Soaring fuel prices solution on the horizon

[Skydrol Leak]

Ok,the fuel prices will never drop again and they will continue rising despite all the anger and complaints we might have against it.Pure fact not fiction. For all of us "believers" that that might happen,it just won't. So,we obviously have to change something rather than complain all the time.I will tell you where the problem lays;It is not in the fuel price itself it is in the CEO's and the boards of every airline company that operates on this planet.
They were used to make such a huge profits in the last 50 years that they just won't realise that that can not happen in this century anymore,unfortunatelly for them and us.
Cutting of routes and crew is the lowest punch they can deliver to their employees, but on the end of the day they still take a enourmous chunk of cash home and enjoy their life ever after,right?How about cutting their own "minimum" earnings? The biggest fiasco last year was that a major oil producing company declared a record profit of 18 Billion dollars (on our behalf)and nobody said anything back??? Sometimes I just adore French people and their revolutionary spirit ,wish more Earthisians would be that way...
So,how about if government would come up with the law to limit the so called "free" market (i do not see anything free there anyways...)and laid down the rules and laws and limits on how much boards, CEO's and owners of respectful companies can make per year or tax them enormously on an extra profit???
That would hurt them wouldn't it? Maybe then we could change this steady decline that will go way into the next decade and bring down many airline companies with it.
As much as this idea might seemed utopic it is not.Somebody has to start it and the rest will follow.
And if more people would realise that it is not in "how much can we cut it down?" it is in "how much more can we do it?"

Cheers

[toolowtoofast]

i thought gas prices are dropping right now, what with reduced demand and oversupply?

[Chimbu chuckles]

SL oil companies make about 8 cents in the $ profit. Plenty of other companies make more like 15-20 cents in the $ as profit.

The price of a barrel of oil currently stands where it does because of a devaluing US$ and speculators (including the refugees from the subprime meltdown). Without those two influences the price of a barrel of oil would be around $70. About what it was worth in 1945 in inflation corrected $ and about what it was before subprime.

As it stands supply has met demand to date. The supply side 'fears' the speculators are using to drive volatility, and therefore profits for themselves, are based on future supply worries which are clearly not an issue...there is enough of the stuff to last us 100s of years.

Demand is now dropping and the world is heading for recession. A rerun of the mid 80s, in effect if not cause. I suspect the price will soon correct substantially...how soon? Don't know, the market can stay irrational longer than most can stay solvent.

Certainly I agree with you that CEO compensation is obscene and they rarely do anything to earn it. But the rest of your post is just silly.

[stator vane]

aren't those high earners, the very ones that put the politicians in their places?

and don't they scratch each other's backs?

[Liftr]

Yes.

Yes.

Hopefully today's oil price downturn is a sign of good things to come.

[VinRouge]

I think if we get away with a mid-80s style recession we will be very very lucky. The lifeblood of the western economic model, cheap debt, has deserted us. Its going to be carnage I believe, with many banks having been left unregulated and with worthless "assets" on the books for which they paid good money, the appetite for more reckless lending has disappeared.

Perhaps for the best. It may become painful, but at least we will learn once again to live within our means.

Any chance people could stop driving cars that do less MPG than an 18 wheeler? We might be able stretch our supplies out a little longer that way.
My car does 80 MPG. Its not a fancy electronic/Hydrogen/hybrid, its a siple little diesel. Cheap as Chips. Why do people have to drive round in Dodge trucks all day long with the boot empty?

right in your analysis. $130+ oil is here to stay now...

[Expressflight]

Can anyone really argue that the current oil price is based upon supply and demand? Surely not, but that is the only reason why oil could remain at its present high price.

If we accept that speculation has a lot to do with the current price, then prices will reduce to a level in line with normal market trading conditions between producers and consumers.

Quite what that level will be and when it will happens is another thing, but happen it will.

[SOPS]

Last quote $128.88 and falling:O

[fourgolds]

Great post Skydrol ! , could,nt agree more. But its only in a perfect world where those at the top are accontable at any level . Greed will remain at the hearts of men and the types you described will continue to prosper.

