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The Impending International Food Crisis (pg. 5)
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| Krypton |
| quote: | Originally posted by jerZ07002
you are definitely missing the point. First, supply and demand is an aggregate concept. It takes an entire population of consumers to determine the supply and demand of a product. It is no different for living quarters and gasoline. To think that demand we create by using gas has little or nothing to do with the price of gas is naive. I will admit that speculation and political instability are components of gas pricing, but the largest price determinate is certainly demand for the product. Even if a products equilibrium isn't set 100% by market forces, the market forces still help determine the price at which people purchase that product. |
I think you are completely wrong here. You might have been right a few years ago, but oil prices are so far off what supply-demand would dictate, that it is my belief that more than 50% of the oil price is caused by forced other than supply-demand. The primary forces are...
1. Global conflict in oil producing regions, especially in Iraq and possibly Iran. (Risk Premium)
2. Oil speculators who have found that in an environment in which few assets are increasing in value, dollars are decreasing in value; oil is one of the only commodities which continues to rise, despite prevailing recessionary trends. They are not buying oil because they need it, they buy because it is one of the places in the market which continues to rise.
| quote: | | as for gas specifically, there are two solutions. One which is easier than the other. The easier solution is to pick up and move somewhere with transportation. Just because someone doesn't want to do it doesn't mean that it isn't an option or that it isn't feasible. Leb moved from Minnesota to DC and now uses the DC metro. I know he goes to school in DC but he could have easily chose an apartment where he couldn't take public transportation. The fact that it may not be an easy decision to leave your family doesn't make it any less a voluntary decision of yours. As for the stigma attached to it, that's a poor excuse for why you are "forced" to pay $3.50 a gallon. You're going to have to do better than that. There wouldn't be a stigma if more people did it. The only reason there is a stigma is because you and all your friends are 100% dependent on your cars. This can't change unless you take the necessary steps, ie., taking public transportation. You and most americans make a conscious decision to drive to work everyday instead of taking public transportation. your decision is one of tens of millions of decisions that are inhibiting the creation of a better public transportation system in this country. public transportation systems don't just spring up out of nowhere. like many products, the demand drives supply. |
As I stated before, public transit in this country is underdeveloped, so don't expect people to enthusiastically pack their bags and move to cities with New York-style public transit systems. It's not going to happen. The stigma is a result of the underdevelopment of the public transit system. It is not ubiquitous throughout the country, especially in cities which have a very good public transit system, but unfortunately, that is not most of the country. I don't think your understanding my reasoning. You think I'm just trying to make up excuses for not using public transit. I'm trying to explain to you, that using public transit is not practical to most people, and so they will not use it! I don't know how much easier I can explain it...
| quote: | | The second option, which is consistent with the aggregate notion of supply and demand, is that the people could demand denser housing that is more apt for efficient public transportation. All you need to do to contribute is to purchase in a downtown area. If more people started thinking like that then developers would take notice and develop properties that suited the desires of the people. Since people want 1 acre lots in florida off some highway in the middle of nowhere, they are implicitly saying that they want to rely on a car. That's a decision those people make and they know the consequences when they make that decision. It's the people's desires, not need, for automobiles that is creating this problem. If people changed their behavoirs and stop complaining then this problem would be mitigated to a large degree. |
You need to take into account the high property values inherent in living in the middle of a big city. People move to the suburbs in search of affordable real estate. You can't just tell people, "Pack up, move to the city, or STFU." It isn't that simple.
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We have diametrically different views of the economy, so we'll just leave it there...
Public transit SUCKS. It isn't practical unless you live in a huge metropolitan area which has developed the system for large numbers of people. Therefore private transit will remain the primary mode of transportation, and therefore, according to this reasoning, people are forced to pay for high gas prices. If you don't agree that, that's fine, but that's my view...:) |
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| Krypton |
| quote: | | you are definitely wrong that demand has little effect on price. Think if everyone didn't want gas anymore, how much do you suspect it would cost? |
Put it this way. If supply-demand dictated oil prices, the price per barrel would be $40-$50. So please don't tell me demand is driving up oil prices to such high levels as today, because it is not!
| quote: | | anyway, the price of gas and the price of oil are not the same thing. Gas is highly refined petroleum with additives. Gas prices are increasing also because of refining capacity. The US doesn't expand its refining capacity because it creates a shortage of supply, and the steady demand causes the price to shoot up when we can't increase supply to catch up with demand. I admit supply shock is the main cause of price spikes, but increased demand is also a huge determinate. here's another question, if china wasn't in the world market, how much do you think oil would cost per barrel? i'm sure it wouldn't be $115. |
The price of gas is inherently connected to the price of oil. Yes, it needs to be refined, but so what? Yes, we haven't built a refinery in decades. Doesn't matter. That does not justify a $3.50 a gallon gas price. The supply is more than enough to meet demand. Hell, we haven't even tapped the strategic gas supply of the country. I keep trying to tell you, supply-demand is not causing oil or gas to be at record highs because if it was, again I say, oil per barrel would be $40-50 and gas would be in the $2 range.
