I honestly don't see this as a "rich" v. "poor" issue; it is a "short term" v. "long term" issue. Do we really think it's appropriate to print more money to support our current energy consumption/production imbalance? How many years do we think that will work before the economic bubble bursts? Do we really want to hand this mess off to our kids (as well as the next generation of "poor" people)?

I really don't understand the argument that we need lower prices and more production at the same time, that's not how it works. The only way you will get energy business to invest in capacity is to increase the value of their product. What would you do if you were on the board of directors, would you start a 5 year refinery project today that is dependent on $90/barrel oil in the future to make a profit? I certainly wouldn't.

You have some valid points. I most certainly do NOT want to see the Government take over oil production. They screw up everything they touch.

However, I do think that some of the consumer protection laws and stock trading and manipulation restrictions already on the books need to be brought to bear on the oil companies AND the futures traders who are driving the prices up.

I also believe that the oil companies would exploit our domestic resources (again, ANWAR and the coastal shelf reserves) AND build more new SAFE reactors (the newer designs are an order of magintude safer than the ones we currently have - as you well know) AND build new production capacity IF the government - the judiciary in particular - would stand up to the rabid environmentalists. They need to stop allowing the far left to obstruct any and every thing that even LOOKS like developing our own domestic resources.

Here's a concept. How about instead of pandering to the radical environmental movement and their penchant for roadblocking these things, revamp the Endangered Species Act to allow for a little balance (instead of everthing being tilted in favor of the needs of every bug, bird, and slug and AGAINST the needs of people), recognize and throw out some of their lawsuits as the spurious legal actions that they are, provide some tax incentives for DEVELOPMENT of both alternative energy AND domestic oil production and get the ball rolling - instead of letting any and every enviro wacko group stand in the way of progress on the energy front? The refineries we have weren't built on $90 a barrel oil prices. They were built when it was under $20 a barrel and the only thing that has changed and has driven the cost out of reach is regulation and environmental lawsuits.

That would be a better way to encourage and develop more energy independance than keeping prices artificially high and placing unreasonable financial burdens on those least able to afford it IMO.

Like pmckechnie, my family's income is still "middle class" enough to afford what we need and at least some of what we want. But we are still feeling the dent that fuel is making in our budget. I really sympathize with the hard working folks who haven't managed to reach the level of income that would be considered "middle class". The kind of additional financial burden that the current fuel prices place on them not only hits them harder, it also makes it that much more difficult for them to rise into the middle class. Not to mention the fact that it is driving more of those in the lower middle class below the line into joining the growing ranks of the working poor. The current stae of affairs is just increasing the divide between the "haves" and "have-nots"...

As for understanding how we can have more production and lower prices at the same time, higher production (increased supply) pretty much guarantees lower prices. That's the most fundimental principle of supply and demand.

__________________
1984 300 Coupe TurboDiesel
Silver blue paint over navy blue interior
2nd owner & 2nd engine in an otherwise
99% original unmolested car
~210k miles on the clock

1986 Ford F250 4x4 Supercab
Charcoal & blue two tone paint over burgundy interior
Banks turbo, DRW, ZF-5 & SMF conversion
152k on the clock - actual mileage unknown

I do have compassion for people. Fuel oil here in Canada is 1100 dollars for 200 galons right now. I think this means some people will be pretty cold this upcoming winter. Housing in general was not constructed well enough for this level of cost.

If things remain much as they are all the downloading of new energy costs will start to impact in the fall or a little later. I just am not certain wages and earnings can compensate for this inflationary period that is just starting to get underway. It always has before. Or at least since the flat inflation curve of the 1950s.

It strikes me the economy cannot be forced as hard as required to do it. As was mentioned the over printing of money may forstall serious problems for awhile. Probably the worse possible policy for the long term though. People are just not ready or willing to adjust in my opinion yet. It is just an indication that things are not too bad yet. Another year of it may change most peoples opinions.

Our primary heating is wood in our house. To replace 200 galons of fuel oil is about two cords of really good hardwood burnt efficiently. It costs about 200.00 per cord delivered cut and split. Plus the joy of throwing it into the basement and stacking.

