A post by WVGasGuy got me thinking about this. Let's say the whole country went green. Ford Excursions are lying offshore becoming artificial reefs. Public transportation is in high demand. Everyone's driving plug-in hybrids, E85 flex-fuel vehicles and hydrogren powered cars. Fuel consumption is down 40% in this country (made up the number so don't debate it). One obvious effect to the economy is to the oil companies. Don't care about them, they're a bunch of greedy bast*%$ds. However, the locally owned gas station will take a big hit.

On the other hand, with lower demand prices should come down, not only reducing the cost of fuel in your car, but all products that need to be transported. Believe me I know. We own a furniture store and our freight bills have gone up lately. That would either make products cheaper (not likely) or increase profits for companies (more likely).

What other effects, good and bad, would this have?

 

Potential for a shift in investment dollars from fossil fuels to other areas?

 

In fairness to those "greedy" oil companies, though, they went through a long period of losses and no profits...about a decade.


The profit margin in that business is very thin, and billions is getting put right back in to develop cleaner technology (ExxonMobil is spending $4.9 billion this quarter).

No, I don't work for an oil company or anything, I'm just saying that they're getting a bit of a bad rap, and are largely not responsible for the current spike in gas prices.

The US needs to pursue a hybrid (pun intended) policy of increased production, including drilling for oil offshore, for oil shale, and in Alaska, and conservation (CAFE standards), tax incentives for cleaner vehicles, etc. We're already going as much as possible for renewables (solar, biomass, geothermal), but the technology takes a while to develop and right now is not economically viable (it costs more to put up and operate a solar panel than the panel produces in energy). We'll get there eventually though.

 

This is HORRIBLE. Oil shale is so DIRTY, and increases CO2 so much, that you really do want to be swimming don't you? Maybe you own some land in northern Alabama that you are banking on to become beach front property. UGH. We need to focus entirely away from a carbon-based energy infrastructure, digging for more WHATEVER will not help us, AT ALL.

 

I actually do for for an energy company. Most of our costs are still somewhat regulated and rates have to not only be competitive but cover our costs. There is nothing wrong with a company making a reasonable return on investment. They are not charities and the product they provide has a cost to produce (I do get mad that my cell phone costs are more than either my electric or natural gas bills). No one complains about paying $1 for a 20 ounce bottle of water when they could basically get the same product for almost free at their tap. Gasoline prices for the freedom it give me is reasonable. When it's not I'll stay home more or drive less.

Companies that don't make a profit that's capable of satisfying their stockholders eventually go under. Less competition and eventually higher prices. I don't expect the oil companies, nor do I really want them, to invest in alternative fuels. They need to stay in the oil business. I want that to be a competitive market not another division of the oil company where they simply shift back and forward between resources and control both. If you look at the cost to drill a well, build pipelines to get the product to a refinery and the distribution of the end product, I believe you'll find it's an expensive business. With all the new environmental compliance issues and pending liabilities it's a wonder anyone even wants to fool with it. That's why new refineries are not being built. "Green" people want clean air and for all of us to take care of the ecology, but most of the time we are unreasonable about the issue as far as economically vialble options or timing of changes.

Companies are spending billions of dollars to clean up the environment and normally that does not produce one single extra unit of product. You have to expect them to raise prices when extra costs are incurred and volumes sold does not increase.

OK, that's my support for the industry. What I want to do though is put the Middle Eastern oil reserves in a situation where we don't need them. That means cutting back on US consumption and creating a business climate where American industry can thrive.

 

I'm glad to see someone else realizes this. It's easy to jump on the bandwagon and bash the oil companies.

I'm not an ecomonmist, but if prices come down too much isn't there a possibility of deflation? I know deflation is one of the worst things that can happen to an economy.

 

i don't think the cost of oil will ever come down. Even if the US went "green" the major oil countries, middle east and south america wouldn't lower prices to meet demand. They don't want to lose money they would just make more oil available to China which I believe IS the current largest oil consumer. Here at home if electric cars became the standard then the rich and famous would be sporting big 7PMG V12 monsters and wasting as much oil as possible to show their wealth. Plus oil is used in more than gas, plastics and lubricants we can't do without will continue to make us a big oil consumer. The day I fear most for you kids is not when we don't have oil for gas, but when there's no oil tom make sanitary food containers or life support systems in hospitals

 

Of course oil prices could come down.
If the price of oil suddenly spikes enough it might send the USA into a deep recession/depression.We would very quickly use a heck of a lot less energy if 10-20% of us were out of work.If we aren't working, then China loses it biggest market.Who really needs the latest piece of electronic BS the Chinese are producing(and making $$ on).China really doesn't make a heck of a lot of money on essentials like Textiles/food etc. Most money is made on non essentials like TVs/steros/ extra computers 3rd car all sorts of BS non essential consumer goods/crap.
Oil will absolutely drop through the floor if we-the USA-suddenly have 15% unemployment.
Folks who think the price of a commodity can't come down are waaaay too optimistic.
Oil went from 35/barrel to $8/barrel in fairly recent history( from 1980 to 1990 roughly).
Yes, oil can drop in price just like any other commodity.If-USA- we have a recession the whole world will have a recession.This could solve the terrorist problem.Iran,SA,Iraq etc wouldn't have any $$ to support Nuke programs, or terrorist organizations.China couldn't support N Korea.Yes, these countries could be taken over by fanatics, but so what.No money=no weapons-Simple!(No sophicated weapons anyway-missles nukes etc).Would Hezbollah have 15000 missles if Iran became poor?No!
Of course, we couldn't support our huge military, but a greatly reduced USA military(with 5000-10000 deliverable nukes) is still many times more powerful than the rest of the world.We wouldn't need as big an army since we wouldn't need to occupy territory.We occupy territory now to secure oil sources-and because we care about Iraqi freedom(keeps me up nights thinking strangers halfway around the world don't get to vote for which variety of religious thug to put in office).
Oh well.Oil can drop in price.It has before(many times),and it will again.Charlie
PS-There is always the tiny chance that fusion power will become viable.We just need a container that won't melt at 10,000,000 degrees.

 

There is a huge difference in oil prices now versus the 70s and 80s....peak oil. According to some sources, we're at or have just passed peak oil. Previous oil spikes occured when the oil supply was shut off. Today, oil production and refining capacity is at peak. It is true that there is still plenty of oil in the ground, it's just that it will cost more and more $$$ to get to that harder to access oil. Need an example of how we are at capacity - look at what happened after Katrina.

The problem we face now is nothing like the past. China and India (a combined 3 Billion people) are striving to westernize, and live like Americans with big homes and at least one car per person. This only increases demand on a diminishing supply. A true crisis will happen with another series of catastrophic events (a few hurricanes, Iran shutting off supply, etc.), then you get our current state of affairs $74/barrel plus added strife...maybe $100/barrel or $125/barrel. As we've seen, our demand for gas will not decrease - we are too dependent on cars because the way our cities are designed. It's true some folks might lose their jobs, but we all know Americans will continue to spend - and borrow - to maintain their lifestyle.

Our generation really doesn't know how to sacrifice anything, and it will take a hard lesson to change that. This is why our leaders feel we can have wars and tax breaks, because we shouldn't have to sacrifice for anything. That is the *new* American way.

 

Prices now are not far away from post-Katrina levels. Next big storm will surely make us reach new highs.