The price of $50 for a barrel of crude oil has long been held as a symbolic milestone for the economy. The price has been charging upwards in recent weeks and as of last night it reached $50.47 at market close.

In another topic an article was cited suggesting that in the price of oil reached $50 a barrel it could have significantly negative consequences for the economy.

Questions for debate:
1. Will reaching this symbolic milestone with oil of $50/barrel be bad news for our fragile economy?

2. What will/should the reaction be from Washington?

3. Will the rising price of oil finally convince our leaders that they need to make serious investments in alternative fuels, increased fuel efficiency and public transit infrastructure or will it be business as usual in Washington?

I'm a bit of a cynic. We have a President and a Vice President who both have the oil industry in their resume. They may see $50/barrel oil as having reached an intermediate goal...

The President dropped into town for a speech a couple of weeks ago. Gas was at somewhere around $1.70 per gallon. The news tells me it is "Up a nickel" over the past two weeks. I have seen one gas station where the price was only $1.98/gallon. At most stations, regular gas is now over $2.00/gallon. I seriously wonder if the price is being manipulated to keep voters away from the polls.

I think it would be interesting to compare gas prices in Red states vs. Blue states to see if it is being manipulated to punish voters in states which are leaning toward Kerry.

I think the Dow closed significantly down last night.

Of course it will hurt our economy. Most of the nation's merchandise, including U.S. mail, is transported by semi trucks. They depend upon gasoline. The price of gasoline has a huge impact, therefore, on the price of transporting merchandise.

In addition, anything made of plastic is made from petroleum. That will bring the cost of everything from bandages to milk jugs up.

And of course, the cost of fuel oil for heating homes is going to rise dramatically.


President Bush claimed that since the emergency oil reserves are in the South where the hurricanes hit, that we have not been able to tap into them. Perhaps we should (or do) have emergency reserves further North where the weather would not place them in jeopardy.


Who knows? There are petroleum companies such as BP which are researching alternative fuels and ways to use them. It would certainly be practical to dramatically reduce our dependence on oil. But it involves a major shift in industry as well as in thinking on the part of Americans.

I think it has more to do with production than reserves - article

The high price of oil is driven by demand, not by supply.

OPEC has said that they cannot affect the prices : Nothing OPEC can do to bring oil down



The problem is that there is a fixed amount of output coming from refineries.

The United States has not added a new oil refinery in over 25 years. Refineries are running at 96% capacity. Demand for refined oil has skyrocketed, while capacity is stagnant.

Lack of new refineries factor in high gas prices, OPEC says



1. Will reaching this symbolic milestone with oil of $50/barrel be bad news for our fragile economy?
Key word: symbolic. There is nothing magical about $50 a barrel, just as there was nothing magical about 1000 deaths in Iraq. It is simply a higher price than it was yesterday.

Since when is our economy "fragile"? It will certainly have an impact. Some people fear a global recession will come from this. Of course, they said the same thing 2 years ago when oil was at $30 a barrel War talk shakes up oil markets

Oil is certainly a large portion of the cost of doing business in certain industries. It should be noted that when Iraq calms down, we may have a more favorable source of oil. However, with few new refineries on the horizon, it will be difficult to determine if any amount of supply will affect gas prices as predicted.

2. What will/should the reaction be from Washington?
Honestly? Mixed signals concerning "alternative fuels" are making oil refiners shy away from adding capacity. What is the incentive in investing billions into new refineries that may not be needed 10 years from now when they actually come on-line? Since it takes so long to get a refinery up and going, and with all the new regulations in place that make new refineries less than competitive with existing refineries, there is very little incentive to do anything about the problem.

3. Will the rising price of oil finally convince our leaders that they need to make serious investments in alternative fuels, increased fuel efficiency and public transit infrastructure or will it be business as usual in Washington?
See my answer to #2 as to why the alternative energy push is not helping the problem in the short term. Certainly, if someone can come up with an alternative that lessens dependency on oil, industry will embrace it. However, throwing money at a problem is rarely the best fix. We need a good mix of short term and long term goals that will take the uncertainty out of risking an investment in new refineries and, at the same time, give incentives to innovate a solution going forward.