We use about 4 to 4 1/2 cords per winter in a two thousand square foot house built about thirty years ago. Air conditioning is only required for about six days a year at most this far north so that is not really an item.

We live in an area adjacent to a town. Plus the last time the town tried to annex us the county fought back and killed it. Apparently we are in the counties best property tax generating area. Housing density is high compared to most of the county. That is why the town wanted us.

Nothing would change yet the property taxes would rise to about four thousand a year if the town got it's way. The last fight was so costly and ugly the town will not try again too soon I suspect.

This means cheap property taxes as long as it lasts of about a thousand per year. No additional sewage or water rates as the property is self sufficient. We are perhaps lucky and might not suffer as bad as some are going to.

I have heard rumours reciently that some people are no longer eating quite as well as they have been. Again the item that concerns me remains will the economy once again properly adjust?

The majority of people are not well equiped or really prepared for a heavy hit. I suspect as mentioned they expect a bubble to burst and things restore themselves to what they were more or less. I tend to fall on the other side of not being at all sure that will happen. Of course I hope it will.

That is the compassionate side of me. The reality side thinks we just had it too good for too long. As the real economy declined especially in the last twenty years it was business as usual with very few if any corrections taken by individuals.

That is exactly the problem if you are on the production side of the equation, you definitely do not want to build more capacity and then have prices tank 5-10 years later. That is exactly what happened last time; prices went up in the 70s, the oil/gas industry spent a bunch of money on capacity, then the oil market crashed in the 80s. Do you really think they will make the same mistake again?

I agree that the US needs a more coherent energy policy, but it needs to work both ways and provide some price stability for both the producers and the consumers; they both need predictability or nothing useful is going to happen. I certainly agree that some controls are required to minimize speculation, but I honestly think that speculation is only responsible for about $10-20 of the current oil price. Even with more controls, I expect the cost of energy will increase significantly before it reaches a supply/demand equilibrium.

Regarding the "environmental movement," it is somewhat of a red herring, I know they are an easy target (for both the industry and the public) but sometimes they are the excuse for inaction, not the real reason. For example, we stopped building nuclear plants due to the economics (not because of the NIMBYs), and we will build them again when the numbers really work.

Regarding the cost to add energy capacity, I don't know the numbers for oil refineries, but I am pretty familiar with the cost of nuclear power plants. In the early 70s, the first generation plants were built for less than $0.5 billion US, by the mid/late 80s the costs were closer to $3-5 billion (partially due to the interest rates at the time). Many of the investors in the later plants lost their butts in a regulated market that did not allow those costs to be recovered in a reasonable time. The new plants being proposed have cost estimates in the $5-10 range. One of the drivers of these new plants is the proposed "carbon tax," which will help make the economics work. Also, keep in mind that one of these plants will serve about 1-2 million people, current nuclear plants provide about 20% of the US capacity, and many of them will reach their end of life within 20-30 years; you can do the math, this will cost real money.

Craig.....I love your closing statement but must disagree with your time line. I think within 5 years $4 a gallon will sound cheap so new refineries should be feasible.

__________________
Cheers,
Bill

Almost inevitable Bill. We are well ahead pricewise of earlier projections already. I still think it is all still up in the air though. Does not mean that much if wages and earnings rise fast enough.

From my simple perspective I just cannot see how that can happen. Our manufacturing and exports are reducing year by year. Our real balance of payments with the orient now must be almost a certain disaster long term. I no longer believe the official figures released. They must be seriously manipulated in my opinion.

Every day I see manufacturing plants and wonder why they still operate here. They would be far more profitable for the owners operated in another country. We need a major structual planning shift to at least start to deal with it all. Almost everything I buy is made offshore or in mexico now. There is no north american equivelant manufactured to buy that makes sense.

Barry, I've been telling my wife for 4 or 5 years "I wonder where all of us will work when ALL our manufacturing jobs go overseas?"

