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Thread: Why gas will hit $5 a gallon

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    Banned Eric Stoner's Avatar
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    Default Why gas will hit $5 a gallon

    So long as we have nitwits in the Congress like Charles Schumer, oil prices will continue to rise. Unless they are totally obivious to the basic laws of supply and demand, the only logical conclusion is that the Dems want oil prices to continue to rise and reach European levels i.e. gasoline at $8 to 10 a gallon.

    The primary reason oil is selling for over $140 a barrel is stagnant supply and increasing demand. Refusal to drill our own oil is telling the commodity traders that there wil not be any serious change for the better so they have gone long on petroleum; home heating oil and unleaded gasoline and will continue to do so.
    If Clinton had not vetoed drilling in ANWR in 1995 we'd have at least 1 million additional barrels of oil in the American market and oil would likely be selling well below $100 a barrel. Add in the collapsing dollar and about $25 to $30 gets added to every barrel. It's NOT the oil companies setting the price of a barrel of oil.



    The global warming true believers have become a genuine pain. The average temperature of the Earth has NOT increased since 1998. Not by a single tenth of one degree. There has been some unusual melting in the Arctic observed during the Summer ( these wonderful scientists never tell us what's happening there in the Winter ) but the Antarctic is getting COLDER. The French produce 85% of their electricity with nuclear power and the Japanese are right behind with zero
    accidents. The British and Norwegians drill offshore with zero spills. The Brazilians
    wil be drilling a huge oil field off their coast. Are all of them so much more advanced than us ?

    To make the current situation even more ridiculous; the same environmental extremists who chirp that "solar and wind will solve all our energy problems"
    are the same folks who scream that we can't put solar farms in our pristine deserts and that wind farms are too dangerous to flying birds.They want us all in
    electric cars heating our homes with thermal vents as we eat tofu and bean sprouts and get ready to bicycle 30 miles to work in a blizzard !. Btw, what are they going to run tractor trailers on ? And the big earth moving and heavy construction equipment.

    Enough already.I want everyone to go to their windows and shout " I'm fed up and I'm not going to take it anymore ! "

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    Banned Eric Stoner's Avatar
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    Default Re: Why gas will hit $5 a gallon

    Btw, the BIGGEST supporters of cheaper fuel prices ought to be strippers. How do you think custies get to most of your clubs ? How do you think they get to Vegas; Miami; Tampa and NYC ? We'll NEVER see an electric or biofuel jet.

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    Featured Member minnow's Avatar
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    Default Re: Why gas will hit $5 a gallon

    Agree with you on need to increase potential oil drilling sites (plus refinery capacity).
    How about the falling dollar that factors in the extra $25-$30/bbl?? The time may be to raise interest rates. Although not the lowest, rates are still lower than they've been for much of last qtr. century. Savers are being penalized by low rates. Even so, how much to raise would be a balancing act. They'd have to rise at least half a point, and probably more like 1 point to get a buzz from foreign investors, & raise the value of the dollar & drop oil prices much.
    Then, one doesn't want to choke US economy by too high rates, but high oil prices (again) are doing that anyway.

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    Default Re: Why gas will hit $5 a gallon

    ^^^ Eric, either you're 'preaching to the choir', or you're 'lecturing to the deaf' !

    To summarize a ton of past threads, the suburban US commuter culture, the US tourist industries (which obviously includes tourism cities), and all US 'goods production' industries, are totally dependent on the continuing availability of 'cheap transportation energy' to remain profitable / viable. On the other hand, huge cities based on service industries are not as dependent on 'cheap transportation energy'.


    Then, one doesn't want to choke US economy by too high rates, but high oil prices (again) are doing that anyway.
    the 'dirty little secret' is that higher interest rates would disproportionately affect the huge cities based on service industries (which are deeply in debt and dependent on muni bond sales with associated interest payments), as well as those service industries (i.e. banking, equities, cash flow businesses). Higher interest rates would also disproportionately affect the working 'poor' who typically live in/near those huge cities , who owe much and save nothing.

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    Default Re: Why gas will hit $5 a gallon

    Quote Originally Posted by Melonie View Post
    ^^^ Eric, either you're 'preaching to the choir', or you're 'lecturing to the deaf' !

    To summarize a ton of past threads, the suburban US commuter culture, the US tourist industries (which obviously includes tourism cities), and all US 'goods production' industries, are totally dependent on the continuing availability of 'cheap transportation energy' to remain profitable / viable. On the other hand, huge cities based on service industries are not as dependent on 'cheap transportation energy'.

    It seems strange sometimes; does it not ? ; to read "Green" propaganda here and elsewhere that directly conflicts with earning of the green.



    the 'dirty little secret' is that higher interest rates would disproportionately affect the huge cities based on service industries (which are deeply in debt and dependent on muni bond sales with associated interest payments), as well as those service industries (i.e. banking, equities, cash flow businesses). Higher interest rates would also disproportionately affect the working 'poor' who typically live in/near those huge cities , who owe much and save nothing.
    Rates have to rise and sooner rather than later. As it is, Bernanke has walked a tightrope trying to keep the banking system afloat to avoid a repeat of 1933. The question is how weak do we permit the dollar to be ? The only beneficiaries are
    exporters and those dependent on foreign tourists. Raising rates would strrengthen the dollar; encourage savings and result in reduced oil prices. Most importantly it would control inflation.

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    Default Re: Why gas will hit $5 a gallon

    ^^^ yes but raising rates would also force untold numbers of US homeowners (primarily variable interest rate) and US businesses (primarily cash flow business model and recent mergers) into rapid bankruptcy ! So to 'save' these undercapitalized and heavily indebted individuals and businesses, the gov't is very probably going to be extremely slow about raising interest rates - even though this screws the savers / retirees etc.