Roll on the revouloution !

[42ongo]

Hi Skydrol
good post

I dont have the exact data to hand but I believe the airline industry even before the current woes has lost more money than it has ever made

So I dont think that in general there was ever huge profits all round for any sustained period of time

Factor in state airlines when money was and still is just thrown at them every time they needed it and we can see that in the words of 1 of my former managers

"you are probably better off running a fish and chip shop than running an airline" I think he was right then and probably he'll be right in the future

good luck

[Rainboe]

I will tell you where the problem lays;It is not in the fuel price itself it is in the CEO's and the boards of every airline company that operates on this planet
Absolute tosh! You should be ashamed of yourself! Oil is a commodity that is worth what people are prepared to bid for it. Start restricting the price and people won't bother digging it out of the ground, so the price WILL go up to it's proper level come what may. The fact is that you are now competing for oil with an enormously expanding domestic Chinese and Indian market, and a burgeoning Far East economy.

The biggest problem with the oil price is violently tax raising western economies with grandiose social spending schemes desperately trying to raise whatever tax they can, on anything, to pay for politicians to spend even more of our money. Hence we pay through the nose for oil to finance their benefit-spending dreams! The actual owners of the oil where it is raised don't get it all!

[Skydrol Leak]

Rainboe,have you at least finished your high school?
You have successfuly missed the whole point...

[Rainboe]

Well I thought I was responding to this in post 1:
So,how about if government would come up with the law to limit the so called "free" market (i do not see anything free there anyways...)and laid down the rules and laws and limits on how much boards, CEO's and owners of respectful companies can make per year or tax them enormously on an extra profit???

Whichever way you look at it, it is restricting a free market, and you cannot get away from the fact that western governments get more in tax revenues from oil than the producers get for it. I believe the UK Exchequer was getting about 65pence/per litre in tax revenues for petrol and diesel- just about half the final cost. That is why the cost is so obscene.

But it is yet another price spike, and prices are on their way down. It's done it before, and it will do it again. Yet on the upwards leg of the spike, people seem to love projecting that cost rise into the future indefinitely- talking garbage like $200/barrel. Not for many years yet, but it gives the Greens ammunition for more of their nonsense. Supplies are plentiful, it will drop below $100, and I think the proper price will be about $80.

High school finished 40 years ago!

[Skydrol Leak]

Well, your answer is exactly what i was pointing out;some people make way too much money for doing nothing! The fuel will not come down for awhile, believe me it is good to read the "boring" Economist now and then,they set your head straight up right there...
The result of the high oil prices is the higher inflation,right? Meaning the prices will go up to counteract the rise in inflation.With all the insecurity in the Middle East (Iraq mostly) it is a gamble anyhow.The rising Asian and Indian economies are taking the role with all the so called "third world countries" doing better then us, which we still won't accept because we live in the best spot in the world,right? Well,reality check again;wake up and smell the coffee people, the world will never be the same as it was before. It is the part of a very good hypothesis from Charles Darwin and I deeply recommend reading the basics, since they help you a lot in making a realistic future plans.
There is a way out, but for us thinking the way we think is not going to happen.

Username:Reality check
Password:Oil

Cheers,

Skydrol

[apachelongbow]

Oil@$130/b is here to stay? What utter crap. Any oil price above $70/b is pure speculation, or paper oil and not actual demand. How do I say this?

Oil demand for 2008 as over 2007 has risen merely 8%, and oil production has increased to cover this demand. So why are oil prices high?

Please check with those greedy ars******, the banks and the financial institutions. After having screwed up the US housing markets, they needed money to pay off those who invested in pension plans and fixed deposits. So whats the best way? To speculate and buy up oil futures in bulk, there by driving up oil prices from $60/b to around $140/b. Now theve made some neat profits and we should see the selling. In fact as of today oil has dropped to below $124/b a drop of $22/b in 7 weeks?????

