuels or nuclear power included the price of dealing with its aftereffects, then the equation would look very different. By comparison, alternatives would look cheaper. I know this is a complicated equation and that drawing the line around the "costs" is a never-ending game of hair-splitting. Even so, I think the price of fossil fuels is deflated.

For example, if the cost of carbon capture and storage were to be tagged onto the price of coal - things would look very different. I don't want to get into a thing about climate, but I'm just using this as an easy and real example.

[flydhest]

As for "too cheap," if there were an economist in the discussion (oh, look, there is one) the point would be about what are referred to as "externalities." The cost to society are greater than the cost to the individual. If those costs could be aligned, the theoretical argument goes, then the "efficient outcome" from the market obtains. A good is "too cheap" meaning that the individual looks at the costs and benefit--to them--and picks the amount that makes sense. Because the cost is higher to society than to the individual (through pollution or what have you) the individual uses more than is good for society, even though it is the right amount for the individual.

[RPS]

...snipped....

If something is too cheap, then it promotes wasteful use. With a finite resource that has lots of consequences associated with its use, that is a valid concern. A confounding factor with energy resources is the cost associated with its use that we do not pay for. Even at $4/gal, the price of gasoline in no way accounts for the environmental consequences. If the cost of fossil fuels or nuclear power included the price of dealing with its aftereffects, then the equation would look very different. By comparison, alternatives would look cheaper. I know this is a complicated equation and that drawing the line around the "costs" is a never-ending game of hair-splitting. Even so, I think the price of fossil fuels is deflated.

For example, if the cost of carbon capture and storage were to be tagged onto the price of coal - things would look very different. I don't want to get into a thing about climate, but I'm just using this as an easy and real example.
As I said above, I see both sides of the issue. But putting my capitalist hat on for a second to play devil’s advocate, don’t you think that most of those costs are already included in environmental legislation at the level that most in society see appropriate?

As an example, “we the people” have decided that cars need to have certain upgrades to make them cleaner, and “we the people” are willing to pay that cost in additional capital when purchasing a vehicle. In essence, doesn’t that burden the cost against using gasoline versus say an electric car?

Likewise the majority of Americans don’t presently want to pay for carbon capture and storage because they see no real benefit in it and therefore place little if any value on it. That is already priced in, just not at the level environmentalist think it should be.

For a small minority to say that capturing carbon is a necessity essentially allows their “value” to override that of the majority. Like you said, it’s complicated.

[93legendti]

Another aspect with high mileage cars is that they are usually on the smaller end of the spectrum, meaning you can't carry much...
Not to mention more dangerous for occupants...

[BdaGhisallo]

As for "too cheap," if there were an economist in the discussion (oh, look, there is one) the point would be about what are referred to as "externalities." The cost to society are greater than the cost to the individual. If those costs could be aligned, the theoretical argument goes, then the "efficient outcome" from the market obtains. A good is "too cheap" meaning that the individual looks at the costs and benefit--to them--and picks the amount that makes sense. Because the cost is higher to society than to the individual (through pollution or what have you) the individual uses more than is good for society, even though it is the right amount for the individual.

Externailities are very hard to value, though. How do you determine their true size to the point that you can apportion that out to end users on a usage basis? Would it be better to have some technocrat "compute" a number and assign it as a tax? Consumers will only weigh up the costs and benefits that they are exposed to, you are right, I don't know how we could properly get to a point where we properly and fairly value them.

Externalities plague many markets, though. Are the true costs of hybrid cars properly factored in? The costs to dispose of very nasty batteries, and the additional costs and training imposed on first responders are only two externalities that I am sure are not being shouldered by hybrid or electric car users.

This is a very enjoyable discussion and very pleasing in how it has remained civil. Cheers to us all!

[Louis]

I've said it before, I'll say it again, if the true environmental cost (or close to it) of burning gas / coal / whatever were reflected in the price of that product consumers would change their behavior in a nanosecond.

Edit: Just because something is difficult to do (i.e. it is not easy to figure out those costs) doesn't mean it's not worth doing. Look at where we are now, and where we are headed. It's probably worth the effort to try to fix things as best we can. At this point the market sure as heck isn't doing a very good job of it.

[93legendti]

...As an example, “we the people” have decided that cars need to have certain upgrades to make them cleaner, and “we the people” are willing to pay that cost in additional capital when purchasing a vehicle...
Funny thing about those "clean" upgrades:

http://en.wikipedia.org/wiki/Catalytic_converter#Negative_aspects

Environmental impact

Catalytic converters have proven to be reliable and effective in reducing noxious tailpipe emissions. However, they may have some adverse environmental impacts in use:

The requirement for a rich-burn engine to run at the stoichiometric point means it uses more fuel than a lean-burn engine running at a mixture of 20:1 or less. This increases the amount of fossil fuel consumed and the carbon-dioxide emissions of the vehicle...

