Oil economics - a likely ceiling on longterm prices?

[swbluto]

For those who are knowledgable, the short-term supply and demand curves are relatively inelastic. That means, if supply goes down a little, price goes up ALOT, if demand goes up by "a little", price goes up ALOT. But is the longterm demand curve relatively elastic? I guess calling it "elastic" may not be the best word because it could just be that the demand curve decreases in the future or moves to the left.

Basically, I kind of wonder if "really high prices" will ever be "reached" in that the sense that they'll average out to a high price. Some seem to predict $200 a barrel, but I wonder if that's realistic? Because, I would think, yes, it may peak there, but there'd be such a humongous push towards alternative fuels that the demand for oil would be decreased and that it'd stabilize at some lower 'ceiling price' in the long run. Also, people would move towards more efficient vehicles of all types, including 100 mpg mopeds, light aerodynamic vehicles and electrics further decreasing oil demand (I think somewhere around 70% of current oil usage goes towards personal transportation.)

What do you think the highest sustainable price for oil is (Let's say a 3 year average)? Obviously, it couldn't stay at $1,000,000 / barrel for 3 years because no one could buy but yet there'd still be oil supply available. It also doesn't seem likely it could sustain $400 a barrel, given that a lot of people would probably take up a bicycle rather than pay $10/gallon for gas. Though, the "I'm going to take a bicycle instead" gas dollar amount is a shifting figure...

 

[Matthijs]

Do not think $10 dollars a gallon is going to change human behavior. Where I live, (highest taxed gasoline prizes in the world) Holland prizes are between $7 and $10 dollars for years. I believe oil prices will be just as much as people are willing to pay. And when we will even see real high oil prices more dirtier alternates will come online. For example coal to liquid or tar sand extraction. Or we will burn more natural gas. (See gasland documentary on that one). First people will drive smaller cars. Here 25% of the car sales are small cars. Or more cars will drive on LPG. I think $75 to $100 will be the pain limit for future years.

 

[justadad1957]

100 usd soon and for maybe the next five years and maybe 200 plus in ten years would be hopefully a high side est
as the worlds population increases demand will rise
costs to extract remaining oil supply will contine to rise
its simple more demand and a more expensive supply will drive prices higher at the pump
peak oil is not some dream far off in the future
peak food will be coming also i believe
there will be more and more people doing research and finding places like this forum
so glad i have my ebikes
maybe some solar panels will be in my future budget

 

[liveforphysics]

I would actually love to see gasoline reach $10/gal here.

It always puts a smile on my face to watch SUVs getting crushed at the wrecking yards.

Unfortunately, fuel will never raise beyond the point of the cost of refining oil shale/sands into gasoline (unless the cost is just through taxes).

 

[swbluto]

Do not think $10 dollars a gallon is going to change human behavior. Where I live, (highest taxed gasoline prizes in the world) Holland prizes are between $7 and $10 dollars for years.

Yes, but, holland's settlement patterns we're influenced by relatively expensive gasoline, no? Someone in America could easily make the choice to live 60 miles away from work when gasoline was $1/gallon and with a 15 mpg vehicle, that was only $8 a day for a status vehicle like an SUV. For someone earning $120/day (After taxes), that's nothing.

However, you take the same person and go to holland where gasoline was, what, $7/gallon (?) and you can bet they'd be living a bit closer and with a more fuel efficient vehicle. That is, unless they wanted to pay $56 a day (Which is a considerably lower percentage of the population). So, people in Holland and the rest of Europe have, on average, a lower trip distance and more compact settlement patterns on average than America and have more fuel efficient vehicles. So, you aren't as effected by significant increases in price as Americans are because you're already adapted to high prices.

What I'm suggesting, is that Americans would follow the same adaptations that Europeans currently have if prices rose as high as it is in Europe. I don't know what those exact adaptations are, though, and it hurts when society as a whole hasn't adapted around high prices and then high prices come around. But, yeah, it seems unlikely people would convert to cycling en masse though a considerably larger proportion of people in Europe cycle for transportation, I believe.

You know, if Europe is lucky enough to have a constant additive tax (Like 2 euro, or whatever, instead of 250%) and assuming this constant is relatively large compared to future price movements, then Europe should be able to tolerate price shocks relatively well. If oil price increases by 100%, then the percentage increase that Europe would see would be less than that (And probably far less than that, maybe 30% or so).

