cnbc: Killer Combo of High Gas, Food Prices at Key Tipping Point

[PeterMP]

Yes we did,they were expanded in response to the 73 one

http://wiki.mises.org/wiki/1973_oil_crisis

Government regulations were also imposed on the oil industry. The price of petroleum products was controlled first by jawboning in 1969 and then by mandatory controls in 1971. This period witnessed the most rapid rate of inflation since the Civil War. As the real price of oil declined, the supply of domestically produced petroleum declined and the share of petroleum imports increased. At controlled prices, the earnings of oil producers declined, and there was little incentive to invest. By the time of the oil embargo of 1973, there were only one-half as many drilling rigs in operation in the continental US. as there were twenty years before. Dependence on imported petroleum approached half of the total consumption.[3]

added history lesson free of charge

Some people believe that the embargo was directly responsible for long gasoline lines and for service stations running dry. The shortages were, in fact, a byproduct of price controls imposed by President Nixon in August 1971, which prevented oil companies from passing on the full cost of imported crude oil to consumers at the pump (small oil companies, however, were exempted from the price control regime in 1973). In the face of increasing world By May of 1973 (five months before the embargo), 1,000 service stations had shut down for lack of fueloil prices, "Big Oil" did the only sensible thing: It cut back on imports and stopped selling oil to independent service stations to keep its own franchisees supplied. and many others had substantially curtailed operations. By June, companies in many parts of the country began limiting the amount of gasoline motorists could purchase per stop.

Really, you are going to quote a page from the Mises wiki with no sources?

How about some facts?

http://www.jstor.org/pss/4537467

"In 1969 a military coup put in power Colones Qaddafi, a bold, dedicated, fanatical young man who rushed in where angels had feared to tread. In 1970, taking advantage of the high demand of oil, the tanker shortage, which almost tripled spot rates, and not the fortuitous damaging of Tapline in Syria, Qaddafi demanded higher revenues, ordered cuts in production in the name of conservation, and threatened to shut down any recalcitrant companies....The lesson was not lost on OPEC; at its Caracas meeting in December 1970, at set 55 percent at the industry wide minimum. A meeting was scheduled for Tehran, in which the Persian Gulf countries as a group, led b the Shah, negotiated with the companies as a group"

In other words, prior to the actual embargo in 1973, things had changed in the ME, and they were already upping the price and limiting production.

Price controls follow these changes, and of course, they were designed to increase US development and production.

[Stillers6SB]

So your saying every dollar made by exxon is from oil?

How much in taxes did they pay 30+ billion?

So the Gov't is taxing the company for billions and the people for billions.

And the subsidizing of corn to ethanol to the pump also?

I try not to villify anyone not breaking the law and paying the most taxes of anyone...

How many jobs do they provide? Winner!

You're right that they also had profits from natural gas and chemicals. Their financial reports don't give the splits for oil vs natural gas. Chemicals did contribute over $1.5 billion.

My numbers were way too simplified. But it's still obvious that Exxon makes much much more than 2 cents per gallon.

2 cents a gallon? BS

Try closer to 60 cents a gallon!

$10.65 billion profit on 18.6 billion gallons of gas. 57 cents. Not 2 cents.

[twa]

You want a source? ...it's on the damn page

Technological Change and

the Profit Motive

by Barry W . Poulson

Depamnent of Economics, University of Cobrado

http://mises.org/journals/jls/8_2/8_2_5.pdf

Government regulations were also imposed on the oil industry. The price of

petroleum products was controlled first by jawboning in 1969 and then by man-

datory controls in 1971. This period witnessed the most rapid rate of inflation

since the Civil War. As the real price of oil declined, the supply of domestically

produced petroleum declined and the share of petroleum imports increased. At

controlled prices, the earnings of oil producers declined, and there was little

incentive to invest. By the time of the oil embargo of 1973, we had only one-half

as many drilling rigs in operation in the continental U S . as we had had twenty

years before. Dependence on imported petroleum approached half of our total

consumption.)"

Although price controls on gasoline ended when the Arab embargo was lifted

in 1974, the Federal Energy Agency (FEA) continued to maintain price controls

on crude oil produced domestically. The price of old oil was controlled at about

$5.25 per barrel. New oil from wells put into production after November 1975,

plus output from old wells that exceeded the base period output levels, was con-

trolled at a price of about $1 1 per barrel.)'

or maybe you prefer MIT?

http://www.jstor.org/pss/3003214

[PeterMP]

You want a source? ...it's on the damn page

Technological Change and

the Profit Motive

by Barry W . Poulson

Depamnent of Economics, University of Cobrado

http://mises.org/journals/jls/8_2/8_2_5.pdf

Government regulations were also imposed on the oil industry. The price of

petroleum products was controlled first by jawboning in 1969 and then by man-

datory controls in 1971. This period witnessed the most rapid rate of inflation

since the Civil War. As the real price of oil declined, the supply of domestically

produced petroleum declined and the share of petroleum imports increased. At

controlled prices, the earnings of oil producers declined, and there was little

incentive to invest. By the time of the oil embargo of 1973, we had only one-half

as many drilling rigs in operation in the continental U S . as we had had twenty

years before. Dependence on imported petroleum approached half of our total

consumption.)"

