A Philosophical Question for Republicans

[HOF44]

If you want price controls to keep the price low, we'll have to learn to like lines because we'll be sitting in them a lot. I need no further proof that gasoline functions like regular commodities than the gas shortages of the 1970's. Price controls equaled lines. When the controls were removed, the prices rose and the lines stopped.

What about gasoline regulated as a utility. Like we do with water and electricity in many places in the US currently. This would not necessarily mean low prices, just that the rates charged would have to be justified. I think the inelastic demand of gas is made for this type of structure to control colusion and monopolistic practices that if, well enough concealed, can occur.

[SkinsOrlando]

What about gasoline regulated as a utility. Like we do with water and electricity in many places in the US currently. This would not necessarily mean low prices, just that the rates charged would have to be justified. I think the inelastic demand of gas is made for this type of structure to control colusion and monopolistic practices that if, well enough concealed, can occur.

We do not control the price of oil as it is "imported" here and refined. Water and elctric are domestic products.

[HOF44]

We do not control the price of oil as it is "imported" here and refined. Water and elctric are domestic products.

But all products have a total cost regardless of origins. All I'm saying is that if you regulate it like a utility you would allow say a 20% profit. Something that alot of utilities are allowed to have. You then look at the cost of the product and allow the price to be set to give a 20% profit(or whatever would be reasonable for that utility to have). I'm not saying you can just set a price at whatever you feel like. Just that the oil "utilites" would have to justify their price levels. Or if profits ran to high prices would be set down by a utlity board just as happens now with many public utilities.

[JohnLockesGhost]

Agreed... but, what about OPEC's control on Supply?

With the emergence of non-OPEC oil supplies like Mexico, Canada, Norway, and Russia, OPEC power to squeeze supplies to keep the price high has been curtailed quite a bit. OPEC still produces ~40% of oil sold on the world market, but that's not so much that any decrease in production can't be made up by independent oil producers.

http://www.canada.com/ottawacitizen/news/business/story.html?id=fff3c797-5125-46ab-ad5f-cf8731c1a54f

For the current year, with total crude oil demand at 84.5 million bpd, non-OPEC states with crude oil and natural gas liquids output of 49 million bpd will grab 58 per cent of the market share.

[SkinsOrlando]

But all products have a total cost regardless of origins. All I'm saying is that if you regulate it like a utility you would allow say a 20% profit. Something that alot of utilities are allowed to have. You then look at the cost of the product and allow the price to be set to give a 20% profit(or whatever would be reasonable for that utility to have). I'm not saying you can just set a price at whatever you feel like. Just that the oil "utilites" would have to justify their price levels. Or if profits ran to high prices would be set down by a utlity board just as happens now with many public utilities.

And if the price of oil is restircted in our market will suppliers ship it here or somewhere else. With the emergence of China as a major user of oil we cannot attempt to strong arm the supplier which is what we'd have to do. In order to set profit ceilings we'd need to contribute a large domestic portion of oil to offset the loss from outside sellers moving product somewhere else.

[HOF44]

And if the price of oil is restircted in our market will suppliers ship it here or somewhere else. With the emergence of China as a major user of oil we cannot attempt to strong arm the supplier which is what we'd have to do. In order to set profit ceilings we'd need to contribute a large domestic portion of oil to offset the loss from outside sellers moving product somewhere else.

You are hung up on the supplier. I get we have to pay market rates for the raw oil. Where the difference would come is the oil companies would have to justify their refining and distribution costs. That's where I believe the major gouging is occuring. So again I say we PAY the going rate for the oil. That's justifiable and unavoidable. It's what happens once it gets here that needs to be scrutinized.

[SkinsOrlando]

You are hung up on the supplier. I get we have to pay market rates for the raw oil. Where the difference would come is the oil companies would have to justify their refining and distribution costs. That's where I believe the major gouging is occuring. So again I say we PAY the going rate for the oil. That's justifiable and unavoidable. It's what happens once it gets here that needs to be scrutinized.

Developing new refineries would also reduce costs, but we haven't done that in over 30 years. Expaning nuclear energy would reduce the use of oil therefore lowering demand and cost, we haven't done that either. I'd prefer to those routes before allowing the government to regulate an industry.

[HOF44]

Developing new refineries would also reduce costs, but we haven't done that in over 30 years. Expaning nuclear energy would reduce the use of oil therefore lowering demand and cost, we haven't done that either. I'd prefer to those routes before allowing the government to regulate an industry.

