Oil @ $150 dollars a barrel

[cannon_fodder]

You're right, I'm off on my inflation number.  I was too high:



YoungTulsan,  I understand your concern with inflation but it is a fact in a currency based economy.  For that matter, it was a fact in gold based economies too.  In anything but a barter system inflation occurs and if managed is healthy for an economy.

But I agree that management of inflation and keeping it under the 4.5% range is very important to the economy.  But going under 2% is considered bad for the economy.  And deflation starts a death spiral.

quote:Shadows saidInflation was capped during WWII by government freezing the value, including wages, on a closed monetary system. After the war in a period of adjustment, private companies who entered into the political circus, looked at their employee pension plans and laid the ground work for our socialistic way of devaluating these pensions through inflation.

While I appreciate your comments Shadows, they are just wrong.  The data clearly indicates a higher rate of inflation during WWII than most other periods, including the post war era you blamed for devaluing pensions.  

That is not hard to explain, during the war the government issued itself unlimited credit and created vast amounts of new wealth.

However, I agree with you rover riding assertion that rising oil prices and the weak dollar are concerns for the US economy.  Coupled with the Federal Reserves release of capital inflation is a real concern for me.  Thanks for the discussion on this matter.

[bokworker]

Interesting to note that in looking at the above chart... the worst economic period for this country was in the decades of the 20's (albeit late 20's) and 30's.... periods with the lowest inflation and in fact the only periods with deflation.

Infaltion is bad... but deflation is worse. The Fed has many more tools to fight inflation than deflation. And Shadows, to offer that the answer is for the government to freeze wages, prices and close the monetary system is laughable.

[bokworker]

On another note.... the Federal Highwway Administration released preliminary numbers yesterday that indicated for the first time in decades the actual miles driven and gasoline usage was DOWN in 2007. In addition, public transportation ridership was at a 50 year high. Consumers are never happy about having to make changes to their habits but it would appear that we are doing just that.

In addition, car sales in the US were down 8% in the first quarter and SUV sales were down 27%.

[FOTD]

Having been attacked here for saying inflation, counting energy and food, was running near %9 in August 2007, I will go out on a limb and say that it could reach double digits this summer. I will not buy our lying governments statistics especially in an election year.

I do think our dollar has bottomed but it may take several periods before it helps to lower the cost of oil per barrel. The further chaos in Iraq will not help.

The dynamics of the "middle" class are changing. Energy and food are only one component. Declining house values, spiraling down more today than during the depression at %30 in many areas, only adds to the complexity of the definition.

Tulsans are fortunate. Most of the country is in a tail spin. Our middle class here will keep on churning due to oil and aerospace jobs. Elsewhere, the majority of middle class is being morphed into the upper lower class. The situation gets exacerbated upon another big hic cup in the financial sector. The Fed has no where else to run with rates without creating a new dollar bottom.

There is still major hurt to follow from Boone Picky and his flock who just are enjoying the ride. A retroactive windfall profits tax should be implemented immediately to offset our decaying infrastructure. It would help the psyche of our country as well. Not likely with their pals in the White House. 8 years of conflicting interests and bad policy from Bushco find us here now.

Summer will be long, hot and very expensive both in our pocket books and to our environment. Our air here will be monstrous. The big greedy oil barons and the huge refiners and polluters should reimburse the "middle" and "lower" class for their windfall at the expense of others' misery and angst. It might help save the republic in the long run.

[cannon_fodder]

[edit]FOTD was right, I over reacted. [/edit]

[YoungTulsan]

quote:Originally posted by cannon_fodder


If you got hurt, you either weren't paying attention, were wholly ignorant, or thought you could ride the wave and get off before it crashed. Sloth, ignorance, or greed.

You say this like everyone who owns a home just does it for the investment purposes.  People do need to LIVE in homes, you know?  Regular people who had nothing to do with the housing market madness shouldn't have to pack up and move their families just because Greenspan and Bush wanted to artificially stimulate more consumption and construction that really wasn't necessary or warranted.