It always ripples through. This is one sign that the booming Chinese economy is driving world-wide inflation upward. On the other hand, it makes going for the more difficult to mine crude oil deposits attractive to oil companies. Oil sands and shales will be mined.



Be honest with us. Seriously though, pump up the R&D funds, tax credits and so forth for alternative fuels that can be produced domestically. For example, vegetable oil based fuels and plastics. Grow more soybeans, corn, canola.



I think the message is clear. I doubt oil lobbyists will fight against alternatives now that the profit has come into the harder to mine oil deposits. Everyone can get a piece of this pie.

On the local level, the city of Colorado Springs uses a 20% vegetable oil / fuel oil mix for city diesel trucks and equipment. I expect this to show up at the commercial pumps down the road.

Expensive crude oil is bad for driving inflation, but good for driving alternatives. Economically, it will depend on how quickly demand can be met by the alternatives. The money's in it -- bet the supply side gears up quickly, finally producing the kind of job growth this country needs.

That is exactly the problem, our capacity is stagnant hence the impact on the economy through oil prices. As Paladin Elspeth said in her post, oil is used for virtually everything in our economy although most people just think the price of a barrel of oil effects them at the gas pump.


I would say that is still a fair description Amlord, considering we are just barely on the upswing from a recession and there are still a lot of competing indicators some showing progress and others showing that we aren't making progress. It is discussed in detail in this thread.


I completely disagree with you. Oil companies will continue to fight for their profits as long as there is still oil to be drilled from somewhere in the earth. Believing that oil companies somehow care about how much you pay for gas at the pump is very naieve in my opinion.

There are quite a few things that could considerably help in the short term:
1) The federal government could require much higher fuel efficiency standards from automobiles now, not in 2015 or something. Cars in Europe get at the minimum 30 miles per gallon with a great majority of them getting in the neighborhood of 60 mpg (and these aren't even hybrid cars). Only a few of the most fuel efficient cars get 30mpg here and none except for hybrids break the 40 mpg mark.

2) The federal government could drastically increase funding for alternative fuels right now instead of making token gestures so they can say they are investing while still keeping the oil companies happy.

3) Federal and State governments can actually take a recent look at diesel engines for cars instead of basing the ban on data from the 1980s saying they are inefficient and unclean. Today's diesel engines have better fuel efficiency and they burn much cleaner than combustion engines.

4) Money at the Federal, State and Local level needs to be allocated for extensive public transit and infrastructure projects. With the noteable exception of a few US cities, public transit here is a complete disgrace and in most cases virtually nonexistent. What is worse is that most people have the attitude that it is only for poor and lower class people. We need to start work on these projects now so we can start changing American car culture in our largest cities.

No one in our government seems to realize that this is in fact a long term problem and we should be attacking it aggressively now. Every gesture I have seen by any administration in this area has been purely a token getsure and has set goals so far into the future that no one really tracks them. When we get to 2020 and gas costs $7/gallon here in the US do you think the administration in power then is going to be adequately equipped to deal with that problem? Based on the way things are going now I sure don't.

There is no reason why we can't do some of the things I mentioned above and work on some more short term fixes like increasing the supply to meet demand. If we can rebuild Iraqi infrastructure in a few short years then there is no reason why it should take 10 years to open a new refinery.

If oil clears 60 dollars a barrel, it will be only marginally less expensive than solar power.

This entire business is disgusting. If you check the oil companies, they have been having the best years ever. All of them have cleared profit expectations by many percentage points, and are doing often times double digit percentage points better than last year. How can this be? How can the government be standing by while we all get price gouged? Simple! The executive (law enforcement branch) is under the control of ... wait for it ... oil men! HA!

Refining oil is unbelieveably toxic (www.epa.gov/tri) to people who are exposed to its pollution. Until now, this hasn't been really an issue, because oil was so cheap most people were willing to sacrifice their health for it.

When I went on my trip across the US, I noticed that gas prices remained constant. I paid on average $2 a gallon. States like Nevada and California, where you expect gas to be high, was high. States like Montana and Michigan were lower. Far off in the middle of no where was more then suburbs.

Compared to all my other trips across country, price where the same. High in areas where it should be, low in other area's.



I think that this pushes alternative fuel sources. With Opec at max production levels, there is only one place to go.

