Original story You want to see what a free, unregulated market looks like? Well, look at the price of oil. There is no shortage, but traders have figured out how to jack the prices up for their own profits, and in an absense of regulation, they will continue to get away with it. I would love to see a graph of the ratio of physical oil to futures versus the price of oil over the last decade. I think it would be educational. On the downside, the rapid rise of fuel prices has finally started to change American's behaviour and I'm concerned that if prices come back down the gains in that area will be lost.
Ummm, this is what we call free market. Those who don't like capitalism are welcome to find homes in countries that support more government regulation. If we cut the price of oil drastically again at this point, our country has already proven that it will irresponsibly just go back to excessive consumption. We needed this push to finally get ANYONE outside of the hippies and academics thinking about green power in a serious way. I actually agreed with the economist that recommended taxing gas up to $4/gal back when it was $2.50 and people were moaning, hoping it could just head off a natural increase whilst making the population rethink its energy demands. My only argument was it was against "free trade" and markets...same as my problem with this one. It's funny how he was right on the figure, as $4 seems to be the breaking point for people to trade in their gas guzzlers and be a little more conscientious about their usage. All changes come with adverse effects. Any attempt at market manipulation to create either a direct or indirect price ceiling historically has ended badly. Speculation is risk, risk is reward, and all of that is part of having a free economy. Attempting to thwart that is...well...poor judgment, however benevolent the act may seem. Would love to write more on this, but honestly it would be a very long missive, so if anyone wants to rip into it then I can go into more detail.
i want the prices to go high and into hell!! this way alternatives have more probability of being created...
Actually, I'd like to hear your take on it. I'm not inherently opposed to capitalism, but like all things I think it needs to have limits. I feel that one of the most critical roles of government is to ensure that the economy of the nation benefits at least most of the citizens, rather than a few at the expense of the majority. Unfortunatly the US has for the last 8 years been under the sway of a radical free-market mindset and I feel that many of the problems we see today can be attributed to that.
doesn't really matter what oil goes to price wise as any short term or long term solution that involved an alternative that was viable and accessible to the mass general public would be blocked by the oil companies, the car industry as a whole as well as the petroleum based companies for fear that their would lose their billions that they earn each year.
I don't get what Americans complain about...$4 isn't that much compared to here.... Whatever happens, whilst there's oil there, it's going to be used. That'd mean there's a finite amount of CO2 that can be released into the atmostphere, causing whatever damage it may or may not cause. Surely it doesn't matter whether it's used soonish or used up in 500yrs. The environment is going to suffer the same amount. Personally I see the oil running low / high priced as more of a problem than the atmosphere getting hot...
A "radical free-market mindset"?? We haven't had free markets in the US for about that long. Ever since Greenspan went off his rocker and decided that the Fed Reserve Chair is really a glorious media spotlight. Over the past eight years, we have had repeated forays into government regulated markets. If you look over those 8 years you will see a dramatic increase in: * "Stops" that prevent free trading of securities * Government oversight of the markets at large (Sarbanes-Oxley, for example) * Multiple changes in GAAP accounting principle that were forced by the SEC * Multiple government "interventions" to bail out and add liquidity to private companies * Many, MANY companies going "off exchange" to be pink-sheet since they can't afford the extreme costs of compliance with some of the new oversight laws. Which means they are now subject to even LESS regulation than they were before. Just to name a few. The markets of the mid 90's were probably some of the most free in the world - but free markets come with a cost. Someone wins, someone loses. Hedge funds and mutuals that were managed by sharp investors won. The average person who can't really understand why stocks even move up and down but INSISTS on doing it himself thanks to those abominations like E-trade and the like lost. This is free market - the informed and level-headed investor wins, the uninformed and emotional idiot loses. The problem is, we get more and more uninformed idiots who determine that they should be doing their own fiscal surgery. The whole concept of "empowering the people to manage THEIR money" creates a bunch of uninformed, ill advised and emotionally volatile assets. These numbers have surged year-on-year, creating increasingly volatile markets. Now, in order to "protect" these people, the guvm't creates new laws, grants the SEC new, wider oversight powers. It's a good thing, right? We're cleaning up the bad, bad corporations and helping Joe Public be a little safer in the market. Stocks falling too low? Oh, better put in a trading stop. Now people can buy, but they can't sell! Stocks can't fall any lower, but they can increase in price. Major investment bank failing because of bad decisions? Let's bail it out with tons of government money, and assist another corporation to buy it out, while the heads all get golden parachute plans. Oh, wait, JP Morgan didn't have the cash on hand to buy Bear Stearns. So it's a good thing it had all that mortgage debt that it could call so that it could comply with the Fed's "matching funds" offer. Wait, some companies can't pay back the loans at the drop of a hat, that the government let JP Morgan break the contracts on to raise funds? Let's infuse cash into the financial sector. $80bn of taxpayer money should do the trick. No? We just lost two of the largest mortgage companies in the country? Why didn't we bail THEM out instead of bear stearns? Now the whole credit market is collapsing. Oh, but it's the fault of American home and Countrywide. They made unfair loans. Ill advised loans. Certainly not the fault of the people who TOOK the loans for over 100% of the home values. Not Joe Public's