[FOTD]

CF, you turned my suggestion on equalization into a personal attack. I am willing to sacrafice some of my windfall profits towards the real priorities of our fellow citizens in dire straights and towards our decaying situation at home....

What suggestions do you have to help give a hand up to the hundreds of thousands getting trounced by Bushenomics?

Also, If Exxon/Chevron/Conoco lose the lease to the Alaska gas field because they have failed 22 times to implement a plan for a pipeline, what does that do for the price per barrel?
The big oilies manipulate the markets. Believe it or not.

[YoungTulsan]

quote:Originally posted by bokworker

YoungTulsan... while not "devaluing" your comments as many of them are on point, the fact is a successful capitalistic economy needs "controlled" infaltion to be successful. We all have some inflationary expectations built in to our phsycology... you would expect to make more in 5 years than today right?

"Built in to our psychology" only because we have to live with the repercussions of the system as it exists.  Just because we are conditioned to it doesn't make it right.

You might expect to make more money 5 years from now, because your VALUE as a worker should increase as you gain experience.  It shouldn't just be because of cost-of-living inflation increases.  If you work for someone, they should pay you what your value to the company is.  If you run a company, your company will make more money year-over-year if they increase the efficiency of the business model, or acquire new customers.  This just expecting to make more over time just "because", seems almost like a subconscious form of entitlement.

quote:You would expect, or maybe hope is the better word now, that you house is worth more in the future than now.

Yes.  Home improvements add value.  Better infrastructure of the community adds value.  Desirable entertainment and recreation opportunities popping up nearby add value.  The value rises as there is more demand to live where you live.  In contrast, if you live somewhere where the infrastructure is decaying, you aren't putting any money into improving your home, and there is no increase in demand to live where you do, why should your home's price go up "just because" ?

quote: You make decisions to invest your money in a way that builds wealth correct? All fo these things have an infaltionary aspect to them. Capitalism has 2 main enemies, "hyper"inflation and deflation. Hence the reason the Fed would like to be able to target 1-2% infaltion.... enough to make things worth more but not enough to debase their value. Targeting zero inflation would invite deflation... and we do NOT want deflation.

I agree that deflation is even worse, but a crazy deflation scenario is only POSSIBLE because of the "all money is based on debt" system that we have right now thanks to the Federal Reserve Act.  Right now, when production stops (Less new stuff to borrow more money against), the money supply either drys up, or the Fed Reserve has to inflate a bunch of money based on nothing to correct the problem.  Yes, it is possible for a hard money economy to dry up as well, by people hoarding money and refusing to spend it, but I think the very nature of our economy and lifestyle today would keep people from doing that.  They want to buy things, eat things, experience things.  The threat of a deflationary depression is like the fire under our butts to keep perpetually consuming more and more year over year.  That cannot continue ad infinitum.  Eventually our monetary system will have to transition to something different, or it will simply collapse and implode.  We should make changes now, while we are still living somewhat comfortably and peacefully (compared to what would happen in a collapse).

quote:I am not arguing that we do not have problems and that many of those problems can be attributed to excess leverage (debt) or acknowledging that debtors that attempt to pay of that debt with devalued money run the risk of causing uncomfortable high inflation but, it is a bit of a stretch to look at our economy and make the call for hyperinflation. When breaking down the components of CPI the single largest parts of the number is tied to housing and labor.... and those parts of our economy are suffering from at best disinflation, at worst actual deflation, which when combined with higher energy and food costs leads to a much lower number on overall inflation. In addition, the history of the Fed has been to strip out food and energy costs as they are too volitile to make monetary decisions based on short term movements in these components. This "core" CPI number is currently running at just over 2%... Sooner or later if food and energy stay higher for long enough this will bleed over into the core number but if they decline then it will not be an issue. I tend to believe that inflation will be more of a problem but not until housing and labor join the party.