It does not matter what China are demanding. They have plenty of petrol too. China has excellent sources of oil in Africa, so saying we have gas prices because of China really has little basis. China has secured its own supplies. America has its own. And so on. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
I think you are completely wrong here. You might have been right a few years ago, but oil prices are so far off what supply-demand would dictate, that it is my belief that more than 50% of the oil price is caused by forced other than supply-demand. The primary forces are...
1. Global conflict in oil producing regions, especially in Iraq and possibly Iran. (Risk Premium)
2. Oil speculators who have found that in an environment in which few assets are increasing in value, dollars are decreasing in value; oil is one of the only commodities which continues to rise, despite prevailing recessionary trends. They are not buying oil because they need it, they buy because it is one of the places in the market which continues to rise. |
no, i'm right today. i'm not saying your factors aren't important, what i'm saying is that supply and demand still drive the price. you should really rip out the economics book on this one, this is pretty basic stuff. even if other factors effect price, it still has everything to do with supply and demand. If americans all of a sudden didn't demand oil, the price would plummet. At that point, geopolitical instability would mean . If that were to happen, saudi arabia and iran would have excess oil and then they would be forced to sell their reserves for less.
since you are simply pulling that 50% number out of your ass i won't argue that because we won't resolve it. but since you attribute 50% of the cost to those two what accounts for the other 50% of cost in your mind?
even assuming your factors drive 50% of the price, that still has everything to do with supply and demand. political instability is a fear of supply shock. your second factor is increasing demand for the product. the fact that it is being purchased on the future market to protect against inflation doesn't make the product any less in demand. once someone purchases the product for that price they have every right to sell it to end users at that price.
| quote: | Originally posted by Krypton
As I stated before, public transit in this country is underdeveloped, so don't expect people to enthusiastically pack their bags and move to cities with New York-style public transit systems. It's not going to happen. The stigma is a result of the underdevelopment of the public transit system. It is not ubiquitous throughout the country, especially in cities which have a very good public transit system, but unfortunately, that is not most of the country. I don't think your understanding my reasoning. You think I'm just trying to make up excuses for not using public transit. I'm trying to explain to you, that using public transit is not practical to most people, and so they will not use it! I don't know how much easier I can explain it...
You need to take into account the high property values inherent in living in the middle of a big city. People move to the suburbs in search of affordable real estate. You can't just tell people, "Pack up, move to the city, or STFU." It isn't that simple.
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We have diametrically different views of the economy, so we'll just leave it there...
Public transit SUCKS. It isn't practical unless you live in a huge metropolitan area which has developed the system for large numbers of people. Therefore private transit will remain the primary mode of transportation, and therefore, according to this reasoning, people are forced to pay for high gas prices. If you don't agree that, that's fine, but that's my view...:) |
your entire argument is based on the fact that people do not want to do it. simple as that. i get your point, but that's does not mean people don't have choices. also, with respect to the comment about people moving out of the city for more affordable housing, that doesn't mean people need to move into an area where houses are on one/two acre lots. lower cost neighborhoods that are now suburbs could have just as easily developed as smaller cities. suburbs are much more expensive to maintain and develop than cities. what makes you think that 500 houses spread over 500 acres is cheaper than 500 houses on 100 acres? if you truly believe that it is you are absolutely wrong. the more distant homes are from each other the more pipes, streets, etc... that need to be built and maintained. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
Put it this way. If supply-demand dictated oil prices, the price per barrel would be $40-$50. So please don't tell me demand is driving up oil prices to such high levels as today, because it is not! |
quanitify that. how can you tell me that the price would be 40-50? you have absolutely no idea about the supply and demand pressures around the world.
| quote: | Originally posted by Krypton
The price of gas is inherently connected to the price of oil. Yes, it needs to be refined, but so what? Yes, we haven't built a refinery in decades. Doesn't matter. That does not justify a $3.50 a gallon gas price. The supply is more than enough to meet demand. Hell, we haven't even tapped the strategic gas supply of the country. I keep trying to tell you, supply-demand is not causing oil or gas to be at record highs because if it was, again I say, oil per barrel would be $40-50 and gas would be in the $2 range.