fault! BAD corporations, BAD! Now, we have foreclosures and massive bankruptcy. Let's not let banks collect on that money, and write a bill that prevents the forgiveness of debt from being taxable income as it always was in the past. We'll turn a blind eye to the fact that we lowered interest rates so damn much over a 2 year period that mortgage companies suddenly could not even make a profit on a 30-yr fixed unless it was inherently risky. Of course, we also ignore that a massive reason for all of that interest rate cutting was to mask a spiraling federal deficit due to the incredibly excessive government spending over the past eight years. I could write a BOOK on this in and of itself, entitled "How Greenspan managed to both save and ruin our economy simultaneously." Now, we've got good ol' Bail-out Ben Bernanke at the helm, ready to tell us MORE government funding is needed to reduce the cost of health insurance. Payable by who? Oh, we have to raise taxes to afford it. So in reality, Joe Public saves...$0. In fact, it'll COST him more. NONE of this even touches into the oil debate, which is actually an entirely separate missive that is oddly related. See, as we reduce interest rates to mask government overspending while trying to prevent incredible inflation, our dollar devalues. This is great for us in many ways, as it makes American goods cheaper worldwide and thus people buy more. There's only one catch: A weak dollar makes imports more expensive. The #1 US import is...OIL. So rather than solve the problem by actually cutting back government spending and allowing the economy to right itself, we're going to apply another "patch" over it by preventing the free trade of oil as a commodity. Short term, we drop the price of oil. Long term, we do nothing to reduce our dependence on it, we do nothing to fix the spasming economy and we intervene AGAIN in the free markets. And when they DO this regulation, what do they do with all the outstanding options and futures that already exist for 5, 10 years out? Do we buy out the contracts? Then it's government-owned oil. Even better. Paid for at an all-time premium by...Joe Public. Of course, we could just not - tear them up and let the hedge funds and futures markets feel ripples for YEARS that will plunge us straight from recession to depression. But wait, there's more. Do you think this will actually stop the PUBLIC's fear of pump prices? Or do you think maybe, just maybe, people have wised up enough to realize that this low price can't last, and they should buy as much as they can while it's cheap? Then we get runs on the pump. That's right, price ceilings create an artificial demand that ALWAYS outstrips the supply. It'll be gas lines as long as in the 70's, which just so happens to be the last time our dear Guvm't thought it was a good idea. Black market gas, trafficking...oh, the fun. This is barely a cursory surface-scratching of what the government has done/can do when they intervene in free markets. And you are free to look up any portion of any event that I mentioned in this, you'll find they're very factual and quite chilling. Conversely, if we just let the price of gas go up, people change their buying habits, money gets spent on alternative fuels and jobs get created as people learn to deal with a new economy and producing goods/services for it. It's quite amazing how resilient a capitalistic free-market economy is, when left to its own devices.
The free market idea can work, put the price up too high and demand drops off forcing the price to fall. However, oil isn't just a commodity like chocolate. The price of oil directly effects the price of almost every other part of your life, not just the trip to work and back. On top of that oil is almost a requirement, not a luxury that we can choose to buy or not. We buy oil indirectly, in almost everything we buy or use oil has played a part in either the production or transportation. It's when you take this into account that you discover some sort of oversight is required.
That's taken well into account. The reality is that you can't have oversight post facto. The same argument you leverage can also be taken into account for natural gas, gasoline (separate commodity), corn or sugarcane (for ethanol production), steel (for the drilling materials, as well as the engines, as well as our buildings) or anything else. Commodity != luxury. And many other "requirements" are traded on the commodities exchange, even right down to electricity (which allows power companies to help lower the aggregate price). You have to understand that this is not the first time speculation has driven the cost of what we deem as necessary and required goods. And if you study the history of government actions during those times, more oversight has always led to disastrous effects. I'm trying not to just dismiss this out of hat, because I understand where you're coming from - but it's a myopic view that is not understanding of the bigger market picture and forces. Ownership of companies, rights, and goods comes with the right to buy or sell. These concepts are the linchpin to any free economy and/or people. Sometimes short-term detriment needs to be suffered for long-term growth. I hoped that by explaining above, I would illustrate that trading anything is not just about THAT thing. It's about how a whole economy moves. Any restriction in that, however well-intentioned, creates havoc that often could have been avoided.
As a American and consumer I can see that this kind of free market thinking is only going to leech over into everything else we use as a commodity. Right now electricity is relatively cheap, around 9-12 cents per Kw. Imagine if that were to just double or triple. It would cripple countless businesses and homes. People would retreat to something way cheaper (look at the housing market, its hurting bad). The wage to spending ratio (or costs of living) is not even close to being equalized, in my opinion. People that are using underhanded tactics to make record profits should be controlled. I can not get around anywhere without the use of gasoline, I am required to buy it. This isnt a simple question of 'I will not buy it' I have no choice as a consumer! And dont get all "you could buy a hybrid, or a blah blah blah" cause thats bogus, it just isnt cost effective ( a freaking hybrid is running about $30k right now, and thats insanity) I bought a scooter recently. Was the decision based on saving gas? Not particularly, I've wanted one for years, and before gas cost what it does now. The whole oil discussion just pisses me off really... greed, corruption, you name it...
