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96 comments on Big Oil and Alternative Energy

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westexas on May 4, 2006 - 8:53am Permalink | Subthread | Parent | Comments top
I think that the key point that is lost in the discussion of industry profits and the price of gasoline is that the US is importing 60% of its petroleum consumption.  The only thing that is (temporarily) keeping the US market supplied is higher prices.  

There are only two ways to allocate a scarce resource--through market forces (price) or through force.   We either pay the higher price, or we do without, or we seize foreign oil fields, which I suppose is what we may be doing in the Middle East.

We have an economy where the majority of Americans live off the discretionary income of other Americans.  This is not in any way sustainable.  Whether we like large homes and large SUV's or not, we are going to be forced to become a country focused on providing essential goods and services.  

My opinion for quite some time is that oil exporters are going to seriously begin to question whether they should continue to give us oil in exchange for dollars, and to question their rate of production.  

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IowaBoy on May 4, 2006 - 4:58pm Permalink | Subthread | Parent | Comments top
"We have an economy where the majority of Americans live off the discretionary income of other Americans. "

You, and perhaps others, have made this point before. I think it's a very important one, in that it makes clear the lack of sustainability in a world where it is likely to become impossible to provide necessities for most. So why are we providing frills, when we can't provide necessities? The market will change this, though perhaps tortuously.

I may know of an exception to this, however. Last year I had a client briefly (paid speech on calculating ROI of intangibles-speaking of non-essentials!) whose business is to provide sophisticated computer systems (software plus hardware) to 4* resorts, hotels and casinos to enable them to provide extraordinary levels of pampering to their extraordinarily rich customers. Since there will (probably) continue to be a very rich class for some time (a few decades? until control breaks down), this niche may survive for quite a while.

It's the $3 latte that is vulnerable to $4 gas. BTW, gasoline here in my California suburb is now $3.599 for a gallon of regular.

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MikeCotton on May 5, 2006 - 12:53am Permalink | Subthread | Parent | Comments top
The market will change this, though perhaps tortuously.

At some point, it will, but by that time there won't be anything left.  One of the points that has stuck with me from reading Orwell's The Road to Wigan Pier is that people routinely cut solid necessities to the bone in order to afford cheap luxuries.  It happens over and over, in every economic circumstance.  And he wrote that book in 1934, before the advent of modern marketing.  

Human beings aren't rational; we see this demonstrated over and over every single day.  Basing the future survival of our civilization on an economic theory which presupposes that we are is a recipe for disaster.

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96 comments on Big Oil and Alternative Energy

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