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RE: [hreg] Re: gas prices

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  • Robert Johnston
    For what it s worth, as a semi-objective outside observer to your discussion, I think you and William Bell both bring out good points, and I don t think that
    Message 1 of 5 , May 30, 2001
      For what it's worth, as a semi-objective outside observer to your
      discussion, I think you and William Bell both bring out good points,
      and I don't think that they are necessarily contradictory. How about
      looking for common ground/understanding? I didn't read his comments
      about your logic as an attack at all.

      You are correct that higher prices discourage consumption. At the
      same time, he is correct that higher prices encourage more production.
      This is basic Economics 101, isn't it? (I have to ask, since I never
      took the course)! Thus, I think you are right that higher prices are
      good for the environment, while he is correct that they also encourage
      more drilling and oil production.

      In a free market with no price regulation or government intervention,
      the supply and demand will be in balance, but with volatility due to
      fluctuations in supply and demand over time. Given the reality that
      oil and gas are declining assets, then over time (though perhaps still
      quite a long time), the mean price around which prices fluctuate will
      rise. Because of this, you will both be right. That is, allowing the
      price to rise now will encourage more production, but the mean price
      will not return to the original price since the supply/demand balance
      will be met at increasing prices due to the limited supply longterm.

      The rub is that the time for the supply to become limited enough to
      substantially discourage consumption of so important and basic a commodity
      as energy is likely to be a long time. After all, energy leads to so
      much wealth creation that the increased cost is often considered
      "worth it" and people accept the higher prices. However, over time,
      this effect will be felt, and as William points out, higher prices
      will encourage not only more drilling and oil production, but also
      increased utilization of renewable energy sources.

      Robert Johnston

      > -----Original Message-----
      > From: Greg Carrier [mailto:gcarrier@...]
      > Sent: Wednesday, May 30, 2001 6:29 PM
      > To: hreg@yahoogroups.com
      > Subject: [hreg] Re: gas prices
      >
      >
      > I am sorry that you chose to attack my logic as opposed to arguing a
      > complex issue (supply/demand). My statement quoted refers to the
      > fact that higher prices will deter usage. That happens far faster
      > than companies can react with higher investments into creating new
      > supply, which will then show the producers a lower consumption number
      > than the "spike."
      >
      > Appliance and electronic producers pay little mind to making energy-
      > efficient products because the average consumer doesn't care about
      > that. Again, something that rising prices can aid. Personally, I
      > prefer free enterprise solutions like that over increased
      > governmental regulations.
      >
      > Let consumers vote with their own dollars.
      >
      > -Greg
      >
      >
      >
      > --- In hreg@y..., "William M. Bell, Jr." <wmb@i...> wrote:
      > >
      > > ----- Original Message -----
      > > From: Greg Carrier <gcarrier@a...>
      > > To: <hreg@y...>
      > > Sent: Sunday, May 20, 2001 9:22 AM
      > > Subject: [hreg] Re: gas prices
      > >
      > >
      > > > If you
      > > > don't want additional drilling, let petroleum prices rise.
      > > >
      > >
      > > I think that something is wrong with your logic. Higher oil prices
      > mean more
      > > drilling and more production. The good news is that there are many
      > existing
      > > fields that were marginally profitable because of low oil prices,
      > but higher
      > > prices should result in more production from these fields. I don't
      > know if
      > > this is enough to make a difference in the demand for new sources,
      > however.
      > > Higher prices mean that PV, wind and oil producers are all in a
      > better
      > > position to produce more product.
      >
      >
      >
      >
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