Although price controls on gasoline ended when the Arab embargo was lifted

in 1974, the Federal Energy Agency (FEA) continued to maintain price controls

on crude oil produced domestically. The price of old oil was controlled at about

$5.25 per barrel. New oil from wells put into production after November 1975,

plus output from old wells that exceeded the base period output levels, was con-

trolled at a price of about $1 1 per barrel.)'

or maybe you prefer MIT?

http://www.jstor.org/pss/3003214

Did you read the MIT link?

The price controls were put in place AFTER prices started going up because of changes in the ME dynamics that I described in the post above.

During the 1973 crisis, US prices were lower than global prices, and the price controls incentivized new domestic production by allowing companies to charge more for oil from new sites than from old sites. Now, the oil companies did let completely operationally active wells sit there and not produce oil for a price that they had been selling at a profit before the crisis. Because during the crisis they could make more money from developing and selling oil from other wells. Of course, that sort of manipulation of "supply" is exactly what I'm talking about being part of the problem.

Prices went DOWN without changes in US price controls AFTER we had secured (what at the time appeared) to be reliable sources from oil from Iran and the Saudis.

Price went back UP in the late 1970s AFTER the Iranian revolution, without changes in the US price controls.

US production went DOWN in the the mid-1980s after complete removal of price controls during a period of time when oil prices were pretty low.

And prices went back up in the late 2000s without changes in US policy. Prices then went back down in 2008, which nobody that seriously looks at the matter was tied to changes in US policy.

And now global prices for raw crude are going back up, DESPITE the fact that what appears should be coming based on the EPAs efforts is a DECREASE in US consumption (and again, even coal prices are going up).

You really have to have a skewed view to look at the last 40 years and declare it is limits on US exploration that is driving prices.

[twa]

Did you read the MIT link?

The price controls were put in place AFTER prices started going up because of changes in the ME dynamics that I described in the post above.

You really have to have a skewed view to look at the last 40 years and declare it is limits on US exploration that is driving prices.

Ignore history if you wish...price controls were in effect in 71 and EXPANDED after the embargo

http://www.google.com/search?q=a+history+of+us+oil+price+controls&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a#q=a+history+of+us+oil+price+controls&hl=en&client=firefox-a&hs=aiu&sa=X&rls=org.mozilla:en-US:official&biw=1280&bih=572&tbs=tl:1,tll:1971,tlh:1971&prmd=ivnsb&ei=W7u-TY2vGYK4tweKp620BQ&ved=0CDYQzQEwAA&bav=on.2,or.r_gc.r_pw.&fp=822bf32b5c0e0691

US exploration and production are not the main driver,but they certainly can be a significant one IF govt policies do not interfere

You ignore the EPA regs will result in more NG/oil usage,as well as the fact the effect of embargoes (and the chance of them) is reduced with more domestic production sources.

Even O & co have seen the light.....now it is just a question of whether they put on the shades.

[PeterMP]

Ignore history if you wish...price controls were in effect in 71 and EXPANDED after the embargo

http://www.google.com/search?q=a+history+of+us+oil+price+controls&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a#q=a+history+of+us+oil+price+controls&hl=en&client=firefox-a&hs=aiu&sa=X&rls=org.mozilla:en-US:official&biw=1280&bih=572&tbs=tl:1,tll:1971,tlh:1971&prmd=ivnsb&ei=W7u-TY2vGYK4tweKp620BQ&ved=0CDYQzQEwAA&bav=on.2,or.r_gc.r_pw.&fp=822bf32b5c0e0691

US exploration and production are not the main driver,but they certainly can be a significant one IF govt policies do not interfere

You ignore the EPA regs will result in more NG/oil usage,as well as the fact the effect of embargoes (and the chance of them) is reduced with more domestic production sources.

Even O & co have seen the light.....now it is just a question of whether they put on the shades.

Are you even reading the sites you are giving links to:

http://news.google.com/newspapers?id=LQtaAAAAIBAJ&sjid=dEsNAAAAIBAJ&pg=7078,4341245&dq=a+history+of+us+oil+price+controls&hl=en

"The way he approached it was a tipoff to his economic philosophy. Rather than using the bludgeon, he sought ways to imporve the supply side-easier access to government timberlands, for example-in order to ease the pressure on process.

The same philosophy came through loud and clear in his National Association of Manufacturers speech last December.

At that time, Mr. Nixon announced a series of moves to increase the supply of oil being pumped from government owned land in an attempt to cut back a 25-cent increase in the price of crude."