CPI simply isn't a cost of living index, or an index of inflation.  If you leave out food and energy, don't use it as a measure for people's costs of living.

quote:As to your other point of the government "masking" actual infaltion. I must admit I have a bit of cynism like you. The fact is their are a huge amount of entitlement programs tied to the reported CPI which puts the government in aposition to want that rate to be as low as possible.

Now you are talking smart.  Look to the motivating factors and it explains why there is so much pressure for them to release data that is simply untrue.

[cannon_fodder]

You're right FOTD, I over reacted to your post.  I have edited my post accordingly.

Instead of a retroactive tax on success, increase the cost of access to publicly owned assets. They want new leases in the Gulf and are getting them at record bid prices.  Raking in billions for the fed.

Open up bidding to all who come off the coast of the #1 and #3 users of oil:  Florida and California.  The revenue for the states would be huge, the revenue for the fed equally.  Oil prices would fall.  The profits made on those fields get double taxed (at the wellhead and as a profit) and we create JOBS.

Same with Alaska.  Open it up to bidding.  By the time the field is developed we won't need a new pipeline because the Alaska pipeline will not be operate at capacity anyway.

THEN, take that money we receive in venture profits (selling un-utilized federal assets) and use it for alternative energy. Stream line nuclear power initiatives to provide a safe and viable alternative. Provide inducement prices and grants for viable alternative energy projects.  You want a viable electric car?  

Award a Federal Contract to buy 10,000 Federal Vehicles per year for the first 5 years for the first manufacturer who offers a vehicle that is:
1) Entirely Electric
2) 120 miles range (3 times the daily average)
3) Over night recharging
4) Meets federal safety standards
5) 70 MPH minimum top speed

Gear the contract so it must be manufactured in the USA.  $40,000 per vehicle for the first year.  $38, 36, 34, and finally $32,000 in the 5th year.  At the end of year 5 the winning patents expire and are public domain (the winning company should have leg up on the competition AND would have had a nice payoff anyway).

That would bring the price into the realm of reality for many people and hopefully funding the research and providing the demand for the start up.

That's $1.8 Billion over 5 years.   The government gets something, spurs industry, and encourages research in a direction we desire.  Inducement prizes work, with the buying power of the Fed as an inducement the American people get something for the money both as a purchase AND the result.

Those are the initiatives I would like to see.  Not taxing private interests because of success and other policies that just punish the status quo instead of inducing people to change it.

[FOTD]

Why doesn't the government just keep a royalty interest? It would amount to a lot more than a meager 1.8 billion dollars.

[perspicuity85]

quote:Originally posted by shadows

Pickens, energy investor, predicts oil may soon reach $150 a barrel.

He says the depletion of producing wells will be sustained by the new wells at 85 million barrels daily.

Demand for oil is increasing at 1.4% or 1.19 M barrels yearly.

There are non governmental predictions that gasoline will reach near $5.00 a gallon by this fall.

$14 oil gave us gasoline under 30 cents a gallon.

30 cent a dozen eggs now $2. a dozen gave us chicken poop in our water.

Does this indicate a robust economy or runaway inflation?

 

My theory is that Pickens is just an astute businessman (and snake) trying to elicit a self-fulfilling prophecy on the price of oil.  Don't burn me alive here, as this is just my personal theory.  He is portrayed as an "expert" on the oil industry and oil prices, which he indeed is by most accounts.  However, facts reported by experts tend to ingrain themselves in human psychology as being true, undeniable, and inevitable facts.  "Experts" are not seen as having a vested interest in the facts they report.  The way I see it, Pickens often reports projections of oil prices as early as possible to reduce the long-term "shock" factor.  In effect, he is attempting to decrease the price elasticity of oil in the United States.  I have no facts whatsoever to back that up, but I want to explore it further.

[cannon_fodder]

quote:Originally posted by FOTD

Why doesn't the government just keep a royalty interest? It would amount to a lot more than a meager 1.8 billion dollars.