I would normaly agree, but I believe the profile of gasoline as a nessecity for all US citizens combined with it's inelastic demand curve demands it be treated as a utility such as electricity and water. It is to vital to the public interest to allow corporations with closed books to be entrusted with its distribution and pricing.

[SkinsOrlando]

I would normaly agree, but I believe the profile of gasoline as a nessecity for all US citizens combined with it's inelastic demand curve demands it be treated as a utility such as electricity and water. It is to vital to the public interest to allow corporations with closed books to be entrusted with its distribution and pricing.

Once you open pandora's box it cannot be closed. How much profit is too much profit? What other indutries therefore need to be regulated? Software? Internet? Cell phone? Those are all now vital in todays societies, when will there profits be too much?

[HOF44]

Once you open pandora's box it cannot be closed. How much profit is too much profit? What other indutries therefore need to be regulated? Software? Internet? Cell phone? Those are all now vital in todays societies, when will there profits be too much?

How did we come about the decison that electricity, water, natural gas needed to be regulated? Seems the "box" was opened then. It didn't lead to a wave of other utlities being created. To me the key thing would be how much demend changed when price did. The widget diplaying a very inelastic demand curve would need to be looked at for regulation.

[SkinsOrlando]

How did we come about the decison that electricity, water, natural gas needed to be regulated? Seems the "box" was opened then. It didn't lead to a wave of other utlities being created. To me the key thing would be how much demend changed when price did. The widget diplaying a very inelastic demand curve would need to be looked at for regulation.

The demand curve is inelastic in oil simply because there happens to be no other product that has the same value to compete with it. By imposing regulatory laws would we not therefore possibly slow down progress in other areas of power technology since "the price is ok now" comfort zone would kick in?

[HOF44]

The demand curve is inelastic in oil simply because there happens to be no other product that has the same value to compete with it. By imposing regulatory laws would we not therefore possibly slow down progress in other areas of power technology since "the price is ok now" comfort zone would kick in?

That probably would happen. That however is a political failing and really a seperate issue.

[chomerics]

I often see this claim but really see no evidence that oil some grand exception to everything we know about markets. Its price is still determined by the same pressures of supply and demand. Even if you claim that demand is fairly inelastic (a reasonable claim), the market is still by far the best way to establish a price that distributes gasoline efficiently.

I disagree with you here to some extent. I do agree that oil is inelastic, and I think you can make a very strong case that no matter what the price is, people will pay it for oil. You can look at the 300% increase in oil from 2000 until now as a case in point. The demand has continued to rise even though the price rose 300%. If it followed the same pressures of simple supply and demand, then an increase of price should show a decrease in demand, when that is decidedly not the case. You could also argue with somewhat effectiveness, that if the price of oil was to increase high enough, then it would out price demand, and follow the set standard we have always followed, but I don't think that is the case. I have always been under the impression that oil is price inelastic, and therefor needs some sort of governing body to insure a fair price for the people.

If you want price controls to keep the price low, we'll have to learn to like lines because we'll be sitting in them a lot. I need no further proof that gasoline functions like regular commodities than the gas shortages of the 1970's. Price controls equaled lines. When the controls were removed, the prices rose and the lines stopped.

I disagree, and I think that is a simplification of the problems that were going on with OPEC and the US. in fact, I think it leads us to show the price inelasticity of oil, and not the other way around. OPEC reduced production to create artificial shortages and thus drive up the price of oil. If oil was to follow a typical supply and demand cycle, the demand would have curbed off to counteract the exorbitant price increase. Instead, demand turned down a mere 7% even though price increased over 400% in some areas. This, IMO, is proof of an inelastic commodity, because the demand was never pushed down by the price increase.

If we want cheaper gas, we need a stronger dollar. It's that simple.

Agreed, very much so.

[Burgold]

The demand curve is inelastic in oil simply because there happens to be no other product that has the same value to compete with it. By imposing regulatory laws would we not therefore possibly slow down progress in other areas of power technology since "the price is ok now" comfort zone would kick in?

Might be a "doomed if you do"/"don't if you don't" situation. If you don't regulate and try to put the breaks on Big Oil corruption, then they are making gads more profit each year and really have no incentive to look elsewhere and have every incentive to suppress other technologies (which they've done successfully for fifty years)

If you do regulate the price down, as you said, it does lower outside motivation to find the new energy source.

