What will soaring oil prices do to alternative products?

yopappamon

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I recently purchased several solar panels off ebay, before oil started climbing. I've noticed recently that the same solar panels have almost doubled in sale price.

As oil goes higher, what do you think will happen to alernative engery product prices?

Short term higher due to increased demand? Longer term lower due to economies of scale kicking in? Transportation costs escalating offsetting any reduced product costs? Through the roof because oil affects everything?

Ebike batteries may mirror other alternative products since they have common materials and manufacturing plants?

I'm considering picking up some NiFe batteries for a future solar project. I'm wondering if buying sooner than later might be wise.
 
A substitute good, in contrast to a complementary good, is a good with a positive cross elasticity of demand. This means a good's demand is increased when the price of another good is increased. Conversely, the demand for a good is decreased when the price of another good is decreased. If goods A and B are substitutes, an increase in the price of A will result in a leftward movement along the demand curve of A and cause the demand curve for B to shift out. A decrease in the price of A will result in a rightward movement along the demand curve of A and cause the demand curve for B to shift in.


Classic examples of substitute goods include margarine and butter, or petroleum and natural gas (used for heating or electricity). The fact that one good is substitutable for another has immediate economic consequences: insofar as one good can be substituted for another, the demand for the two kinds of good will be bound together by the fact that customers can trade off one good for the other if it becomes advantageous to do so.
 
I've been reading about margin compression. Where companies are absorbing the costs of rising raw materials without raising prices. Another reason why unemployment is still so high. At some point they can't absorb anymore and have to raise prices or fold. I'm not sure how that effects non-US dollar based countries. Meaning, as the US prints more $ it deflates the buying power of existing money, part of the cause of rising comodity prices. But if you are buying your raw materials in Yuan not dollars maybe they aren't affected.
 
I've been reading about margin compression. Where companies are absorbing the costs of rising raw materials without raising prices. Another reason why unemployment is still so high. At some point they can't absorb anymore and have to raise prices or fold. I'm not sure how that effects non-US dollar based countries. Meaning, as the US prints more $ it deflates the buying power of existing money, part of the cause of rising comodity prices. But if you are buying your raw materials in Yuan not dollars maybe they aren't affected.

Margin compression is just a fancy word for inflation for producers and business. In non fiat market producers can adsorb a tremendous amount of costs. The efficient producers of solar panels are hoping to survive and push out their "weaker" competitors. Once the "weaker" competitors are squeezed out they will surely raise prices in order to become more profitable again. As far as whether you or I are buying anything in Yuan or whatever currency it really doesn't matter, because right now the reserve currency of the world is the US dollar. So if we print more dollars the world's currencies are inflated with it. Eventually, the world will tire of this and drop the US dollar as reserve currency. In fact, there is already tremendous pressure by China, Russia and OPEC to create a new global currency to replace the dollar. Once this happens our treasuries will be worthless and the US will be in deep doo doo. Oil will be expensive as hell and so will food and all commodities. Look at the bright side: The US dollar has been the longest running Fiat currency regime in the history of the world. The down side: All Fiat currencies have failed and failed miserably :( :( :( :( :( :( :( :( :( :(
 
Hard to beat Chinese PV panel prices. But, when demand goes up, its not just the US thats buying them. Its the entire globe.

If you are serious about NiFe batteries for your RE home storage, Iron is plentiful and cheap, but Nickel has nowhere to go but up. Nickel prices took a little dip when Lithium-family batteries began significantly replacing NiCDs and NiMHs a couple years ago, but nickel miners didn't pack up and close their doors. Nickel is still a key element in many flavors of stainless steel.

20 years from now, your NiFe batteries may have lost enough capacity that you may want to replace them...20 years from now, what will the recycler pay for recoverable nickel?...a lot more than a worn out set of Flooded-Lead-Acids (FLAs)
 
Substitution of lower priced products sounds feasible when applied margarine vs. butter or coal vs oil, but when translated to energy it does not work. Barring outrageous fixed costs, the lowest priced energy will always be that with the highest EROI (energy returned on energy invested). If you can use existing energy sources costing x per kWh and make n*x kWh to sell you will can make an n-fold return on investment. A hundred years ago n was 100 for oil wells; now it is less than 30 in the best case and averaging around 5. When EROI for oil drops below that of renewables then those will ultimately set the price. In the meantime we might as well enjoy the fiesta.
 
dak664 said:
Substitution of lower priced products sounds feasible when applied margarine vs. butter or coal vs oil, but when translated to energy it does not work. Barring outrageous fixed costs, the lowest priced energy will always be that with the highest EROI (energy returned on energy invested). If you can use existing energy sources costing x per kWh and make n*x kWh to sell you will can make an n-fold return on investment. A hundred years ago n was 100 for oil wells; now it is less than 30 in the best case and averaging around 5. When EROI for oil drops below that of renewables then those will ultimately set the price. In the meantime we might as well enjoy the fiesta.
I agree, but we have subsidies for oil and ad infinitum so this confuses it even more!
 