This is from March of '71 where they are starting to talk about maybe using price controls. The previous Dec is Dec. 1970 where the post I already talked about OPEC negotiating increases in oil prices.

In other words, despite efforts by Nixon to increase production, by opening federal lands, actions by OPEC had driven prices up. Further uncertainity in the ME and actions by OPEC continued to drive up prices, which finally lead Nixon to consider price controls.

NG I agree with, but we aren't talking about NG. The EPA is also going after the refinement of oil. It isn't at all clear to me that the gain from using oil over coal isn't going to be lost in the increased restrictions of reining oil.

AND IF that what was really driving things, then the markets should also be looking at a substantial drop in US coal use, which should drive global prices down. The gain in oil and NG should be offset by a loss in coal, but that's not happening because coal is going up rapidly too.

You've already essentially admitted what is happening. The industry is looking at decreased use of their products longer term w/ replacement of new technology and improved effeciency, and therefore decreased incentives to do anything, but milk every bit of profit they can from existing wells.

We aren't going to see a significant increase in US production because companies aren't going to put in money into it unless there is some reason for them to believe that there will be a substantial market for the product in 10 years for them to get the money out, which doesn't make any sense to ensure if we are actually serious about becoming less dependent on oil.

That's also why the price of coal is going up. Because the people in the coal industry are looking a the same exact situation and the same exact information and making the same exact decision. They want to get every dollar they can out of their existing mines/resources before the importance of their commodity is decreased.

We have a choice either to transition to new technologies, which means going through a transitionary phase where the oil producers are going to try and get every bit of value out their current investment and paying for it, or ignoring the issues with oil and other fossil fuelsand comitting to them longer term to continue to encourage reinvestment.

Because independent of government action, if those industries feel like they are about to become less important, they are going to raise prices and slow investment to try and make as much money as possible.

Which is also why prices were going up prior to 2008 (coal and oil). Because the technology to diminish their importance is getting closer independent of the potential EPA regulations.

[twa]

Remove the restrictions and see if production does not follow,hell Shell has billions tied up in one Aaskan site they are slow walking approval on

wasting my breath

[PeterMP]

Remove the restrictions and see if production does not follow,hell Shell has billions tied up in one Aaskan site they are slow walking approval on

wasting my breath

Are you talking about the explatory wells they are trying to dig in deep water in the Arctic?

What percentage of explatory wells in deep water ever go to actual oil production (and we don't even need to get into the extra costs this will entail in terms of getting equipment to operate in the cold)?

[twa]

What percentage of wells not drilled produce oil??

I'm done,enjoy the fruit

[Thiebear]

But TWA, Chomerics said on this very board 6 years ago that it would take years to get the oil to Market, what good is it now.

[mardi gras skin]

http://post-gazette.com/pg/11121/1142937-373.stm

The price of gas is a dollar a gallon higher now than it was at this time a year ago. Most of the rise has come since Mr. Obama imposed a partial ban on drilling in the Gulf of Mexico.

The last oil price spike ended on July 14, 2008, which, noted Will Collier, "was the very same day then President George W. Bush lifted, by executive order, a federal ban on offshore drilling."

The price of oil began to rise again in January 2009, which, coincidentally, was the month Mr. Obama announced he would reverse Mr. Bush's order.

But only 1 percent of the oil price stories on the evening newscasts of ABC, NBC and CBS since the drilling moratorium was imposed have mentioned there might be a connection between administration policy and rising gasoline prices, noted the Business & Media Institute.

[PeterMP]

http://post-gazette.com/pg/11121/1142937-373.stm

Nobody mentions that there might be a connection because nobody that studies the issue actually believes there is a connection. I've already given twa a piece that included several economists that study oil prices.

[twa]

Nobody mentions that there might be a connection because nobody that studies the issue actually believes there is a connection. I've already given twa a piece that included several economists that study oil prices.

How did those economists work out for ya in the housing crash or even predicting the present prices?

You ignore they do not dismiss it as a factor,but rather as the primary

[DRSmith]

Bin laden is killed oil goes down

Oh there may be a terror attack in retaliation

Oil goes back up

Yep totally supply and demand

Meanwhile natural gas is so cheap right now companies will not bother developing new wells

[alexey]

How did those economists work out for ya in the housing crash or even predicting the present prices?

the swiss army knife of arguments

It also works well for climate change - scientists have been wrong before, which obviously means they are wrong whenever twa wants them to be.

[PeterMP]

How did those economists work out for ya in the housing crash or even predicting the present prices?

You ignore they do not dismiss it as a factor,but rather as the primary

The current oil prices?

Nobody I know claims to be able to predict oil prices because you can't predict what OPEC is going to do.

Different people predicted the housing bubble pop.

Generally, though just because something can't be predicted doesn't mean we can't do a good post-mortem.

Lot's of people died and nobody predicted they were going to die, but we still can figure out what killed them after the fact.