I think pressuring big oil through regulations may actually induce them to seek profits elsewhere. Doing nothing to them hardly incentivises them, although it may motivate other little guys who have been traditionally crushed by big oil.

[SkinsOrlando]

That probably would happen. That however is a political failing and really a seperate issue.

But in order to address the perceived/actual problem we must look at all possible outcomes in order to determine the best way to proceed. It's the same issue, anything to do with oil is political this day and age. It's simply not just a market issue. The truth is we must take the necessary steps towards moving away from oil, if it means 6 dollars a gallon to make it happen so be it. Putting a band aid on this problem(which I believe would be price ceilings etc.) only furthers the problem and slows progress towards different energy sources. Also, if "we" were to find a large supply of oil(I'm not referring to Alaska) somewhere within the states, it would also relieve the burden since we would no longer be at the mercy of the suppliers.

[HOF44]

The truth is we must take the necessary steps towards moving away from oil, if it means 6 dollars a gallon to make it happen so be it.

So would you be all for the Gov. regulating it, bumping it up to 6/gallon now and using the proceeds exclusively for finding alternatives?

As Burgold says I don't think big oil has much incentive currently to find any other choices.

[chomerics]

I'm having trouble "getting it"

Welfare is paying out money already paid(by someone else) in taxes,while a tax break is charging you slightly less tax for upfront expenses in a venture that generates more taxes.

How is collecting less upfront to get more later comparable in any way to welfare?

A tax break is the same thing as a welfare check in terms of government spending, don't let your moral judgment corrupt the reality of the situation. There is no difference to the U.S. Government in terms of a tax dollar given as an "incentive" or a dollar given to a woman for free cheese. It means the same exact thing on the bottom line to our government and our economy.

That is what I am trying to get people to understand. You need to look at things from within the U.S. operating economy. A dollar going to cheese is the same thing as a dollar not coming in from a tax. Welfare is welfare anyway you look at it. It is just a redistribution of money, and the argument is to where the money goes.

Welfare certainly has it's place in society,but equating the two is impossible and a stretch even for you.

it is not a stretch by any means. One means the same exact thing on the bottom line as the other. Look at it from the budget standpoint and understand that you have X amount of money. You can either give said company $1 or give said woman $1, the same things works out on the bottom line no matter to whom it goes to. If you want to operate a balanced budget, then it matters not where the money is, but the total sum on moneys, and the budget sees both as the same entity in terms of overall cost.

Even if the welfare recipient manages to become a taxpayer and starts to contribute to the tax base the contributions are unlikely to even recoup the money paid out....Which is not the case for the Oil tax breaks(which bring in bundles and provide what we "need to survive" )

Do you honestly think the money given to certain things like education grants for college, and job training to not reap the benefits down the line, while giving an oil company who is already making 25billion in profit and additional 18billion does? They both have their place in the economy, and in fact, i could argue very convincingly that the money given to the welfare mom has a better effect on the economy than the rebate given to the oil company. This is because the money is spent right away, and recycled into the economy, whereas the oil company could just take the $18billion and invest in something overseas which would have no benefit to the US taxpayer. . .other than the shareholders of the company. In other words, the poor welfare dollar is a better way to spend the money in terms of economic stimulation than a rich welfare dollar because the money influx is seen instantly.

Added Quote DJTJ

What is the real difference between the two payments, in terms of their effect on the economy?

The difference in my eyes is that the tax breaks not only help provide a "need" but generates MUCH more taxes...you in effect create money,it is not static.

IYO, you create more money for the government by cutting taxes? How? Hasn't it already been proven that Supply Side Eco is an abject failure, and the only reason the economies have grown is because of the increase in government expenditures during the tax cuts?

I appreciate your attempt to answer the question TWA, but I think you need to think of my question from a different prospective, coming from the US govt.

[DjTj]

Added Quote DJTJ

What is the real difference between the two payments, in terms of their effect on the economy?

The difference in my eyes is that the tax breaks not only help provide a "need" but generates MUCH more taxes...you in effect create money,it is not static.

A lot of people have said that a dollar to Exxon can generate more taxes because Exxon can create jobs or prevent a refinery from closing, but what if a dollar in welfare prevents a local grocery store from closing? What if it allows 7-11 to open a store in a poor neighborhood? Why is giving a dollar to Exxon any better or worse than a food stamp spent at Wal-Mart?

[cathartic-j]

Color me impressed with Cathartic-j. :notworthy

That's a very kind sentiment, but I just hope that your endorsement of him won't embarass you at a later date. Have you looked at his posting history? To me, he looks like he's a bit of a pompous ass. He may even be the type of guy who would refer to himself in the third person.

