Oil economics - a likely ceiling on longterm prices?

[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.

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."

What word, then, you would suggest would reflect the total sum of a basket of good's average price increase, whose influenced by things like money supply('proper inflation'), energy supply, material supply and demand "supply"(The amount of demand)? Ultimately, I care about my "buying power", which is not a 1-1 relationship with the money supply.

If we look at the money supply, according to wikipedia,

It looks like the M2 was roughly 8.5 billion at the beginning of 2010 and 4.6 billion in 2000. That implies a total increase of 87% in the money supply over the past decade. Hmmmm.... looking at that, it seems the CPI understates the inflation by quite a bit. But is that an accurate measure of the inflation? If production has become less "costly", then goods would become "cheaper" which would partially counteract the expansion of the money supply. But does that even make sense?

 

[dak664]

Williams was mentioned previously; his estimates for a constant-standard-of-living market basket shows inflation running around 10% since 2000 http://www.shadowstats.com/alternate_data/inflation-charts

 

[wineboyrider]

The whole idea of a "basket of goods" is pure speculation and I don't see how it could ever be relative to anything in the real world. In 1970 the average US citizen drove a car that got 12 miles per gallon (speculation on my part) and today that same person drives a car that gets 30 miles per gallon. Does this reflect in the basket of goods? It's all pure hypothesis isn't it?

 

[hydro-one]

Oil= Fail
Economics= Fail
Corporate law= shiet

Its all shit lets get on with the revolution!!!!! Now get out and Ride!!!!

 

[dak664]

In 1970 the average US citizen drove a car that got 12 miles per gallon (speculation on my part) and today that same person drives a car that gets 30 miles per gallon. Does this reflect in the basket of goods? It's all pure hypothesis isn't it?

I'd say that automobile cost per mile is one of the more reliable figures since it is determined each year by cold hearted IRS accountants to determine the deduction for the business use of car. Seems to me that since the mid 1990s that number has been going up quite a bit each year.

 

[deardancer3]

Petroleum/nat gas and their price is imbedded into many things.. Fertilizer, Food, Transportation, most plastics, home heating, War and Defense, moving water.

If we see the equivelant of $170/Barrell of oil, we will see another BIG Recession. Then consumption goes down, and prices go down IF the supply/demand curve corrects. If supply stays too close to demand-even as demand drops, we are in deeeep doo doo.

The infrasturcture CANNOT change to alternative fuels as fast as prices can change. .. Gas can go up $1/gal in 6 months.. but can you build 10k miles of mass transit, put in 10k of bike paths/lanes, install 1000 Nat gas or electric filling stations and convert/build 100,000 cars in 6 months from scratch while we are in an oil induced recession? And if Opec sees you doing it, dont you think they will drop the oil price to screw you?

That is why we have to do this ahead of time, before the next petro crisis. And if done smoothly and successfully, it will seem like someone cried "WOLF", when there was no wolf. (but there was a wolf.. . its just the preperations worked)

 

[wineboyrider]

I'd say that automobile cost per mile is one of the more reliable figures since it is determined each year by cold hearted IRS accountants to determine the deduction for the business use of car. Seems to me that since the mid 1990s that number has been going up quite a bit each year.

Good point!

 

[swbluto]

Using the IRS prices as an indicator, it looks like we have here:

http://en.wikipedia.org/wiki/Business_Mileage_Reimbursement_Rate

It seems to be fairly influenced by the oil prices, so maybe this isn't the best measure (Well, actually, maybe it is.).

In 2000, the rate was 32.5 cents. In 2010, it was 50 cents per mile though, oddly, it was 55 cents per mile in 2009. Using the 2009 figure, it looks like the average increase was 55/32.5 = 69% instead of the CPI prediction of 30% (Which is closer to the money supply's increase of 87% over the decade). I wonder if there are any earlier IRS figures, because maybe I could create a more accurate "inflation adjusted" historical oil price chart / graph.

 

[deronmoped]

Petroleum/nat gas and their price is imbedded into many things.. Fertilizer, Food, Transportation, most plastics, home heating, War and Defense, moving water.

If we see the equivelant of $170/Barrell of oil, we will see another BIG Recession. Then consumption goes down, and prices go down IF the supply/demand curve corrects. If supply stays too close to demand-even as demand drops, we are in deeeep doo doo.

The infrasturcture CANNOT change to alternative fuels as fast as prices can change. .. Gas can go up $1/gal in 6 months.. but can you build 10k miles of mass transit, put in 10k of bike paths/lanes, install 1000 Nat gas or electric filling stations and convert/build 100,000 cars in 6 months from scratch while we are in an oil induced recession? And if Opec sees you doing it, dont you think they will drop the oil price to screw you?

That is why we have to do this ahead of time, before the next petro crisis. And if done smoothly and successfully, it will seem like someone cried "WOLF", when there was no wolf. (but there was a wolf.. . its just the preperations worked)

No, you can not do all those things quickly, but people for the most part have a lot of leeway in how much of something they use. People would cut back on all the unnecessary trips that mindlessly burn fuel. If it gets worse, they can carpool, even worse they dust off the bike to take care of short errands... I saw this happen when gas hit $4.00 a gallon, the freeways were noticeably less crowded, on the weekends there was less traffic on the streets. Even today the weekends seem to have less traffic then they did a couple of years ago, probably from money still being tight.

Deron.

 

[deronmoped]

Using the IRS prices as an indicator, it looks like we have here:

http://en.wikipedia.org/wiki/Business_Mileage_Reimbursement_Rate

It seems to be fairly influenced by the oil prices, so maybe this isn't the best measure (Well, actually, maybe it is.).

In 2000, the rate was 32.5 cents. In 2010, it was 50 cents per mile though, oddly, it was 55 cents per mile in 2009. Using the 2009 figure, it looks like the average increase was 55/32.5 = 69% instead of the CPI prediction of 30% (Which is closer to the money supply's increase of 87% over the decade). I wonder if there are any earlier IRS figures, because maybe I could create a more accurate "inflation adjusted" historical oil price chart / graph.

No wonder I opt to ride one of my E-bikes or one of my mopeds before I take a car. Gas on a moped runs me two cents a mile, wear and tear are probably another three cents a mile, no registration, insurances... The E-bikes have to be even less.

I wonder what a regular bike would be if you counted the human fuel.

Deron.

 

[Kiwi]

I read a report once that its cheaper to charge your battery and not pedal, than to buy your food, eat it and pedal.

So here's for eating less and not pedaling!

(will see I can find it)

 

[swbluto]

No wonder I opt to ride one of my E-bikes or one of my mopeds before I take a car. Gas on a moped runs me two cents a mile, wear and tear are probably another three cents a mile, no registration, insurances... The E-bikes have to be even less.

Assuming gas is $3, you get 150 mpg?

Looking at http://hubpages.com/hub/MPG-Guide-The-Fuel-Economy-Of-250-Top-Selling-Scooters, it looks like 50cc scooters seem to average at 110 mpg or so. That's pretty impressive, though I'm not under the impression they have significant hill climbing capability. If I were to get a motorcycle/scooter, it would definitely have to be at least 125cc to match my bike's torque performance. And it seems 125cc averages around 70 mpg. That implies it'd cost me around 4.3 cents/mile in gas if I went gas.

I think the last calculation on the battery + electricity cost for me was like 4 cents per mile. That doesn't include wear and tear. Since my vehicles are more periodic in their use than daily, it's probably even higher for me.

 

[wineboyrider]

http://www.youtube.com/watch?v=pIbbEQweJMw&feature=related