It does not matter what China are demanding. They have plenty of petrol too. China has excellent sources of oil in Africa, so saying we have gas prices because of China really has little basis. China has secured its own supplies. America has its own. And so on. |
where are you getting this information from? how do you know our supply is sufficient? how do you know how much oil china is getting from africa? you have no idea!!
just because you keep saying that it isn't supply and demand driving the prices doesn't mean that is true; it clearly doesn't mean i believe it. |
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| Krypton |
| quote: | Originally posted by jerZ07002
no, i'm right today. i'm not saying your factors aren't important, what i'm saying is that supply and demand still drive the price. you should really rip out the economics book on this one, this is pretty basic stuff. even if other factors effect price, it still has everything to do with supply and demand. If americans all of a sudden didn't demand oil, the price would plummet. At that point, geopolitical instability would mean because we wouldn't be purchasing the product. If that were to happen, saudi arabia and iran would have excess oil because we wouldn't be buying it, and then they would begin selling it for less money to get rid of their reserves. |
When an asset enters bubble territory, as oil has done, supply and demand takes a backseat...
| quote: | | since you are simply pulling that 50% number out of your ass i won't argue that because we won't resolve it. but since you attribute 50% of the cost to those two what accounts for the other 50% of cost in your mind? |
I didn't pull 50% out of my ass...:rolleyes:
Let's refer to page 3 again when I posted...
| quote: | 3. Much of the price of gas is not a result of supply and demand. A good percentage of the oil price is something called the "risk premium". It ranges 20-30% by most analyst estimations. This is a result of increased levels of violence, terrorism, and war in the Middle East and other oil producing countries like Nigeria. Another factor in the oil price is something I call the "speculator's premium" which is the rise in oil prices due to speculative buyers by financial traders. This premium is in the range of 30-40%. Also take note, that the risk and speculative premiums partially overlap at times, such as a unrest in Nigeria convincing traders to buy more oil futures contracts, thus driving up oil prices. Also take note that none of this has anything to due with the supply or demand of oil commodities themselves or OPEC. It is all wicked psychology.
http://www.msnbc.msn.com/id/4962032/
http://www.latimes.com/news/opinion...inion-rightrail |
So more than 50% of the oil price is not a result of supply-demand but of the risk and speculator's premium. After that, THEN supply and demand come to play. Also a falling dollar spurs speculator's to load up on hard assets which oil would be the most prominent.
| quote: | | your entire argument is based on the fact that people do not want to do it. simple as that. i get your point, but that's does not mean people don't have choices. also, with respect to the comment about people moving out of the city for more affordable housing, that doesn't mean people need to move into an area where houses are on one/two acre lots. lower cost neighborhoods that are now suburbs could have just as easily developed as smaller cities. suburbs are much more expensive to maintain and develop than cities. what makes you think that 500 houses spread over 500 acres is cheaper than 500 houses on 100 acres? if you truly believe that it is you are absolutely wrong. the more distant homes are from each other the more pipes, streets, etc... that need to be built and maintained. |
You completely skipped over the underdevelopment of most of American public transit infrastructure. So no, my argument is not based on what people don't want to do. It is based on the practicality of using an antiquated public transit system. I'll say for the 3rd or 4th time, IT SUCKS. If it sucks, why would people want to use it? They don't, so they use cars. Cars are the only practical way of getting around in most of the country, so therefore, people have to fill up their gas tanks at the prevailing gas prices. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
When an asset enters bubble territory, as oil has done, supply and demand takes a backseat...
I didn't pull 50% out of my ass...:rolleyes:
Let's refer to page 3 again when I posted...
So more than 50% of the oil price is not a result of supply-demand but of the risk and speculator's premium. After that, THEN supply and demand come to play. Also a falling dollar spurs speculator's to load up on hard assets which oil would be the most prominent. |
the problem i see with your formula is where does production cost and delivery cost come in to play.
we'll just agree to disagree on this one.
| quote: | Originally posted by Krypton
You completely skipped over the underdevelopment of most of American public transit infrastructure. So no, my argument is not based on what people don't want to do. It is based on the practicality of using an antiquated public transit system. I'll say for the 3rd or 4th time, IT SUCKS. If it sucks, why would people want to use it? They don't, so they use cars. Cars are the only practical way of getting around in most of the country, so therefore, people have to fill up their gas tanks at the prevailing gas prices. |
no i didn't. you seem to be missing the point that a transportation infrastructure can't pop out of nowhere. people have to make the necessary steps to enable the system to grow. people don't want to make those choices. |
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| Krypton |
| quote: | Originally posted by jerZ07002
the problem i see with your formula is where does production cost and delivery cost come in to play.
we'll just agree to disagree on this one. |
Production cost and delivery falls into the remaining % of the cost of a barrel of oil. As I stated before, supply-demand, as stated by OPEC themselves, would dictate a reasonable price of oil at $40-$50 a barrel, which would include production costs and delivery.