In fact these speculators are playing a double game. Buy oil futures and speculate that the housing prices fall further (since oil rises inflation, the housing sector is anyway falling)

US senate is thinking about putting a bill 'banning' speculation in oil futures, and that to before the august holidays. If this happens, then good bye to these speculative morons.

[Rainboe]

I think you are right apache. How much of the recent spike in prices is die to demand? Not a lot I think. Speculation in these blasted oil futures has been setting the price trend and caused most of it. Demand has been falling in the western world- summer is upon us and nobody is refilling their heating tanks at this price. Something has been causing such a rocket in price, and it is financial machinations. But it cannot be maintained. The price trend will continue down- I still think $80 will be achieved this year. One can only be grateful that Gordon Brown, showing his real financial ineptitude, has not refilled Britain's strategic reserve at $150/barrel following his real 'coup' selling most of Britain's gold reserves at $160/oz at a complete price minimum!

[peter we]

Oil@$130/b is here to stay? What utter crap. Any oil price above $70/b is pure speculation, or paper oil and not actual demand. How do I say this?

Oil demand for 2008 as over 2007 has risen merely 8%, and oil production has increased to cover this demand. So why are oil prices high?

Oil production hasn't increase in three years.

The price of a commodity is how much a customer is willing to pay for it, not how much you want or wish it would cost.

Demand is still increasing in China, so I guess the price isn't too high.

[6chimes]

As some rightly point out; the emerging eastern nations are adding to the pressure for world resources. But they can only grow if the west can afford to buy their products.

Oil prices have to fall or we can't afford to buy anything and those people in China and India can go back to the countryside as they won't be needed in factories producing products that no one is buying.

In 12 mths time we will all be looking back at this year and admitting we all overreacted and worked ourselves into a right state for nothing. Unless of course the American public don't wake up and realise that they are not the only culture on the Planet and vote for an Old man still bent on giving the rest of the world their version of freedom or killing them if they don't agree.

6

[peter we]

As some rightly point out; the emerging eastern nations are adding to the pressure for world resources. But they can only grow if the west can afford to buy their products.


Thats not true and a pretty arrogant statement. The Chinese and Indian's are buying goods for themselves, the Chinese middle-class is numbered in the tens of millions. Oil consumption in the west is falling and demand for Chinese goods with it but it has hardly affected Chinese growth and increase in Oil consumption.

[6chimes]

Its not arrogant at all. I am not for one minute suggesting that the Eastern nations are totally reliant on the west, but they are not self sufficient either. We need them as much as they need us. There is a shift in global power both political and economical towards the East and it will continue, although the East needs Oil at a cheaper price if those tens of millions of middle class chinese are to see their living standards rise.

6

[peter we]

Do they need cheap oil? In the first quarter oil imports continued to rise. In the US and EU consumption fell, which indicates they are more sensitive to the price. China is obviously dependant, to an extent, on exports, but growth only fell from 10% to 9% last month. I would have thought they would be affected to a greater extent but so far...no.

[apachelongbow]

/*Oil production hasn't increase in three years.

The price of a commodity is how much a customer is willing to pay for it, not how much you want or wish it would cost.

Demand is still increasing in China, so I guess the price isn't too high.*/

I am not gonna debate on how much has oil production increased over last 3 years. A basic googling would give out these.

Can you please explain your demand theory with respect to paper oil i.e. 'oil futures'?? Futures are exactly that: speculation. Now its the first time ive heard of speculation being linked to demand :ugh:

Speculation is like trading in shares. A company's performance is not reflected always by its share price, and the share price is always a reflection of the market's 'sentiment' of that company. So since the world obviously 'feels' that oil might not be there in next 10 years, are people buying it in larger quantities, thereby driving up prices? An obvious NO!!! The price of oil today is high because some ars***** has betted on it being 150$/b in the next 2 months.

As I mentioned before oil demand over last 1 year has risen by only 8%!!!! now how can 8% demand rise explain a price increase from about 20-30$/b to 140$/b?????? Which market works like this????

As we speak today the oil demand has actually fallen... now why doesnt price fall by as much????

We surely need to ask and answer these kinda questions.