What I find odd is that Iraq was a war for oil. Yet the prices of gas have gone up even as Iraq is producing more barrels then before the war. How was this again about oil?

1. Will reaching this symbolic milestone with oil of $50/barrel be bad news for our fragile economy?

It depends on what one means by "bad". Oil prices must inevitably go up. There is finite supply and growing demand. Incentives for alternative energy sources and improved efficiency can be realistically enabled in two ways: economic and political. The latter method, while working very well in Europe, does not seem to work in the US (for many reasons). What remains is the economic incentive model. Unfortunately, this model may move too slowly to compensate for the actual market changes we are seeing in oil supply. Thus, we see large fluctuations in the market itself -- generally a bad thing™.

2. What will/should the reaction be from Washington?

Ah, this is a huge topic in itself deserving of its own thread. Personally, I think that the federal government should start with tax credits for home owners and companies installing both power generation and power storage technologies (which do not involve oil or natural gas). I also think there ought to be a re-education on how not all nuclear power generation is bad; that there are technological solutions to the problems of the past. I think a serious program of weening our society off of oil is necessary economically and strategically. But, I would like to see more encourgement of private enterprise in this area. Specifically, I'd like to see smaller companies be incented and not necessarily the big oil companies.

3. Will the rising price of oil finally convince our leaders that they need to make serious investments in alternative fuels, increased fuel efficiency and public transit infrastructure or will it be business as usual in Washington?

No, that is, only a few politicians care about the long-/medium-term issues on anything but a superficial level. This is why we have an ever increasing national debt and it is why very little infrastructural change has been done with power generation/distribution.

How can it be a war for oil?

www.exxonmobil.com/corporate/

The value of exxon stock has gone up 17% since september 11th, and dividends have gone up about 8% (they are on track this year for about 12% dividen growth). What happened is this - the U.S. government changed who was selling gas to the refineries - from Iraq to the U.S. American companies are now controlling the flow of oil from Iraq. This means that instead of of oil profits in the U.S. coming from refining and selling gas directly to consumers, oil profits are now being gained for American companies directly from Iraqi output. The price rise is due to gouging - now that they have the supply in control they can manipulate demand to their heart's content, especially with the Bush administration sleeping on (profiting from?) price gouging.

I agree it is symbolic. Will that translate into actual reverberations in reality..I dunno. I disagree that America's economy is fragile..unless of course by ours you mean all of the people of the world. If we are speaking internationally then yes I think this price hike effects other nations with far more fragile, troublesome and vulnerable economies..who presently are not adjusting well to the changing global economy to begin with. This is just going to further exasperate their pain.


Well me thinks they already have. KSA is promising to push production up 1.5 million barrels a day which resulted in oil falling below the ever pivotal $50/barrel...to a smidge under. And many still claim the Saudi govt is not our ally?


Well a rising death toll wasn't convincing enough so I have to think this oil thing is pretty lucrative business for those in power...and those who help balance this power don't care.
On a personal level...I hope the govt stays away from this future path and that we will hopefully achieve it privately.

And most people in DC use public transportation! It is all the coveted citizens in Ohio and Florida, who apparently now decide the course of this nation, that need convincing that their way of life is in need of a makeover.

I don't know, you tell me?



Will: Nothing
Should: Enact policy to consider alternative and renewable energy, and decrease our utter dependancy on fossil fuels pillaged from arab nations. Likely? No.




A Break Down of Energy Corporations investment in "Democracy"


Maybe, but this year alone Oil and Gas companies have made $15,366,989 worth of political contributions. 81% of that money went to Republican candidates. The recipients of that money are paid to fend for the interests those companies. The interests of those companies do not include "serious investments in alternative fuels, increased fuel efficiency and public transit infrastructure." www.opensecrets.org as linked above has documentation on all or at least most campaign contrbutions, so if you have questions and are willing to look at a few spreadsheets, just follow the money.

3. Will the rising price of oil finally convince our leaders that they need to make serious investments in alternative fuels, increased fuel efficiency and public transit infrastructure or will it be business as usual in Washington?

I don't have much time, but I wanted to share one reason I personally don't think things are changing, or will change anytime soon. International, the maker of big rigs, is coming out with this behemoth (14,500 lbs) for those who think Hummer is too puny: International CXT

Seeing as how they're being built in Texas, Bush will probably offer tax incentives to business owners to buy one!