| quote: | | no i didn't. you seem to be missing the point that a transportation infrastructure can't pop out of nowhere. people have to make the necessary steps to enable the system to grow. people don't want to make those choices. |
Let me use Tampa as an example. The Tampa Bay area is about 50 miles across. Now, if I live 20 miles from downtown Tampa, using a bus would take me substantially more than 1 hour to get there, with all the stops, bus changes, etc. There is no train or metro line straight into the city. In fact, some idiot had the lofty idea of building a toll road from my area to downtown, which only cars can use, and it's $6 round trip! Are you starting to see what I'm trying to say? I am not going to move to a more expensive neighborhood just to use the easier public transit inside the downtown proper, nor am I going to sit on a bus for an hour and a half for a one way trip.
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We'll just agree to disagree, YAYYY!! :gsmile: |
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| Lebezniatnikov |
| quote: | Originally posted by Krypton
the underdevelopment of most of American public transit infrastructure. So no, my argument is not based on what people don't want to do. It is based on the practicality of using an antiquated public transit system. I'll say for the 3rd or 4th time, IT SUCKS. If it sucks, why would people want to use it? They don't, so they use cars. Cars are the only practical way of getting around in most of the country, so therefore, people have to fill up their gas tanks at the prevailing gas prices. |
Antiquated public transit system? Who's fault is that? Don't you think that if Americans demanded better transit, or started taking it in greater numbers, that investment would soon follow? I would think that a good deal of money could be made in private mass transportation as well if there were a demand for it. The fact of the matter is that in places like Tampa there is no demand, not that infrastructure is poor. |
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| jerZ07002 |
| quote: | Originally posted by Lebezniatnikov
Antiquated public transit system? Who's fault is that? Don't you think that if Americans demanded better transit, or started taking it in greater numbers, that investment would soon follow? I would think that a good deal of money could be made in private mass transportation as well if there were a demand for it. The fact of the matter is that in places like Tampa there is no demand, not that infrastructure is poor. |
+1...well said.
new york city's public transportation system didn't just appear and then the demand followed. there was a demand for the public transportation system and they built it to meet that demand. there is no way the state of florida is going to invest 10 billion in public transportation when people want to live on huge lots far removed from downtown areas and people like yourself attach a stigma to using public transportation. the person with the bright idea to make that $6 toll highway was providing the necessary highway to meet your demands. you are one of 16 million reasons that highway was built. i don't know why it's not getting through that you and your neighbors are the reason there isn't a public transportation system. your decisions affect the kinds of transportation systems you have. you can't even blame this on other people's decisions to build developments that way because at the end of the day the population of florida wants suburban sprawl. those houses are only built that way because there is a demand for it. |
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| Krypton |
Haha, well you guys expect the federal government to invest in improving public transit, yet, our infrastructure does not even get improvement. So what if people start riding the antiquated public transit systems? The government is bogged down as it is fighting foreign wars.
Look ---> http://www.msnbc.msn.com/id/7137552/
This is all a part of my reasoning supporting my theory on high oil markets. We can always agree to disagree on economics. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
Haha, well you guys expect the federal government to invest in improving public transit, yet, our infrastructure does not even get improvement. So what if people start riding the antiquated public transit systems? The government is bogged down as it is fighting foreign wars.
Look ---> http://www.msnbc.msn.com/id/7137552/
This is all a part of my reasoning supporting my theory on high oil markets. We can always agree to disagree on economics. |
it appears you have the same misconception about infrastructure that most do: infrastructure is not a federal government responsibility. it is the responsibility of the state to maintain its infrastructure. while the federal government provides transportation assistance, most funding comes straight from the states.
A small segment of a new subway line being built in NYC is costing in excess of $4 billion, of which the fed is only providing 1.3 billion over 7 years. The total cost is approximated at well over 15 billion dollars, most of which will be paid for by state bonds, fare increases, and city taxes. |
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| daydreamer |
point goes to jerZ
on the whole public transport thing.
at least it makes more sense to me.
if public transportation sucks in the U.S., imagine a third world country PT system, now that is the suckiest thing that ever sucked, yet people still use them.
in guatemala, where i'm from, the buses are not run by the government but by private companies who compete with one another for customers. they are packed all the way, and i mean all the way (three or four on each side with all the rest, standing up.)
you wake up at 4 or 5 in the morning to catch the bus, and it's already packed. it takes you to the next town where you work, a good 1 hour away. you work longer hours and the pay is not even 1/10 of what you would make in the U.S. and oh yes, gas is more expensive over there.
so yeah... quit your whining, and get on the bus. |
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