You gents seem to have an interest in economics and the US "Printing of Money..." As part of my reading I dug deeper into the Federal Reserve Annual reports. The 2010 Fed Reserve Cleveland district report is full of inflation articles. This one in particular I found interesting and worth of understanding: "How can the Federal Reserve keep all the money it’s been “printing” from developing into runaway inflation?"

You can see that the lending to financial institutions is now over, and the "printing" is mostly sitting in bank reserves. This is the reason we have not seen run away inflation to date. The "printing" is NOT in circulation, it is in reserves. My layman understanding is basically it was used to "prop up" the defaults in the banking system. For the past 2 or 3 years you and I have been getting squat on our deposits, while the banks lend at 6 lor 7 percent. This "spread" is about double what they usually get. So all of us with depostis are bankrolling the recovery of the banks. If the Fed Reserve draws back these reserves as economic activity increases, they "should" be able to control inflation. If these reserves "circulate" we are screwed. See pages 16 and 17 of the report on this link:
http://www.clevelandfed.org/about_us/annual_report/2010/pdf/complete_publication.pdf
 
Exactly Bigmoose! Here is the Dr.'s prescription. Dr. Paul that is.
http://www.tnr.com/article/politics/91224/ron-paul-debt-ceiling-federal-reserve
Ron Paul’s Surprisingly Lucid Solution to the Debt Ceiling Impasse

Dean Baker
July 2, 2011 | 12:00 am

Representative Ron Paul has hit upon a remarkably creative way to deal with the impasse over the debt ceiling: have the Federal Reserve Board destroy the $1.6 trillion in government bonds it now holds. While at first blush this idea may seem crazy, on more careful thought it is actually a very reasonable way to deal with the crisis. Furthermore, it provides a way to have lasting savings to the budget.

The basic story is that the Fed has bought roughly $1.6 trillion in government bonds through its various quantitative easing programs over the last two and a half years. This money is part of the $14.3 trillion debt that is subject to the debt ceiling. However, the Fed is an agency of the government. Its assets are in fact assets of the government. Each year, the Fed refunds the interest earned on its assets in excess of the money needed to cover its operating expenses. Last year the Fed refunded almost $80 billion to the Treasury. In this sense, the bonds held by the Fed are literally money that the government owes to itself.

Unlike the debt held by Social Security, the debt held by the Fed is not tied to any specific obligations. The bonds held by the Fed are assets of the Fed. It has no obligations that it must use these assets to meet. There is no one who loses their retirement income if the Fed doesn’t have its bonds. In fact, there is no direct loss of income to anyone associated with the Fed’s destruction of its bonds. This means that if Congress told the Fed to burn the bonds, it would in effect just be destroying a liability that the government had to itself, but it would still reduce the debt subject to the debt ceiling by $1.6 trillion. This would buy the country considerable breathing room before the debt ceiling had to be raised again. President Obama and the Republican congressional leadership could have close to two years to talk about potential spending cuts or tax increases. Maybe they could even talk a little about jobs.

In addition, there’s a second reason why Representative Paul’s plan is such a good idea. As it stands now, the Fed plans to sell off its bond holdings over the next few years. This means that the interest paid on these bonds would go to banks, corporations, pension funds, and individual investors who purchase them from the Fed. In this case, the interest payments would be a burden to the Treasury since the Fed would no longer be collecting (and refunding) the interest.

To be sure, there would be consequences to the Fed destroying these bonds. The Fed had planned to sell off the bonds to absorb reserves that it had pumped into the banking system when it originally purchased the bonds. These reserves can be created by the Fed when it has need to do so, as was the case with the quantitative easing policy. Creating reserves is in effect a way of “printing money.” During a period of high unemployment, this can boost the economy with little fear of inflation, since there are many unemployed workers and excess capacity to keep downward pressure on wages and prices. However, at some point the economy will presumably recover and inflation will be a risk. This is why the Fed intends to sell off its bonds in future years. Doing so would reduce the reserves of the banking system, thereby limiting lending and preventing inflation. If the Fed doesn’t have the bonds, however, then it can’t sell them off to soak up reserves.

