Re: Poll: "Britons doubt cause of climate change"


On Jun 22, 10:51 am, aracari <spamt...@xxxxxxxxxxxxxxxxx> wrote:
On Sun, 22 Jun 2008 01:22:53 -0700 (PDT) 'Mel Rowing'
wrote this on uk.politics.misc:

The only response possible to an increase in demand that outstrips
capacity to increase supply is an increase in price. It would appear
that the demand curve for oil is rather inelastic (amount demanded is
uaffected by change in price) but this will not always be the case as,
at the upper reaches of the demand curve, limits of general
affordability are reached. Prices then will stabilise.

At what price pb?

I don't have a crystal ball but clearly as petroleum products become
more expensive then considerations of affordibility will bring
pressure to bear on further production.

In the meantime, the worst thing any government can do is to take
actions like reducing fuel taxes in order to reduce pump prices. Any
such reductions will not materialise or at least for long and the
revenue loss will go straight into the coffer of the producers who at
the moment hold a commodity that is in short supply.

They could introduce a voucher scheme as I outlined last week,
which would allow them to reduce fuel taxes without increasing
demand.

In short rationing.

The problem with rationing is that potential demand is supressed by
edict. It becomes inevitable in situations where supply is restricted
and so normal market operations become impossible e.g. war.

Even in such situations it becomes a bureaucratic nightmare. Consumers
inevitably seek and contrive to obtain a greater entitlement to
coupons like claiming for vehicles that they own but don't operate. A
grey or black market in coupons inevitably develops.

Years ago the Italian Tourist Board used to issue vouchers that could
be bought before entering Italy. The idea was that at that time,
Italian fuel was the dearest in Europe and there was no desire by the
Italians to discourage motor tourism. These vouchers could be redeemed
against fuel in Italy. It was really worth while if you were taking
the car to Italy, to buy your maximum allowance of vouchers since any
unused vouchers could be redeemed at the border as you left Italy.

However, you could do even better than that if you succombed to the
charms of touts who would inevitably approach you to ask "any spare
vouchers for sale?" In fact the most common tout was the forecourt
attendant who filled up your car!

I am convinced that voucher schmes would invoke similar practices
here. The beauty of a price is that it rations goods without setting
limits on demand. It allows individuals to set and amend their own
spending patterns.

High prices will eventually drive back demand which will eventually
feedback on price.

Unlikely IMV. Your view assumes that peak oil is a fantasy, and
doesn't take account of what happens when we go 'over the top'
into decline.

Peak oil is a superficially attractive theory but AIUI it rests on an
assumption that all the oil demanded will be pumped. The easiest and
hence cheapest oil will, logically speaking, be pumped first and as
demand increases and easy oil becomes exhausted then harder more
expensive reserves would be exploited and so on. Eventually, when
about half the world's available oil is gone (the choice of this point
confuses me - I presume it is based on the normal distribution curve)
you reach a point where the rate of increase in production cost sends
oil prices spiralling.

There is only one objection to this theory wthin the presnt situation
and that is that it is the selling price of crude oil that has
spiralled and not its production cost. That has not increased
dramatically over the years. In fact in real terms, it's fallen!

It seems to me therefore that the present difficulties are not so much
attributable to peak oil as to the failure of the industry to increase
production capacity to meet increasing demand.

There might well be a fallback in oil prices in the foreseeable
future, but nothing to the low levels we used to see. Volatile
prices are a more likely scenario, with the trend ever upwards
unless and until new clean, cheap sources of energy are found.

I wouldn't disagree with much of that except to add that high oil
prices will spur on such activity which thus far have been held back
by low energy prices. Increasingly alternative and substitute energy
sources can be seen as viable.

There is already good evidence that this is
happeng. Abelard yesterday pointed to an article which showed that
driving miles in the US are down by billions. Living in a tourist area
I'm convinced that driving miles are down here too this summer (though
the weather has not been that good) We have reports from third world
countries that governments are ceasing to subsidise motor fuel
(previously subsidised to the point that it was sold at below cost in
some cases) . If these reports are true then reduction in demand
represents the best hope for a reduction or at least a stabilisation
of price in the short term.

A reduction of excess miles travelled is not surprising. But once
you skim off the excess miles, further cuts require more serious
action. It gets harder and harder to cut back.


In any event, these cutbacks are trivial against strong demand
and capped supply.

This would be true except that there is no necessity to return to
point zero. What would be nice would be if demand could be cut to well
below capacity to supply so as to allow the industry to play catch up
with new global economic realties vis a vis China, India etc.

There is ample margin to act as incentive (most oil is produced at
under or around $10/bl)

.

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