Additionally, the U.S. EPA has stated catalytic converters are a significant and growing cause of global warming, because of their release of nitrous oxide (N2O), a greenhouse gas over three hundred times more potent than carbon dioxide.[16]

Catalytic converter production requires palladium or platinum; part of the world supply of these precious metals is produced near Norilsk, Russia, where the industry (among others) has caused Norilsk to be added to Time magazine's list of most-polluted places.[17]

http://www.nytimes.com/1998/05/29/us/autos-converters-cut-smog-but-add-to-global-warming.html?ref=matthewlwald

[Louis]

Funny thing about those "clean" upgrades:

See my post above. Carbon emissions are clearly not the only damage done by cars and trucks. Simply saying "clean is bad because it causes other problems" is no solution either.

[BdaGhisallo]

Edit: Just because something is difficult to do (i.e. it is not easy to figure out those costs) doesn't mean it's not worth doing. Look at where we are now, and where we are headed. It's probably worth the effort to try to fix things as best we can. At this point the market sure as heck isn't doing a very good job of it.

Well, the government certainly hasn't done any better. Is ethanol any better than using oil, considering how much oil gets used to produce ethanol? In the grand scheme of things, the free market isn't necessarily the best way to figure things out, but I would venture that it is the least bad way to do it.

[Pete Serotta]

:crap: Our long term strategies are seldom if ever achieved/delivered as discussed or voted on, The last one I knew of was "putting a man in space on on the moon". This is just the world we live in.....with countries like China and others. It is not doom for us yet but we need to reinvest more in the US and needed executable strategies.

Many of these commodity price run up were, in my view, a primary result of speculation. In many areas a vegas without going to vegas or a crap shoot can be done by hedging. Financial hedging is a exampe for the 2006-8 area in mortgage and junk debt. (There are many smarter and more educated folks than me here,) Flydhest and 1centaur are two that stand out but I am sure there are many more, one can see just reading the prior notes.

There are many ways to influence things...but most business decisions today are highly influenced by quarterly and annual profits for public corporations, so investing in the future is quite often a smoke and mirror short term exercise .

Adding to the complexities is the special interest groups of companies and also the influence on international business. China and EPA are words not very seldom heard in the same sentance. And yes we can do better also but it will cost to reach that goal of cleaner air and at the same time compete internationally,

Just my 2cents and probably not worth that.

Even in the US a BMW M3 get hit with a $1500 gas guzzler tax even though a SUV that is much heavier and used more gas, actually had a great chance to get a tax credit if used by a business or by a family that could have it in their business (ie Lawyer, Acct, etc).

If one looks at cost of ethanol in food prices and use of water the reason for its use becomes questionable, even before one factors in the tax incentives given by government. Another example is Chevy volt that USA will give about a $7000 tax credit. It will use electricity but where is the electrical generation growing and advancing in the country...

YEAH we need measurable strategies and plans to achieve them.....


Have a good day. AND thanks for sharing information, ideas, and knowledge without getting on a personal level. :beer: PETE

[Louis]

Is ethanol any better than using oil, considering how much oil gets used to produce ethanol?

I'm not sure ethanol is a good example. That's just something designed by the farm lobby to help farmers, not solve any environmental / energy problems.

The free market might be the least bad way to do things right now, but how long are we going to wait for things to improve?

Eventually when the oil barrels begin to run dry the price will increase to the point where alternatives will be cheap in comparision, and the market will presumably handle that situation, but too many other issues are not taken into account.

[RPS]

I've said it before, I'll say it again, if the true environmental cost (or close to it) of burning gas / coal / whatever were reflected in the price of that product consumers would change their behavior in a nanosecond.

Edit: Just because something is difficult to do (i.e. it is not easy to figure out those costs) doesn't mean it's not worth doing. Look at where we are now, and where we are headed. It's probably worth the effort to try to fix things as best we can. At this point the market sure as heck isn't doing a very good job of it.
I completely disagree because you are using your own version of what "true environmental cost" is rather than what it means to the majority of people.

Being right is not enough; we have to convince others that we are right. As long as others don't care what coal does to the environment then that cost is near zero. And will unfortunately remain so until a true "value" is placed on that damage.