Because the value to the public is more than the $1.8 Billion or any other licensing fee.  Government research is best utilized in the public domain.  Hording the information and releasing it only to paying industry members lends itself to corruption and under utilization of the resource.

Basically, if the public funds the research they should all be able to bennefit from it  - especially since the point of this en devour was to get a no-emissions car on the road.  The tactic outlined above would encourage major participants to advance towards the desired goal and provide a return to the most successful.  It would then free up the information for the utilization by anyone who can use it, thus providing a fair return for the winner and a competitive chance for everyone else (and the market).

[YoungTulsan]

quote:Originally posted by perspicuity85

quote:Originally posted by shadows

Pickens, energy investor, predicts oil may soon reach $150 a barrel.

He says the depletion of producing wells will be sustained by the new wells at 85 million barrels daily.

Demand for oil is increasing at 1.4% or 1.19 M barrels yearly.

There are non governmental predictions that gasoline will reach near $5.00 a gallon by this fall.

$14 oil gave us gasoline under 30 cents a gallon.

30 cent a dozen eggs now $2. a dozen gave us chicken poop in our water.

Does this indicate a robust economy or runaway inflation?

 

My theory is that Pickens is just an astute businessman (and snake) trying to elicit a self-fulfilling prophecy on the price of oil.  Don't burn me alive here, as this is just my personal theory.  He is portrayed as an "expert" on the oil industry and oil prices, which he indeed is by most accounts.  However, facts reported by experts tend to ingrain themselves in human psychology as being true, undeniable, and inevitable facts.  "Experts" are not seen as having a vested interest in the facts they report.  The way I see it, Pickens often reports projections of oil prices as early as possible to reduce the long-term "shock" factor.  In effect, he is attempting to decrease the price elasticity of oil in the United States.  I have no facts whatsoever to back that up, but I want to explore it further.

I think that is probably a very good assessment of the situation.  I did hear on the radio a minute ago that Pickens thinks we need to switch to natural gas as the primary fuel if we are to become energy independent.  Is NG his dog in the race?

[Conan71]

quote:Originally posted by YoungTulsan

quote:Originally posted by perspicuity85

quote:Originally posted by shadows

Pickens, energy investor, predicts oil may soon reach $150 a barrel.

He says the depletion of producing wells will be sustained by the new wells at 85 million barrels daily.

Demand for oil is increasing at 1.4% or 1.19 M barrels yearly.

There are non governmental predictions that gasoline will reach near $5.00 a gallon by this fall.

$14 oil gave us gasoline under 30 cents a gallon.

30 cent a dozen eggs now $2. a dozen gave us chicken poop in our water.

Does this indicate a robust economy or runaway inflation?

 

My theory is that Pickens is just an astute businessman (and snake) trying to elicit a self-fulfilling prophecy on the price of oil.  Don't burn me alive here, as this is just my personal theory.  He is portrayed as an "expert" on the oil industry and oil prices, which he indeed is by most accounts.  However, facts reported by experts tend to ingrain themselves in human psychology as being true, undeniable, and inevitable facts.  "Experts" are not seen as having a vested interest in the facts they report.  The way I see it, Pickens often reports projections of oil prices as early as possible to reduce the long-term "shock" factor.  In effect, he is attempting to decrease the price elasticity of oil in the United States.  I have no facts whatsoever to back that up, but I want to explore it further.

I think that is probably a very good assessment of the situation.  I did hear on the radio a minute ago that Pickens thinks we need to switch to natural gas as the primary fuel if we are to become energy independent.  Is NG his dog in the race?

T. Boone has said within the last couple of years that he's making far more speculating and trading energy than he ever did producing it.

When T. Boone starts talking about oil or gas markets, he's got the kind of clout Greenspan does when he lets out a fart.  I promise you, anything that man says at this point is self-serving. (no pun with the KU basketball coach intended).

[YoungTulsan]

Self-serving, LOL