But as it turns out, there are other mechanisms for restricting lending, most obviously raising the reserve requirements for banks. If banks are forced to keep a larger share of their deposits on reserve (rather than lend them out), it has the same effect as reducing the amount of reserves. To take a simple arithmetic example, if the reserve requirement is 10 percent and banks have $1 trillion in reserves, the system will support the same amount of lending as when the reserve requirement is 20 percent and the banks have $2 trillion in reserves. In principle, the Fed can reach any target for lending limits by raising reserve requirements rather than reducing reserves.

As a practical matter, the Fed has rarely used changes in the reserve requirement as an instrument for adjusting the amount of lending in the system. Its main tool has been changing the amount of reserves in the system. However, these are not ordinary times. The Fed does not typically buy mortgage backed securities or long-term government bonds either. It has been doing both over the last two years precisely because this downturn is so extraordinary. And in extraordinary times, it is appropriate to take extraordinary measures—like the Fed destroying its $1.6 trillion in government bonds and using increases in reserve requirements to limit lending and prevent inflation.

In short, Representative Paul has produced a very creative plan that has two enormously helpful outcomes. The first one is that the destruction of the Fed’s $1.6 trillion in bond holdings immediately gives us plenty of borrowing capacity under the current debt ceiling. The second benefit is that it will substantially reduce the government’s interest burden over the coming decades. This is a proposal that deserves serious consideration, even from people who may not like its source.
If more people understood the problem like Bigmoose than we wouldn't be in this situation. 8) 8) 8)
 
Bigmoose, that's what I've read, also re: the printed money setting as reserves and not having the effect of inflating the money supply like it would in circulation. Others have also written that some of it does make it into circulation as loans are given out.

Isn't what we are seeing technically Stagflation? Inflation is rising prices due to excess demand. Deflation is lower prices due to excess supply. Stagflation is rising prices and dropping demand.

Whatever you call it we are screwed! It's just a matter of time. QE2 is ending, no one will buy treasuries at the low rates, rates will rise, economy will stall further, QE3 through 100 will begin, printing pressing go into overdrive, and something between Zimbabwe to Argentina will happen here. Throw in another war or two for good measure....
 
yopappamon said:
Bigmoose, that's what I've read, also re: the printed money setting as reserves and not having the effect of inflating the money supply like it would in circulation. Others have also written that some of it does make it into circulation as loans are given out.

Isn't what we are seeing technically Stagflation? Inflation is rising prices due to excess demand. Deflation is lower prices due to excess supply. Stagflation is rising prices and dropping demand.

Whatever you call it we are screwed! It's just a matter of time. QE2 is ending, no one will buy treasuries at the low rates, rates will rise, economy will stall further, QE3 through 100 will begin, printing pressing go into overdrive, and something between Zimbabwe to Argentina will happen here. Throw in another war or two for good measure....
Have you looked at food prices lately? How about gasoline? No inflation my ass!
What Bigmoose is talking about is HYPERINFLATION!
If the QE3 money is unleashed on the economy all hell is going to break loose!
 
wineboyrider said:
Have you looked at food prices lately? How about gasoline? No inflation my ass!
What Bigmoose is talking about is HYPERINFLATION!
If the QE3 money is unleashed on the economy all hell is going to break loose!

Why don't you know that food and gas are not purchased by people and thats why our government excludes them from their inflation calculations? And when apple comes out with a new iPad that is twice as fast for the same price, the govmt factors it as if the price was cut in half in their inflation calculations? And since no one owns a home anymore, they don't factor actual home ownership cost, they use a rental equivalent rate. If they used the same formulas for inflation that they did in 1980, that actual inflation rate would be over 11%.

You will find no argument with me, wineboy. Hell is already Breaking loose, you just don't hear much about it.
 
yopappamon said:
wineboyrider said:
Have you looked at food prices lately? How about gasoline? No inflation my ass!
What Bigmoose is talking about is HYPERINFLATION!
If the QE3 money is unleashed on the economy all hell is going to break loose!

Why don't you know that food and gas are not purchased by people and thats why our government excludes them from their inflation calculations? And when apple comes out with a new iPad that is twice as fast for the same price, the govmt factors it as if the price was cut in half in their inflation calculations? And since no one owns a home anymore, they don't factor actual home ownership cost, they use a rental equivalent rate. If they used the same formulas for inflation that they did in 1980, that actual inflation rate would be over 11%.

You will find no argument with me, wineboy. Hell is already reaching loose, you just don't hear much about it.
Great! I thought you might have been one of those "opiate" masses that Karl Marx wrote about. The PPI and the CPI have been manipulated for years! So are the unemployment numbers. Read carefully Ron Paul's destruction proposal and you will see that it's not too late!
 
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