"Cost" is based on the value we assign things, which is very subjective. As an example, my wife must think that shoes are more valuable than their cost because she has about 10 times more than I do. By comparison I place far less value on shoes that she does. Unfortunately, there are enough people like her buying too many shoes that it drives the cost up for me. On the other hand I have far more bikes because I value then more than she does.

Ultimately it's the price we pay for a free society where we decide what is of value rather than having it forced on us. Again, being right isn't the issue if our views represent but a small vote in a large democracy.

[flydhest]

You get no argument from me about the difficulty involved. I think we know the sign (in a mathematical sense) but not the magnitude.

you make reasonable points, I don't know that those points mean not doing anything, but I don't know

Externailities are very hard to value, though. How do you determine their true size to the point that you can apportion that out to end users on a usage basis? Would it be better to have some technocrat "compute" a number and assign it as a tax? Consumers will only weigh up the costs and benefits that they are exposed to, you are right, I don't know how we could properly get to a point where we properly and fairly value them.

Externalities plague many markets, though. Are the true costs of hybrid cars properly factored in? The costs to dispose of very nasty batteries, and the additional costs and training imposed on first responders are only two externalities that I am sure are not being shouldered by hybrid or electric car users.

This is a very enjoyable discussion and very pleasing in how it has remained civil. Cheers to us all!

[93legendti]

Doubling the cost of our petro fuel would be a disaster. Consider how important trucking is to our economy:

Trucks are vitally important to U.S. industry, however, measuring the impact of trucking on the economy is more difficult, because trucking services are so intertwined with all sectors of the economy. According to the measurable share of the economy that trucking represents, the industry directly contributes about 5% to the gross domestic product annually. In addition, the industry plays a critical support role for other transportation modes and for other sectors of the economy such as the resource, manufacturing, construction, and wholesale and retail trade industries.[16]

Over 80% of all communities in the US rely exclusively on trucks to deliver all of their fuel, clothing, medicine, and other consumer goods. The trucking industry employs 10 million people (out of a total national population of 300 million)[31] in jobs that relate directly to trucking. The trucking industry is the industry of small business, considering 93% of interstate motor carriers (over 500,000) operate 20 or fewer trucks.[32]

[BdaGhisallo]

I'm not sure ethanol is a good example. That's just something designed by the farm lobby to help farmers, not solve any environmental / energy problems.

The free market might be the least bad way to do things right now, but how long are we going to wait for things to improve?

Eventually when the oil barrels begin to run dry the price will increase to the point where alternatives will be cheap in comparision, and the market will presumably handle that situation, but too many other issues are not taken into account.

Does the Govt mandate the explicit use of any other fuels? It's especially bad considering adding ethanol to gasoline makes it a worse and not a better fuel!

And you are right. The market will appropriately price oil when it becomes scarce (and that'll be a long...long way off) and the alternatives will stand on their own merits without artificial efforts to distort its price and value.

[1centaur]

By the way, I thought I heard that some transactions require as little as 3 percent skin in the game. Can that be correct? And if so, would raising the margin to something like 20 percent make much difference?

I'm not an expert, but yes if a counterparty is creditworthy (a shifting line) the margin requirements for derivatives can be pretty low which implies the leverage is high. Higher margins would be one way of making it harder for short-term speculators to play the game cheaply and easily, but separating those speculators from true hedgers (who don't need as much margin, IMO) is difficult.

To flydhest: Your point about people making stupid investments and public purpose is why I introduced the element of time. Where I work, we cannot close out a profitable trade in our personal accounts in under 60 days. The Compliance department does not want PMs trading on company time, but they don't stop them from investing. It works surprisingly well. The markets have always been full of stupid and smart people bidding prices to some kind of equilibrium, but in recent years we've seen derivatives (and thus leverage) and cheap transactions costs and trading by button pushing speed up the decision making (all the way to the millisecond for HFT) to the point where fundamental views are literally not possible pre-trade for a growing % of the market. I have to think that's bad for markets. Yes, as Goldman would say, it adds liquidity, but that's a poor substitute for judgment. And future academic studies might show it only adds liquidity in one direction, which policy would suggest is a major flaw. My thought, and a fledgling it is, is that forcing segments of the market to invest only over longer periods would change the nature of their investing and bring human-speed thought back into the equation. My pet peeve is the increase in technical (graphs) trading, because graphs don't think, they are a derivative of prior thoughts, but those prior patterns may not pertain when greater %s of the market are trading on the charts (self-fulfilling momentum extenders) than on fundamentals. Charts need a certain proportion of fundamentalists in the market making human time decisions to be valid as repetitive indicators of human psychology, and I feel the balance getting out of whack. By introducing time elements, particularly around levered (derivatives on margin too) positions, I'm trying to squeeze out the "if the trade doesn't work I'll just take it off, no big harm" mentality that has developed in the last five years. I'm not trying to inject trade by trade public policy thoughts into markets. I could even imagine limiting this concept to institutional trades because retail trades are not significant drivers. Institutions could run software to make the compliance work.