 

[swbluto]

Unfortunately, fuel will never raise beyond the point of the cost of refining oil shale/sands into gasoline (unless the cost is just through taxes).

You're right, in that the price of a commodity will be the cost to extract oil will be that of the most expensive barrel (The profitable most expensive barrel; unprofitable operators would just shut down in the long run, and this is when rigs are abandoned, when increasing extraction costs surpass market value). So, until the quantity demanded outstrips the supply capability of shale/sands, conventional oil and deep sea, you're not likely to see any significant long term increases (You may see peaks with supply/demand fluctuations). However, the supply capability / ceiling of shale/sands is projected to be much, much lower than conventional supply and conventional supply is already decreasing (Or near to peaking, if you assume OPEC has a lot of spare capacity), so if demand was high enough or supply low enough such that the last person demanded that last cheapest available barrel that costs $220 dollars or whatever, oil would cost that much. Will this be a tolerable long run condition, though? If people suddenly pushed towards alternative energy sources and some revolutionary source was found, then demand for oil itself may actually decrease thus pushing down oil prices. And people would turn towards increased fuel efficiency in their transport as well as settlement patterns would likely get denser. During 2008, moped and scooter sales increased significantly, compact cars increased, SUV sales plummeted, etc. Significant changes in settlement patterns would likely require persistently high prices over several years, maybe even a decade or two.

 

[liveforphysics]

It's pretty simple as I see it.

The bulk of people will always go for the cheapest energy option present. That means the providers of the energy need to provide the cheapest energy if they want to function as a company.

If that meas barrels from OPEC, then they will buy barrels from OPEC. If that means barrels from shale/sand, then they use shale/sand. If that means deep sea oil, then they use deep sea oil. If that means some ethanol based bio-fuel, then they will use some ethonal based bio fuel. etc etc.

The moment some new player becomes cheaper, the previous player needs to reduce costs to be competitive (which should be easy with the reduced demand volumes inherent from having another player join, just cherry-pick the wells with the best $/oil ratio.)


Also, our money isn't worth sh*t right now. Doesn't really matter what the numerical value happens to be, $100, $200, $300, etc if your money is worth half (it's not that bad... yet) of what it used to be prior to Obamanation etc etc. It's just a number, the worth/value etc might be moving in the opposite direction while the numerical price increase.

 

[swbluto]

It's pretty simple as I see it.

The bulk of people will always go for the cheapest energy option present. That means the providers of the energy need to provide the cheapest energy if they want to function as a company.

If that meas barrels from OPEC, then they will buy barrels from OPEC. If that means barrels from shale/sand, then they use shale/sand. If that means deep sea oil, then they use deep sea oil. If that means some ethanol based bio-fuel, then they will use some ethonal based bio fuel. etc etc.

The moment some new player becomes cheaper, the previous player needs to reduce costs to be competitive (which should be easy with the reduced demand volumes inherent from having another player join, just cherry-pick the wells with the best $/oil ratio.)

It's true that buyers will seek the lowest price available (This is shown in the demand curve). However, when the "lowest price" supplies are exhausted by other buyers, buyers have no other option than to up the ante. And thus price goes up. This is described by the supply curve.

However, it's not quite as simple as buyer #1 pays $10 for the first barrel, buyer #2 pays $20 for the 200,000th barrel, buyer #3 pays $70 for the 88 billionth barrel.... if the last buyer is paying whatever x-amount, then generally all buyers pay that amount (Except for those who aren't trying to pay the cheapest for a commodity good). What happens is that oil suppliers who produce oil with the cheapest costs profit the most. The "cheapness" of production has little to do with the price if "supply is outstripped by demand". And, to realize the supply capability of the alternatives, you should look into that. I think most have found it isn't anywhere near as much as oil has been, though maybe only a little "leeway" is needed with each alternative to keep things in balance.

I think it's funny when people say "natural gas" is the ready alternative to oil, but they haven't seen what the supply capability gas has if a signficant percentage of the car fleet operated off gas. So far, gas has been mainly used for heating and industrial purposes, which is dwarfed by the energy used by transportation. Well, don't quote me on that. That depends on further quantitative analysis.