If we want cheaper gas, we need a stronger dollar. It's that simple.

It is, and it isn't. Yes, a stronger dollar would probably be somewhat effective in reducing gas prices, but keep in mind that it has far more effects than simply changing the price of one commodity. A stronger dollar would reduce inflows of foreign capital and widen our trade deficit. This could be a positive outcome, but isn't necessarily.

So a lot of people make this argument that bankruptcy is necessary to create a disincentive to bad loan policies, but it's not like there isn't a huge disincentive from the billions of dollars that have already been lost and the thousands that have already lost their jobs. Avoiding bankruptcy is not getting off scot-free; and in fact, staying out of bankruptcy means that debts must actually be paid in full.

What's the difference between losing 90% of shareholders' value and losing 100% of the value? You don't need bankruptcy to force banks to adhere to responsible loaning and investing policies; they will do so because they don't want to lose money, and because they like making money.

Whether Bear Stearns needed to be saved by the Fed is a complex question, and I wonder if JPMorgan would have acted anyways (perhaps at a lower price) without the Fed backing the loans, but in some sense the Fed is a private entity making its own judgment on what is best for the economy, and they are also interested in making money, so it's not exactly an act of charity either.

There is definitely some price at which JPMorgan would have been willing to buy Bear Stearns and some price at which the Fed would have been willing to back the loans, and maybe political pressure forced a resolution more quickly than it would have happened otherwise, but how much difference did it really make? The line between free market capitalism and government intervention is really kind of blurry here, and I think that's true of almost every high-level financial activity ...

There is a lot of gray area between bankruptcy and getting "bailed out." We shouldn't look at them as our only two options.

:applause:

As Burgold says I don't think big oil has much incentive currently to find any other choices.

It might not help energy prices, but major oil companies are actually making a commendable effort to explore some environmentally-friendly technologies. For example, oil companies are currently very major players in research efforts to learn more about geologic carbon sequestration. That's not to say that I like oil companies, or that they aren't going to price at a level that will maximize profits . . . but I do think it indicates that they've become a little more forward-looking.

[chomerics]

A lot of people have said that a dollar to Exxon can generate more taxes because Exxon can create jobs or prevent a refinery from closing, but what if a dollar in welfare prevents a local grocery store from closing? What if it allows 7-11 to open a store in a poor neighborhood? Why is giving a dollar to Exxon any better or worse than a food stamp spent at Wal-Mart?

:applause:

Someone gets it

[Beer is Food]

With the emergence of non-OPEC oil supplies like Mexico, Canada, Norway, and Russia, OPEC power to squeeze supplies to keep the price high has been curtailed quite a bit. OPEC still produces ~40% of oil sold on the world market, but that's not so much that any decrease in production can't be made up by independent oil producers.

I don't want to pretend like I'm an expert in the worlds oil prices... but this still doesn't make sense to me.

We agree if the dollar was stronger, oil prices would be in much better. And, when I think about, as would just about everything else.

OPEC controls 40% of SUPPLY of oil. That's a big share of the market. Big enough that price setting is more than a reality.

And, common sense states that the DEMAND of oil will remain somewhat constant. People need to get to work, goods need to shipped, and there is only so much conservation that can curb this, and it takes time to regear society to conserve.

Lastly, other oil producing nations and oil companies seem to reap big rewards from high prices.

Why would Gov't control be bad to the consumer- when the artificial supply of oil can be manipulated in order to effect price?

[twa]

A lot of people have said that a dollar to Exxon can generate more taxes because Exxon can create jobs or prevent a refinery from closing, but what if a dollar in welfare prevents a local grocery store from closing? What if it allows 7-11 to open a store in a poor neighborhood? Why is giving a dollar to Exxon any better or worse than a food stamp spent at Wal-Mart?

Ya'll are overlooking a important aspect

Welfare is a payment(and yes it is good if not abused)

Tax breaks are collecting five dollars you would not have had if you demanded six. ....you are not GIVING ****,simply taking a little less.

Tax breaks (in this case)is not collecting as much of taxes as possible from a NEW tax base.

Tax incentives or breaks (specific to domestic exploration or infrastructure) are generating tax payments that did not exist and likely would not exist in the US.

It is a way to not only address the stability of oil supply and demand,but also generates jobs,manufacturing,lease payments,royalties that would otherwise be sent overseas.