As I was riding today, this line of thinking crossed my mind: Remember the Goldman testimony last year on credit derivatives and mortgage-backed securities? Carl Levin said Goldman bet against its clients; Goldman said it facilitated client-desired trading with derivative counter bets. Well, both of them were right. Goldman's not basically in the business of making fundamental bets (yes they shade the balance one way or the other sometimes, but as they say they were not overall significantly net short), they're in the business of being the house, in sports book parlance. They set the line and make the vig, not caring which way the game turns out, but they do it with derivatives long and short - Levin happened to focus on the short ones and missed the forest for the trees. The trouble is that a sports book does not create huge negative externalities to society - sports bettors win and lose and know they won't make a living, in general, and if they go bankrupt it's a local problem. But when Goldman facilitates massively levered long and short positions by institutions running other people's money, and they do so not caring about the outcome because they have a balanced book themselves, the potential for societal consequences is high. The credit crisis in part was about the ease of creating investments via derivatives where no investments could have been created before due to lack of available investment instruments. In so doing risk was separated from personal consequences at MANY steps in the chain - that's bad. I wish our regulatory structure was focused mostly on restoring that relationship.

Yes, I'll agree that Dodd-Frank will turn out to be overlobbied and under realized. I'll even say it was intended to be thus - Congress loves creating threats that have to be eliminated with campaign dollars. If I were a politician I'd propose my time-mandate thought and I'd have all those bankers come to my office and tell me why I'm wrong and they'd make good points and I'd be accused of regulatory capture, but ultimately my character would steer me towards the best solution I could find. Whether that character exists in any person in Washington at this or any other time is a question we all ask ourselves during every election.

[Louis]

I completely disagree because you are using your own version of what "true environmental cost" is rather than what it means to the majority of people.

Just because "the majority of people" (and I don't know if your statement is true or not) don't know or don't care about the consequences of their decisions doesn't mean that those consequences won't be important in the future. Somehow, I think it's going to take more than just educating people about this.

The govt. mandates some things for the public good - from Driver's Ed, and the color of your house to whether or not I can build a small nuclear research reactor in my back yard. I suppose we could try to get the free market to do that, but I doubt it would work very well. It's been quite a few years since the govt. has been in the business of regulating our impact on the environment, so this is nothing new. We'll see what happens in the long run.

[Karin Kirk]

Does the Govt mandate the explicit use of any other fuels? It's especially bad considering adding ethanol to gasoline makes it a worse and not a better fuel!

And you are right. The market will appropriately price oil when it becomes scarce (and that'll be a long...long way off) and the alternatives will stand on their own merits without artificial efforts to distort its price and value.

I think all people on all sides (except corn farmers) agree ethanol is a bad deal all the way around. Thankfully we reached that conclusion fairly swiftly.

I agree that when oil gets scarce and the price goes up, then alternatives will get a boost and the playing field will be more level. There are wide-ranging opinions about when that will be, but I do find it telling that some of the world's biggest oil fields are declining. I do not think that oil shales are going to be the savior that they may appear to be on paper. Or if so, they will not produce oil at the cheap rate it is currently being produced.

Supplies of coal, however, will last us for 100 years or more. In a sense that is too bad because it's the dirtiest fuel that we use.

There are some really neat innovations going on in the alternative energy field. The array of technologies is impressive and as a science person it sure is fun to follow the developments. I would love to imagine a future where societies and economies have enough energy but from cleaner and more sustainable sources.

[Climb01742]

But when Goldman facilitates massively levered long and short positions by institutions running other people's money, and they do so not caring about the outcome because they have a balanced book themselves, the potential for societal consequences is high.

you've highlighted the essential rub, IMO. 'free' markets occur in societies, where the results of those markets create both opportunities and costs. somehow those consequences to society need to be figured into the equation. in law there is the accepted concept that one person's free speech ends when it causes harm to another person (yelling fire in a crowded theatre). we need a financial version of that, because, sadly, wall street, as a whole, seems ethically incapable of acting wisely without an external authority reminding them that the world is somewhat larger than greenwich, ct.