Also, our money isn't worth sh*t right now. Doesn't really matter what the numerical value happens to be, $100, $200, $300, etc if your money is worth half (it's not that bad... yet) of what it used to be prior to Obamanation etc etc. It's just a number, the worth/value etc might be moving in the opposite direction while the numerical price increase.

Maybe I have been following the wrong metrics, but hasn't inflation been kept relatively low over the past few years? Maybe there's other goods that are more important than that represented by the CPI index (But, it seems to fairly represent my purchases), like maybe imports... though a lot of CPI goods are imports.

 

[liveforphysics]

Maybe I have been following the wrong metrics, but hasn't inflation been kept relatively low over the past few years? Maybe there's other goods that are more important than that represented by the CPI index (But, it seems to fairly represent my purchases), like maybe imports... though a lot of CPI goods are imports.

What I'm saying is, make sure to keep your value of the US dollar in line with the "cost" of gasoline (or a barrel of oil). From looking at last month's inflation data, you can see that a $1 in 1986 was worth $1.99-$2.01 of todays US currency. (depending on the source you check)

So, with no change in the worth of a barrel of oil, if it was $50 a barrel then, it should be $100 a barrel now. (same oil value/worth/etc, just the US dollar is worth half what it was.)

 

[dogman dan]

FWIW, gas in the SW USA is cheaper now than it was relative to a typical blue collar workers pay in the last bad recession, 81-83. Even when it peaked close to 4 bucks here, it was about the same relative to a dollars worth as it was in 82. We really had a nice run though the 90's of cheap fuel.

Oil has always gone though brutal cycles of supply variations because of new fields discovered. There was a huge crash in price when the Crimea opened, and another when Texas broke. That may never happen again, but for sure, at 200 a barrel lots of other new types start to profit such as biofuels or wind turned into hydrogen, whatever. As well as crappy stuff lilke shale and tar sands. One thing we can count on for the future is no real long term stability in energy prices.

 

[wineboyrider]

swbluto wrote:

Also, people would move towards more efficient vehicles of all types, including 100 mpg mopeds, light aerodynamic vehicles and electrics further decreasing oil demand (I think somewhere around 70% of current oil usage goes towards personal transportation.)

You just brought up the biggest argument against the peak oil theory. How efficient do we become as the price of oil goes up? Real hard to guess, because when the price of gas went up in to the stratosphere last time trucks were driving slower, people were buying mopeds, people were car pooling etc. Some bought electric bikes and than never drove them again. Mopeds and scooters go on sale on craigslist as soon as gas goes back down to that "mental" price point.
UPS raised their shipping rates when gas went up last time, but they didn't go down after the price of gas went down. How efficient is that? Pure profit. :wink:

 

[wineboyrider]

Liveforphysics wrote :What I'm saying is, make sure to keep your value of the US dollar in line with the "cost" of gasoline (or a barrel of oil). From looking at last month's inflation data, you can see that a $1 in 1986 was worth $1.99-$2.01 of todays US currency. (depending on the source you check)

So, with no change in the worth of a barrel of oil, if it was $50 a barrel then, it should be $100 a barrel now. (same oil value/worth/etc, just the US dollar is worth half what it was.)

The CPI, PPI and all other measures of inflation are all based on the fiat dollar. The measures of inflation have all changed since, we went off the gold standard and ended the Bretton woods agreement. The price of oil to gold is the best measure of the real "cost" of oil. Because, the Federal Reserve can print as much money as it wants (if people want them) there can be no way of knowing how much or how many dollars are out there. Gold however, is relatively finite and although some is consumed (mostly in electrical applications like e-bikes!) it is accepted world wide as valuable. The other fact is that most major oil producing countries price their oil in US dollars except Iran (Euro dollar) so they will always get their value for their oil. So the price of oil is even more confusing now, because the US dollar is totally unstable! Oil producers don't care what they sell their oil for it's what they can buy with their oil that matters.

 

[swbluto]

Liveforphysics wrote :What I'm saying is, make sure to keep your value of the US dollar in line with the "cost" of gasoline (or a barrel of oil). From looking at last month's inflation data, you can see that a $1 in 1986 was worth $1.99-$2.01 of todays US currency. (depending on the source you check)

So, with no change in the worth of a barrel of oil, if it was $50 a barrel then, it should be $100 a barrel now. (same oil value/worth/etc, just the US dollar is worth half what it was.)