As long as there is a bustling market for bloated, ridiculously overgrown vehicles like this (and all it's only-slighty-smaller brethren, the Expeditions, Escalades, et al), alternative fuel vehicles will never be taken seriously.

Then explain why at max output in Iraq and the US, Oil Companies can not decrease the cost per barrel.

(source)

The source you provided says absolutely nothing about Iraq and the US’s capacity (???) It's a blurb with only 5 short paragraphs.

As for Iraq:

And the US supply has been temporarily halted due to all the hurricane activity in the Gulf.


If you read past the title of your source, it says:

Once OPEC takes this step (and they have agreed to do so), the market will probably stabilize…or not. As demand goes up, there is always some "crisis" to excuse raising the price of oil. I did read somewhere in my research that $50 a barrel today is not as bad as the Iranian oil crisis, when oil was $80 a barrel (adjusted for 2004 dollars).

You are talking about reserves.

"OPEC has the ability to add output. There is around 1.5 million bpd of spare capacity. Saudi Arabia has the capability," he said. From my source.

When do you use the reserve tank in your car? When you run out of gas in your main tank. The fact that OPEC is forced to use its reserves only more clearly indicates that OPEC can not control the market.

The discussion is whether or not the Bush administration went to war in Iraq for Oil. The answer is clear, there is not enough oil in Iraq to surpass the demands of the consumer. Once the price match the demands of the consumer, we have recession. With recession comes more job lay offs, more dependance on foreign oil, less new products, fewer goods at stores, etc..

So again how is any of this the same as us going to war for oil?

Still feel that oil going past $50 a barrel isn't significant Amlord (and others, not to single you out)? As of today, it Closed at $53/Barrel. That means that in a little over a week, it has gone up $3. I filled up at the pump in San Francisco for 2.55 today, which is about 20 cents higher than the price has been in weeks, the premium grade is getting dangerously close to $3.00 a gallon.

So how much longer till it hits $60 a barrel? How much longer till people are willing to admit we have a serious problem?

1. Will reaching this symbolic milestone with oil of $50/barrel be bad news for our fragile economy?


The answer to this has to be yes. This is from a September 29th article in BusinessWeek Online.



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http://www.businessweek.com/bwdaily/dnflas..._1858_db035.htm

2. What will/should the reaction be from Washington?

Who knows what Washington will do. I’ve heard several Republican spin masters in the past few days. None of them had much to say about this.

I find it odd that this question didn’t come up in Friday night’s debate in St. Louis.

OPEC has agreed to step up production, but will it be much too little too late?



http://www.smh.com.au/articles/2004/09/29/...s&oneclick=true

3. Will the rising price of oil finally convince our leaders that they need to make serious investments in alternative fuels, increased fuel efficiency and public transit infrastructure or will it be business as usual in Washington?.

I’ve seen this several times. In 1974, people were only allowed to fill their gas tanks on alternate days, depending on the ending number of one’s license plate. It’s almost like the “Bpy Who Cried Wolf.” We get in trouble, make promises and then when then when the crisis passes, all is forgotten until the next crisis. I’m hopeful, but not optimistic.

Hmmm, yeah, right. If the rising price of gasoline at the pump is supposed to be a "bad thing" that is worthy of voter attention, and voters won't like paying more at the pump, then exactly WHY is it that the powerful, manipulative oil executives that control the oil market would raise prices as we come up to an election? Especially since such an action would hurt their "captive" candidate?

Nothing odd about it, nor is it strange that the Kerry camp is not making a huge deal about this. People would look at it, and, lo and behold, actually ask the same question I just raised. A question that will challenge the entire "Bush is a puppet of the oil companies" notion, which is a constant subtext of the anti-Bush rhetoric.

1. Will reaching this symbolic milestone with oil of $50/barrel be bad news for our fragile economy?

$50.00 per barrel crude may now be a pleasant dream. It closed at $55.17, up 70 cents per barrel today.

Meanwhile the market was down today.

Dow -107.95
Nas -38.48
S&P - 10.75

Much of the decline involved a rush to buy Google shares, but there was also concern for a shortage in and the price of heating oil as winter approaches.

Source: CNBC Closing Bell