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    Default Re: Why gas will hit $5 a gallon

    Quote Originally Posted by Melonie View Post
    ^^^ yes but raising rates would also force untold numbers of US homeowners (primarily variable interest rate) and US businesses (primarily cash flow business model and recent mergers) into rapid bankruptcy ! So to 'save' these undercapitalized and heavily indebted individuals and businesses, the gov't is very probably going to be extremely slow about raising interest rates - even though this screws the savers / retirees etc.
    Um. Not necessarily. If, IF we rein in the money supply and slowly put the lid on we should avoid much of your doom and gloom scenario. Markets respond to signals and are largely based on expectations- e.g. "oil will continue to rise; GM will continue to experience tough times" so reversing the psychology is just as important as the actual reality.

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    Default Re: Why gas will hit $5 a gallon

    ^^^ agreed that this is true for investors, both individual and institutional. However, where Joe Sixpack is concerned, he doesn't earn interest he PAYS interest. So any increase in interest rates goes straight to his monthly budget in the form of higher credit card payments, higher ARM mortgage payments etc.

    Joe Sixpack also doesn't save money he OWES money. So from the Joe Sixpack perspective, other than its effect on energy and food prices inflation is a 'good' thing because a depreciating US dollar also depreciates his debts.

    In general, a depreciating US dollar has a mixed effect on Joe Sixpack's 401k ... depending on what sort of company stocks are in the 401k funds.

    Again I agree that sooner or later, if the US is going to avoid becoming a 3rd world economy it WILL be necessary for the powers that be to stop printing money like a drunken sailor. However, if the gov't can't use freshly printed money (i.e. money from additional treasury bond sales) to meet its foreign debts, it will have to meet those debts via tax increases !!! This is the essence of the 'caught between a rock and a hard place' criticism of the US fed ... the gov't either needs to print new dollars or confiscate additional dollars via tax increases, and both are bad for the US economy.

    Of course there is a third option, but this one has so far been unthinkable. The gov't could actually REDUCE the amount of money it spends to the point of achieving a positive cash flow in the absence of printing new dollars or increasing tax rates. However, this cannot be achieved by reducing the 'popular' (or perhaps politically correct is a better description) budget items alone i.e. military spending. In order to achieve a positive cash flow it would be necessary to A) cut spending on social welfare programs - B) significantly reduce public sector civilian employment - C) significantly reduce entitlement spending i.e. Social Security and Medicare - D) reduce 'someone's' pet subsidy i.e. ethanol / solar / wind / farm / God only knows !

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    Default Re: Why gas will hit $5 a gallon

    Quote Originally Posted by Melonie View Post
    ^^^ agreed that this is true for investors, both individual and institutional. However, where Joe Sixpack is concerned, he doesn't earn interest he PAYS interest. So any increase in interest rates goes straight to his monthly budget in the form of higher credit card payments, higher ARM mortgage payments etc.

    Joe Sixpack also doesn't save money he OWES money. So from the Joe Sixpack perspective, other than its effect on energy and food prices inflation is a 'good' thing because a depreciating US dollar also depreciates his debts.

    In general, a depreciating US dollar has a mixed effect on Joe Sixpack's 401k ... depending on what sort of company stocks are in the 401k funds.

    Again I agree that sooner or later, if the US is going to avoid becoming a 3rd world economy it WILL be necessary for the powers that be to stop printing money like a drunken sailor. However, if the gov't can't use freshly printed money (i.e. money from additional treasury bond sales) to meet its foreign debts, it will have to meet those debts via tax increases !!! This is the essence of the 'caught between a rock and a hard place' criticism of the US fed ... the gov't either needs to print new dollars or confiscate additional dollars via tax increases, and both are bad for the US economy.

    Of course there is a third option, but this one has so far been unthinkable. The gov't could actually REDUCE the amount of money it spends to the point of achieving a positive cash flow in the absence of printing new dollars or increasing tax rates. However, this cannot be achieved by reducing the 'popular' (or perhaps politically correct is a better description) budget items alone i.e. military spending. In order to achieve a positive cash flow it would be necessary to A) cut spending on social welfare programs - B) significantly reduce public sector civilian employment - C) significantly reduce entitlement spending i.e. Social Security and Medicare - D) reduce 'someone's' pet subsidy i.e. ethanol / solar / wind / farm / God only knows !
    Exactly ! One of Bush's many failings as POTUS was total failure to even try to control spending. Iraq, NCLB, Medicare etc. etc.
    And in the D.C. mentality spending restraint is a "budget cut". How many of us have had to make do for two or three years on the same income ? In other words, like me, what you're making this year is pretty much what you made in '07 and '06 ? A lot of people. Right ? Not the government. Forcing the Federals to spend this year what they spent last year is a "budget cut" that gets them squealing like stuck pigs. It's one way Clinton managed to get surpluses plus reckless cuts in defense and Intel spending.

    As far as Joe Sixpack is concerned, the system was rigged to encourage him to borrow and spend. It's the primary reason Paul Krugman and Robert Reich are dancing jigs of joy over the recession they predicted and rooted for over the past six years. ( Read their columns before chirping at me.)
    Entitlement reform is decades overdue.
    We ought to let the free market determine losers and winners in energy as with any other consumer field.

    Personally, if I chaired the Fed, I would have let at least one big bank go belly up without a FED bailout as an object lesson for everyone else. The Fed and the Gov't ought not reward bad behavior.

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