Thursday, August 18, 2005
Marx Versus Smith
I'm having trouble believing that oil is actually worth over $65 a barrel. So I'm looking at stories about oil prices to try to obtain some insight. All I find is more confusion. Like this.
One story, from BBC News, about recent decline in the oil price since a $67 high, says Chinese demand is jacking up the price. It's quoted as follows:
Although concerns about US refining have lessened after some of the 12 plants that had closed reopened on Friday, analysts said fears about oil supplies from Iran, and demand from fast-growing nations such as China could still drive crude prices higher. (Emphasis added).
Another story, from the Taipai Times, says central government planning is causing Chinese refineries to put out less product. Here are some quotes:
Officials scrambled yesterday to resolve severe gasoline and diesel shortages in China's south and east amid complaints that government price controls are worsening supply problems...
Although disruptions to tanker traffic due to recent typhoons were one factor, the crisis is mainly blamed on government price controls that prevent local refineries from passing on higher costs due to surging crude oil prices.
So, let me get this straight. Chinese demand is causing oil prices to rise but Chinese supplies of gasoline in the south and east are dropping. Can both these things be true?
And look at the results of different political attempts to lower the high price of gasoline. In the west, with capitalistic free markets, the government knows better than to try to control prices and we have plenty of gas (even though we're paying a lot for it). Of course, a long term solution would be to develop oil fields in some God-forsaken, frozen corner of Alaska, for example, or to help an oil rich nation (with a crumbling oil infrastructure caused by years of neglect due to a corrupt, totalitarian government) export more oil . The Chinese decree a price ceiling and the gasoline goes away. Hmmm.
One story, from BBC News, about recent decline in the oil price since a $67 high, says Chinese demand is jacking up the price. It's quoted as follows:
Although concerns about US refining have lessened after some of the 12 plants that had closed reopened on Friday, analysts said fears about oil supplies from Iran, and demand from fast-growing nations such as China could still drive crude prices higher. (Emphasis added).
Another story, from the Taipai Times, says central government planning is causing Chinese refineries to put out less product. Here are some quotes:
Officials scrambled yesterday to resolve severe gasoline and diesel shortages in China's south and east amid complaints that government price controls are worsening supply problems...
Although disruptions to tanker traffic due to recent typhoons were one factor, the crisis is mainly blamed on government price controls that prevent local refineries from passing on higher costs due to surging crude oil prices.
So, let me get this straight. Chinese demand is causing oil prices to rise but Chinese supplies of gasoline in the south and east are dropping. Can both these things be true?
And look at the results of different political attempts to lower the high price of gasoline. In the west, with capitalistic free markets, the government knows better than to try to control prices and we have plenty of gas (even though we're paying a lot for it). Of course, a long term solution would be to develop oil fields in some God-forsaken, frozen corner of Alaska, for example, or to help an oil rich nation (with a crumbling oil infrastructure caused by years of neglect due to a corrupt, totalitarian government) export more oil . The Chinese decree a price ceiling and the gasoline goes away. Hmmm.
# posted by Roger Fraley @ 10:08 PM 