Ya'll ALSO ignore the US is not the cheapest or easiest place to produce or refine oil, and there is little or no incentive w/o the tax breaks for investing here.

With the reasoning I see in this thread ,it is no wonder business is finding greener pastures elsewhere. :2cents:

[isle-hawg]

Oil companies ARE creating value, the welfare mother you mention does not.

Agree with the later 100%. As to the former, yes they are creating value but for who mostly? ANS: the Saudis and other who view us as the infidels. It was not the welfare moms that caused 911, can't say the same for the Saudis.

Just a thought....

If you increase taxes on oil corporations they will pass that tax cost DIRECTLY on to the consumer via a price increase. By giving oil companies a "tax break" they have a lower cost basis to work from.

NO corporation have EVER paid a dollar in taxes. All corporations do is collect taxes for the government.

IMHO we need a hell of a tax increase on gas to fund alternative fuels to ween us off of giving all our money to those who seek our destruction, and ease our trade deficit with them.

[81artmonk]

What about the mother who is receiving government cheese and working three jobs to try and make something for her child? Is she still a mooch? Does her job give less service to our country because she is cleaning the oil exec's toilet?

What you just stated here I wouldn't consider a mooch. And Yes I would consider an oil exec not a mooch since he employs millions of people where as a welfare mom doesn't. No disrepect just simple facts. WHo would I rather give me money too....the one who keeps the economy going is the oil company. My money going to a welfar mom has no return on it. Where as my money to a oil company gives me jobs, gas and transportation.

in other words, what makes one side different then the other side? Anything? is there a single difference in a dollar going to an oil executive then a person who is writing off his house then to a person on welfare? In terms of a dollar, why is there a difference?

I believe I explained that in the above post.

Yes, i do think we should be in a rich-->poor tax system, but it has been reversed lately. We have flattened the taxes in this country which implies a poor-->rich scenario.

This is where most people are wrong IMO. Why should the RICH be punished for being rich. Based on our current tax system, the RICH pay the lions share of the taxes that this country runs on. Meaning, the middleclass and poor pay far less in taxes than a rich person does. That isn't my opinion or myth but solid fact(which I have backed up before in other threads).

So with that being fact, why should we lower non-rich people taxes and raise Rich people taxes?? The system we have now is fair, it just needs to be run that way.

It is not surprising the people who ardently stick up for the GOP are in the 6 figure bracket in terms of income. I, OTOH, while in that bracket, am not. Maybe that makes me foolish, who knows. I only know what I believe is best for the country, and debate is a good thing. It is just a shame there are not more people here who get the gist of my post, or understand why I posed the question the way I did.

I'm not really getting why people think rich people need to get soaked in taxes?? I hear all the time liberals and dems say, "these Bush tax cuts are for the RIch". Uh yeah, they are for everyone. It's a numbers game.

Rich people make more than middleclass and poor so their tax break is obviously going to be greater than them. That doesn't mean that a taxcut is only for rich people.

When I hear that from libs and dems I hear, Soak the rich and don't allow them any of the taxcuts. Last time I checked, didn't they work for their money just like joe blow in middle america?? Or am I wrong and it magically appeared in their bank account from some fairy!

Look, to think that Republicans are the only party who deals in giving freebies to rich companies is ignorant. The dems do it too, they are just better at pointing the finger and making repubs look bad for it.

The real problem isn't that we support big biz, it's that we are so stupid in government to not drill, refine and produce our own oil which is right here in our own back yard!! The notion that we will have some alternative fuel soon, is foolish. It's so far off, we need to think of the right now, and right now OIL is our fuel, it pleantiful and abundant. Yet, becuase there are those who are KOOK fringe wackos who think that our earth is dying and we need something other than oil, that's why we don't.

research the alternative, but in the meantime, drill and refine our own oil NOW. Support the Big Biz oil companies to do so and see what kind of drop in oil prices at the pump you see.

[twa]

Agree with the later 100%. As to the former, yes they are creating value but for who mostly? ANS: the Saudis and other who view us as the infidels. It was not the welfare moms that caused 911, can't say the same for the Saudis.

The DOMESTIC tax breaks do not benefit the Saudi's at all or any country other than the US. :hammer:

IMHO we need a hell of a tax increase on gas to fund alternative fuels to ween us off of giving all our money to those who seek our destruction, and ease our trade deficit with them.

Now I would not object to that,but remember you are going to be penalizing US businesses and consumers with higher costs....it ain't new money