The CPI, PPI and all other measures of inflation are all based on the fiat dollar. The measures of inflation have all changed since, we went off the gold standard and ended the Bretton woods agreement. The price of oil to gold is the best measure of the real "cost" of oil. Because, the Federal Reserve can print as much money as it wants (if people want them) there can be no way of knowing how much or how many dollars are out there. Gold however, is relatively finite and although some is consumed (mostly in electrical applications like e-bikes!) it is accepted world wide as valuable. The other fact is that most major oil producing countries price their oil in US dollars except Iran (Euro dollar) so they will always get their value for their oil. So the price of oil is even more confusing now, because the US dollar is totally unstable! Oil producers don't care what they sell their oil for it's what they can buy with their oil that matters.

Well, here's gold prices over the past 10 years.

And here's the CPI index over the past decade.

While I understand how valuable "precious metals" can be used as a reference source, I'm a little skeptical of it during this period of history. The reasoning goes like this... there's been 3 major traditional classes of investment vehicles: stocks/bonds, commodities and real restate (Basically, they represent companies/"economic groups", land and physical capital). As far as I'm aware, stocks have been doing poorly over the past few years and real estate started going down the toilet in 2005, so it'd make sense that investment money would start to flow into perceived 'stable' precious commodities like gold, but the supply of gold is probably small relative to the money supply, so it and other precious metals would probably be vulnerable to significant money flow.

btw, the gold charts imply I could buy like 3 times the amount of goods after inflation if I had invested in gold in 2000 and cashed in now. Unless goods have gotten cheaper by "3 times" (Which contradicts the CPI data - it suggests they've become 1.3 times more expensive), I don't see how gold is a good reference of what my money is 'worth' since my money could buy substantially more goods. Well, unless those goods are mainly gold.

And, here's an inflation adjusted oil price chart.

Since they're calibrated by 2004 dolllars, you can pretty much plot todays prices on the graph after subtracting 13%. That means $80 right now is worth about, oh, ~70 on the graph which is certainly above the 1985 spike and definitely above the majority of the past price history, except during the "oil embargo" / middle-eastern wars era. Except, this time, the historically high prices are relatively stable and there are no significant supply impacts that I'm aware of such as an embargo, or wars causing significant oil supply disruptions.

 

[wineboyrider]

btw, the gold charts imply I could buy like 3 times the amount of goods after inflation if I had invested in gold in 2000 and cashed in now. Unless goods have gotten cheaper by "3 times" (Which contradicts the CPI data - it suggests they've become 1.3 times more expensive)

No just the opposite swbluto. Your dollar is 3 times less valuable!

 

[wineboyrider]

Chart showing the price of oil in U.S. dollars, Euros and in gold.

As we know, the price of oil rose steeply in this time frame. We pay more dollars for the same amount of oil. Those who purchased in Euros also pay more, though not as much as we paid in dollars. But if you compare the spot prices of oil to gold, there has been almost no increase!
The Federal Reserve is known to buy gold (with printed money) to keep Gold prices artificially low. Since, we don't really know how much money is printed and who get's the money there is no way of knowing what the price of dollars to oil is. Because, the dollar is dead. It can't tell you the value of anything anymore really, because it's supply is infinite.
Any comparisons of oil to any commodity other than a stable commodity like Gold to me is mute, because it only matters how much oil I can afford not how many $$$ my oil is worth. In other words, wealth is not how much money you have it's how many goods, services and conveniences I can afford to buy.

Simple Austrian Economics really actually too simple.

 

[swbluto]

In other words, wealth is not how much money you have it's how many goods, services and conveniences I can afford to buy.

That seems to be what we agree on. If you look at the gold prices, that suggests with the same amount of money in 2000, you'd be able to buy 4 times less goods in 2010. While, if you look at the CPI, that suggests you'd be able to buy 1.3 times less goods. Since CPI is a price index of a "typical basket of goods" (thus Consumer Price Index), I'd be inclined to think that's more indicative of my general 'buying power' and thus wealth than gold prices. And the dynamics behind gold prices have already been explained previously, though that's hypothetical at this point.