This country used to produce things that were top quality and crafted by skilled workers. Then we entered the age of the throw away society and threw our jobs away in the process.

True craftsmen are practically impossible to find in this country because people do not want to pay for quality, they just want it to look good for now and don't care if it falls apart in a couple years. The widget is cheap enough so when it does fall apart, they' ll just go buy a new one. Thats the mentality of todays consumer.

I consider myself to be a skilled craftsman, having been restoring fine antique furniture for 35 years. I am quite capable of doing everything from veneer to carving to matching or restoring a 200 year old finish. I've seen a decline in restorations starting about 10 or 12 years ago, about the same time that our trade defecit [sp.?] started. In the 70's when i first started, I had literally years worth of back log. They were waiting in line at my door.

There will come a day when nobody will know how to work with their hands and its all because of this import/sell cheap/ then throw it away mentality....

__________________
Cheers,
Bill

For good or bad, I recently read/heard that the manufacturing sector is now only 15% of the US economy.

You may be correct, I wish I knew. I do think prices will climb until they reach some price point that will make investing in new capacity safe, then (5 years later, when the capacity is actually built) we will see some kind of equilibrium.

Don't get me wrong, I'm not in favor of paying more for energy; I just think it's inevitable that we will, and that any interference to try to hold prices lower will probably just make things worse in the long term.

The question is at what price does the industry view as being feasible to invest in refineries. It doesn't seem to be the $4/$5 mark so whats it going to take?

Drilling new wells in this country may not be the answer to price reduction either. The oil in Alaska is being sold overseas because it's not the sweet crude that our clean air policy demands.

I do compare the oil market to the housing market i.e. it is a bubble that will burst then level off but IMHO that level may not be much below the $4 mark.

Never thought for a minute you or anybody else in this country for that matter is in favor of higher prices for energy. EDIT.....except the greedy American oil mongers.

__________________
Cheers,
Bill

UK was an importer of oil, and then suddenly they discovered oil in the North Sea, and overnight they became exporter of oil, did it make any difference in the price of gas at the pump? NO.

Drilling oil will make absolutely no dent in the availability or the price, all of which are completel out of our control.

Vahe

The reason for UK fuel prices is primarily taxes, not the market price of oil. The US is not about to become a net oil exporter; they currently import about 40% of their oil, so to break even they would have to increase production by 67% (at current consumption levels).

Or, the crooks who set this in motion could get theirs. As if an oil man with a masters in business didn't know what he was doing...

http://www.globalresearch.ca/index.php?context=va&aid=8878

__________________
1982 300CD Petrol/Black Leather

Great truthful article.

Old sayings are around for many years because of one thing....they're true.

Ever hear the one "Every dog has its day"?

Banks are now paying the price for the housing market tumble. They [the banks]created the rise in housing costs and consumers made that bubble burst by defaulting/not buying homes.

Speculators too will pay the price. We as consumers must now do our part to keep our foot out of the throttle thereby reducing demand then the bubble will burst. But until people, like the guy that blew by me then 1/4 mile later turned left, learn how to drive with some dang sense, the price is going to stay high. I know my driving habits have changed dramatically and its amazing just how long a tank will last when you go easy on the throttle. lol....the guy that blew by me and then turned.....Past him at a gas station 10 minutes later.

I still can't see the price falling all that much though. More of a leveling off.....

__________________
Cheers,
Bill

That article just confirms exactly what I have been saying all along. Our own government is letting this happen to us - when it is completely within their power to put a stop to it. The anti-trust and anti-monopoly laws that have always been there to protect us from greedy monopolies and unscrupulous traders have been abandoned.

I have never been more dissapointed with a President I voted for than I am with George W. Bush right now...

__________________
1984 300 Coupe TurboDiesel
Silver blue paint over navy blue interior
2nd owner & 2nd engine in an otherwise
99% original unmolested car
~210k miles on the clock

1986 Ford F250 4x4 Supercab
Charcoal & blue two tone paint over burgundy interior
Banks turbo, DRW, ZF-5 & SMF conversion
152k on the clock - actual mileage unknown