 

[veloman]

Good topic.

90% of drivers will still be filling their cars with gas at $10-$15 a gallon. They might cut out some of the needless trips and bitch and moan, but that's about it. Only a few will actually seek bikes, scooters and such. And the auto industry won't put out a 70mpg car bc they are idiots. Even though they could build one for that kind of mpg on the highway (aero), and no fancy hybrid.

Most people might spend 20-40 a week on gas. So at $10, they will be spending 80-160. A lot of people could still afford that and will still pay it, vs the alternative of biking or taking a bus or carpooling.


But true, I suppose there would be *some* changes when gas gets above $7 or so.

 

[swbluto]

Good topic.

90% of drivers will still be filling their cars with gas at $10-$15 a gallon. They might cut out some of the needless trips and bitch and moan, but that's about it. Only a few will actually seek bikes, scooters and such. And the auto industry won't put out a 70mpg car bc they are idiots. Even though they could build one for that kind of mpg on the highway (aero), and no fancy hybrid.

Most people might spend 20-40 a week on gas. So at $10, they will be spending 80-160. A lot of people could still afford that and will still pay it, vs the alternative of biking or taking a bus or carpooling.


But true, I suppose there would be *some* changes when gas gets above $7 or so.

Indeed, seems likely. But if oil is the reason behind higher gas prices, the influences/affects will be more complex than that. They don't just simply make driving more expensive. They make industries that use oil whether for shipping, production or material creation (like plastics) more expensive thus reducing the average wealth by decreasing output. So, it won't be just a simple case of people paying more for gas, but they'll be paying more for everything and/or (receiving less discretionary income and/or having higher unemployment). When you see yourself paying more for everything else, something has to give. But, given America's general per capita wealth, it seems like there's A LOT to cut before we get to the point of famine so it seems like famine shouldn't be a worry like it has been nearly all throughout human history. In poorer countries, it will be, and have you ever wondered why the spontaneous food riots of 2008 coincided directly with the oil price spikes of 2008?

http://en.wikipedia.org/wiki/2007%E2%80%932008_world_food_price_crisis

 

[dak664]

Since CPI is a price index of a "typical basket of goods" (thus Consumer Price Index), I'd be inclined to think that's more indicative of my general 'buying power' and thus wealth than gold prices.

Sadly the CPI no longer means anything, as a google search on "consumer price index manipulation" or "consumer price index hedonics" will convince you, e.g. http://www.safehaven.com/article/1458/using-the-consumer-price-index-to-rob-americans-blind. Substitution and hedonics are the main tools, the latter also used to inflate the GDP "growth" (for example if computers become 10% faster for the same price their contribution to GDP goes up 10%).

 

[swbluto]

Since CPI is a price index of a "typical basket of goods" (thus Consumer Price Index), I'd be inclined to think that's more indicative of my general 'buying power' and thus wealth than gold prices.

Sadly the CPI no longer means anything, as a google search on "consumer price index manipulation" or "consumer price index hedonics" will convince you, e.g. http://www.safehaven.com/article/1458/using-the-consumer-price-index-to-rob-americans-blind. Substitution and hedonics are the main tools, the latter also used to inflate the GDP "growth" (for example if computers become 10% faster for the same price their contribution to GDP goes up 10%).

Well, *that* sucks. Is there a "real index" anywhere? (Ok, I know someone is going to mention gold but I prefer a "real basket of goods" that I'm likely to buy because I don't buy gold often. )

 

[wineboyrider]

Sadly the CPI no longer means anything, as a google search on "consumer price index manipulation" or "consumer price index hedonics" will convince you, e.g. http://www.safehaven.com/article/1458/using-the-consumer-price-index-to-rob-americans-blind. Substitution and hedonics are the main tools, the latter also used to inflate the GDP "growth" (for example if computers become 10% faster for the same price their contribution to GDP goes up 10%).

Concur wholeheartedly! CPI and most definitely GDP mean nothing, because they are manipulated due to currency debauchery. I don't buy gold either, in fact I own none..zero. I can't afford it, because I am too busy consuming rather than saving like the majority of Americans. A good example of the CPI sham is the fact that the CPI shows that we are in a deflationary period right now and for some goods we are (housing for example), but the continued propping up of the housing market and the US dollar cause unknown ripple effects. I believe the oil fluctuations are one of them.?? Don't know. But, how can anyone predict the price of oil in the foreseeable future if you can't predict the amount of dollars in the foreseeable future? Deflation usually comes before a massive hyper-inflationary event when all things including oil will become expensive and you can burn your dollars in the wood stove, but you might still be able to gas your car up with a bar of gold.

swbluto: Economics is not an exact science, which is probably why I love it!
I am an economist by training anyway. But, if you want to know more read Hayek.

 

[swbluto]

In reference to GDP being meaningless due to "Current debauchery", assuming you mean currency, there's this thing called 'Real GDP' that accounts for inflation.

However, it does appear inflation as measured by CPI is controversial indeed. If the government is the one who calculates CPI (Or modifies its formulas) and the CPI is also tied to any financial programs they operate like medicare and social security, which it is, then I would certainly suspect an incentive to "cheat" by the government. So, I'm looking for other more independent measures of inflation.

This article at http://www.investopedia.com/articles/07/consumerpriceindex.asp compares the CPI and PCE price index as measures of inflation. Here's a tidbit I found interesting.

David Ranson, another U.S. economist, also questions the official CPI's viability as an indicator of inflation. Unlike Williams, Ranson doesn't espouse the viewpoint that the CPI is being manipulated. Instead, his view is that the CPI is a lagging indicator of inflation and is not a good indicator of current inflation. According to Ranson, increases in the price of commodities are a better indicator of current inflation because inflation initially affects commodity prices and it may take several years for this commodity inflation to work its way through an economy and be reflected in the CPI. Ranson’s preferred inflation measure is based on a commodity basket of precious metals.

If that's true, then there's some massive inflation coming up since the average precious metals price has nearly tripled over the past decade. But are precious metals really a good measure of "recent inflation"? This could be easily historically checked for validity. Checked against what, though? I think a simple basket of necessary goods should be enough, but for some reason, some think GDP needs to be introduced into the equation. Just because people buy more of higher quality goods as time goes on doesn't indicate inflation, that indicates growing living standards.

Like maybe, an average acre of american land. A constant number of pieces of wood to build a constant-sized house (No, inflation doesn't go up just because people pay more for a bigger house. :wink. A fixed baskets of foods. 20 articles of the cheapest available retail clothing.

 

[dak664]

A constant number of pieces of wood to build a constant-sized house (No, inflation doesn't go up just because people pay more for a bigger house.

In fact the ridiculously easy credit that led to the building boom has kept official inflation low since the CPI basket uses rent for the 40% housing component which goes down when fewer people are renting. Now that the price of homes is dropping I expect the gummint will substitute bought for rental homes in the basket. This could show growth as well since bigger homes for the same price will increase the GDP through hedonics!
[Insert fingers in ears] La la, la la la...

 

[deronmoped]

Everybody looks at the price of gas and compare it too how much it used to cost. They forget to factor in inflation, what they now make in wages, what is the gas mileage of the car they have compared to what they used to drive...

Back in the 1970's into the 1980's gas mileage was not all that great if you compare it too the cars we have now. I used to drive a Chev C10 that got maybe 8 to 10 MPG, now that same newer truck probably gets 14 to 16 MPG. Plus people are driving more smaller fuel efficient cars, the era of the large V8's is turning into the era of inline 4's.

I bet most peoples fuel use has dropped over the years. My fuel use has dropped dramatically. I burn about 20 gallons a month. I used to burn that much a week. I would bet if you compared peoples use of fuel 20 to 30 years ago, to what they use today, it's gone down quite a bit.

The point I'm getting at is, relative to each individual, people are getting around cheaper when it comes to fuel use. That has a huge effect on what they can push fuel prices to and still have people, that are financially able, to buy their product. All they have to do is figure out a way to do it without us taking their heads off. This is where politics, market forces, buying habits, human emotions... come into the picture.

Deron.

 

[wineboyrider]

In reference to GDP being meaningless due to "Current debauchery", assuming you mean currency, there's this thing called 'Real GDP' that accounts for inflation.

As Mises explained in his essay "Inflation: An Unworkable Fiscal Policy":

"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation."