Ready for $262/barrel oil?

yahoo ^ | 1-27-06

[LouAvul]

DAVOS, Switzerland (FORTUNE) - Be afraid. Be very afraid.

That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel.

The other, billionaire investor George Soros, wouldn't make any specific predictions about prices. But as a legendary commodities player, it's worth paying heed to the words of the man who once took on the Bank of England -- and won. "I'm very worried about the supply-demand balance, which is very tight," Soros says.

"U.S. power and influence has declined precipitously because of Iraq and the war on terror and that creates an incentive for anyone who wants to make trouble to go ahead and make it." As an example, Soros pointed to the regime in Iran, which is heading towards a confrontation with the West over its nuclear power program and doesn't show any signs of compromising. "Iran is on a collision course and I have a difficulty seeing how such a collision can be avoided," he says.

Another emboldened troublemaker is Russian president Vladimir Putin, Soros said, citing Putin's recent decision to briefly shut the supply of natural gas to Ukraine. The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online.

[fallujah-nuker]

I HAVE told you but you wont listen. The rest of the world would have cheaper energy by a ton...

I am trying to reconcile this with what you wrote in post #399:

"...I have to say that if you want prices higher and US tax payers subsidizing the world you have found an ideal tool. A tariff helps opec. because world prices will go up. US consumers will pay the bills."

How can it be that the tariffs will both help OPEC with higher oil prices and give the rest of the world "cheaper energy by a ton" at the same time?

I fail to see how an increase of domestic oil prices by 37.5 cents per gallon will torpedo the American economy when it has seen several times that increase in this decade. In fact the tariff will cause a slight decrease in US oil imports as we cannot go from importing 12M bpd overnight, in a year or two, or even within a decade.

A year after the tariff would go into effect the US would still be worlds largest importer of oil, in five years time it would still hold that distinction. We cannot build Rome in a day but we can change the trend from greater dependence each year to lessened. If the world price of oil drops due to lowered demand the country that would benefit the most would be the United States. The mullahs would end up with less per barrel and Uncle Sam would have more, the tariff would transfer money from them to us.

Domestic producers will make out, good, I look upon that as capital formation for investment in synthetic oil plants. The companies that will make the profits are in the industry that would have the expertise to build them.

I am already stuck with paying to defend the free flow oil from the Mideast by way of the income taxes, shifting the burden to an oil import tariff would make it easier for me reduce that cost by using less oil.

A national goal should be to eliminate dependence upon oil imports (with the exception of Canada and perhaps Mexico) rather than a marginal decrease. The Persian Gulf can pull oil out of the ground cheaper than we can, no amount of tax cuts will change that. Saudi Arabia can produce it for a few dollars per barrel, you can cut taxes till the cows come home but they will still be the lowest cost producer with the ability to flood the market and drive high cost producers out of business.

Were we to simply seize their oil I could really, really, really get on board with that program. But a nation that gets in a dither over an Islamofascist with panties on his head does not have the stomach to take such measures.

[Light Speed]

World Corporate Synergy may be mans best hope to solve the dilemma of nationalism.
Some coment that this planet is not ready yet for such grandeous dreams.
Nations entrenched in Religious hatred or nationalsitic view can be contolled.....but for how long?

Much of what goes for Global Business Synergy...is infact an extortion reality which see's problem solved by throwing money at it.

Integrity of relationships is fickle.
Nations which sign onto collective agreements are found to be doing business via the backdoor....circumventing protocals.
Crime finds easy transit in this reality ...and continues to visit the King on the side.
Our World may be run by Crime more than we imagine.

The Movie Star Wars captures the import of Trade Federations.....and their military projection.

Granted...its a movie which suggests future dynamics.
But it may not be far from the truth.

Fighting over possesions may be an sentient existence reality,

Here on Earth......and eventually.....out there : )

[WoofDog123]

"I was never under the impression that China owned the canal. I thought that they run the two ports at either end, but you have dismissed that as a factual inaccuracy. "

well they do run the ports, but that issue has been extrapolated in almost all written articles on the subject as a 'sphere of influence and control' issue.

""I still find it disturbing that there is a build up (for lack of a better term)of Chinese nationals right under our noses. I don't think that it is unreasonable to assume that if we were to go to war with China, their loyalties would lie with their homeland.""

Yes, on the one hand they are paying huge money to leave china and get their family out. I have wondered the same thing you mention.

That said, if europe has to commit cultural suicide by allowing mass immigration, they have committed a fatal error not giving tremendous prefernce to people from SE asia, china, etc, rather than north africa and the middle east.

[gogeo]

Oh, man...I used to be in the petroleum industry, and have followed it for the past 30 years...don't you fools ever get tired of being wrong?

[gogeo]

This is today's new and improved version of the '70s notion that we would be out of oil by 1990.

[FredZarguna]

He forgot about asteroids plowing into the Earth, Super Novas, Aliens attacking....Have I left anything out?

There's a holdup in the Bronx.
Brooklyn's broken out in fights.
There's a traffic jam in Harlem
That's backed-up to Jackson Heights.
There's a scout troop short a child--
Khrushchev's due in Idlewild.
(Car 54 where are you?).

Peak Oil. You heard it here first. End of the world as we know it. Seriesly. Hugh. Invest in Peak Oil Futures now. Only thing Jim Morrison has in his portfolio. Yup. Yup. Peak Oil. Yup.

[ichabod_65]

Europe is in a stranglehold of Islam. They do nothing that will enrage the muslims. If Israel is waiting for the EU to criticize the Palistinians for electing a Hamas led government they will wait forever. I have been paying attention to this issue for some time now and am noticing that the same is starting to happen here. CAIR is getting it's way on a lot of issues. We are being lulled to sleep by Islam in the US and I'm afraid that we may wake up to something we thought would never happen.

[Sunnyflorida]

OK, I'm feed up. Quit trying to use grade school, John Kerry, debating tactics. Learn something from me. I am giving you a lesson in economics for a fraction of what I charge my clients. Learn and profit.

" The rest of the world would have cheaper energy by a ton...

I am trying to reconcile this with what you wrote in post #399:"

Cheaper than us you dolt. If we put a tax on the oil we use then people that do not have the tax will have CHEAPER OIL THAN US BY THE AMOUNT OF THE TAX (approximately). Taxing imported oil will cause all oil to go up for US consumers. Do you have a clue as to why? In effect we are subsidizing industrial production of the REST OF THE WORLD. Can you grasp that?

YOU REALLY need to go to a book store and learn about economics.

"I fail to see how an increase of domestic oil prices by 37.5 cents per gallon"

Either you or the other economic moron took the barrel of oil and divided it by gallons to get the increase in price of gas at the pump directly arithmetically from your per barrel tax. If you had a clue you would know that a gallon of crude does not translate into a gallon of gasoline. AND you can't go use linear math for g----sake. You have to look at the marginal impact. A 5% decrease in availability of anything at current market prices could raise market prices double. If you had a clue you would know by now about the supply/demand CURVES not LINES. Buy a highschool math book while you are at it. My 13 year old eighth grader knows better. Did you go to public school?

Taxes slow economies. Slow economies reduce production and tax receipts and the standard of living.

Look if you want to screw the mulahs don't screw us in the short term. By the way you do have support from you idea in two places; Dorgan the idiot. and the friggen Canadian liberal party. 'nugh said. I refuse to waste my time on you any more until you read a book by Tom Sowell. Or chech with any respected conservative ecnomists. I took your dopey comments Sunday night to about a dozen and they all think your idea is wacky. It would improve your outlook on life.

[Sunnyflorida]

"lol, I am *IN* the Club for Growth. The oil import tariff is the only tax I could learn to love, and what you are failing to account for is the many ways our political and military and economic depedency costs of imported oil are *NOT* calculated in your calculus of the pros and cons of this idea. "

I passed your idea by a director at CfG on Sunday and he thinks its "whacko"

Quote It is definitely whacko. Free trade is a no-brainer. Unquote

You can not be a good standing member of the CfG and call for tariffs.

Show me one citation from the CfG that supports tariffs. The only support I see for your idea is the Liberal party in Canada a while back and Sen Dorgan.

PERIOD.

"I've insisted that it be balanced with tax cuts on US production so that argument does not hold water. "

Your an idiot, If you tax imported oil, US produced oil goes UP TO THE SAME PRICE. Unless you are suggesting price controls, Mr Carter.

[WOSG]

It's sad that you are now misrepresenting/misunderstanding my points ...

I've been proposing a tariff on oil to balance our economic and political costs of dependency. Now even the President is lined up on that, talking about our 'addiction to oil' (pity he didnt say 'addiction to foreign oil' since domestic oil is hardly a harmful addiction). You berate it like the second coming of leninism while missing key points...


Me: "I've insisted that it be balanced with tax cuts on US production so that argument does not hold water. "

You: "Your an idiot, If you tax imported oil, US produced oil goes UP TO THE SAME PRICE."

I never said otherwise. I propose $50 billion in tax increases on imported oil balanced with *tax cuts on capital gains, income, and social security*. Bringing the price of US oil is red herring here - the *point* is to increase the price of oil to consumers.

I'm sure you failed to mention that part of what I was saying to the CfG guy - I want this to be revenue neutral.

"Unless you are suggesting price controls, Mr Carter."

That indeed is whacko and a cheap shot. I said nothing of the kind, indeed I *want* higher oil prices as the only sure incentive

If you want real whacko, here is whacko: Spending billions of dollars researching more expensive sources of energy than oil, without making the final prices balance out so those alternatives are cheaper. Then we wonder why we are 'addicted' to the cheapest form of energy.

[WOSG]

You claim that "when people that do not have the tax will have CHEAPER OIL THAN US BY THE AMOUNT OF THE TAX (approximately)." ... yet you fail to mention that almost every other OECD nation has *higher* taxes on oil (and downstream products like gasoline) *already* than the US.

We are the lowest-oil-taxing consumer in OECD, and coincidentally the one with largest per capita use of oil.

As noted below in a speech by Norway's oil minister on the topic of oil taxes, the taxes on oil average out to over 25 dollars a barrel. So an oil import fee of under 25/barrel
is not even reaching parity with that tax level.

I would amend my tax proposal to achieve merely parity with the other OECD nations (Europe and Japan) - which woudl equate to about a $15/barrel oil import fee.

Note that this minister understands that oil taxes shift wealth from oil producers (to oil consumers).

http://odin.dep.no/odinarkiv/norsk/oed/2001/taler/026031-090022/dok-bn.html
"Taxes on oil have increased steadily during the last 20 years and are now at a level of about 25 USD/barrel.

Taxes are especially high in Europe and particularly on diesel and gasoline. About 60 % of a composite barrel of oil are made up of taxes in OECD Europe.

Income from oil taxation in European OECD countries is about 250 billion USD annually. This is a considerable amount of money, and could make it difficult for governments to reduce taxes significantly, as expenses then have to be cut."

"When oil taxes are debated, the focus is often on the distribution of the economic rent from oil resources, that is how taxes effect producers' export revenues and consumers' import expenses for oil.

High oil taxes means that part of the oil rent is transferred from oil producer to consumer nations, via a reduction in the producer price that comes about when taxes restrict demand. We don't know by how much, but it is not insignificant.

Understandably, there is much resentment among producers because of this. But I’m afraid there is little producers can do about it. Gasoline is a good tax object, because of the inelasticity of demand in the short term. Efficiency loss is small and revenues from the tax are not much undermined by reduced consumption. Relatively high taxes on oil are probably here to stay.

The distributional effect of this is in my view to be regretted.

Because, with a few exceptions, oil exporting countries cannot be considered to be rich countries.

Thus, when oil taxes increase, the rich OECD countries gain at the expense of relatively poorer countries."

[demkicker]

Go ahead and make our alternative oil day... (sooner rather than later).

[Lowcountry]

It's clear to me that 95% of the posters on this thread have not got the slightest clue about the indisputable laws of supply and demand. Therefore, any rational discussion is not possible.

Oil will never be $262 a gallon. Take that to the bank all you Malthusian losers.

[WOSG]

Btw, SF, cut out the ad hominem.

"I fail to see how an increase of domestic oil prices by 37.5 cents per gallon"

"Either you or the other economic moron took the barrel of oil and divided it by gallons to get the increase in price of gas at the pump directly arithmetically from your per barrel tax."

A barrel of crude can create, depending on the refinery methods, around 40-42 gallons of equivalent refined product, distillates or gasoline. Usually its not more than 30 gasoline gallons in the spread. So it is reasonable to consider a $15 per barrel cost adder as adding around 37.5 cents per gallon cost.

"If you had a clue you would know that a gallon of crude does not translate into a gallon of gasoline. AND you can't go use linear math for g----sake."

All this abuse, yet he did the math right. tsk tsk.

"You have to look at the marginal impact. A 5% decrease in availability of anything at current market prices could raise market prices double."

Yes, you, me and world has noticed that - the crude market has tightened up by increasing demand a mere 5% in 2 years - and the price doubles .... Now, why does that make his point invalid? It doesnt! The price of crude will be market price X + taxes. Now, because the tax will increase the pump price, demand will marginally go down, which will market price of crude.

In fact, the market price of crude, due to the magnified impact you speak of, could easily fall by close to $15 / per barrel due to that oil import fee. THIS IS ONE REASON TO SUPPORT THE OIL IMPORT FEE - it will cut the market price of oil, sending less money to the oil dictatorships.

"If you had a clue you would know by now about the supply/demand CURVES not LINES. Buy a highschool math book while you are at it. My 13 year old eighth grader knows better. Did you go to public school?"

This abuse is unnecessary and pointless,
especially since fallujah-nuker's points are still valid and have nothing to do with high school math:

"A year after the tariff would go into effect the US would still be worlds largest importer of oil, in five years time it would still hold that distinction. We cannot build Rome in a day but we can change the trend from greater dependence each year to lessened. If the world price of oil drops due to lowered demand the country that would benefit the most would be the United States. The mullahs would end up with less per barrel and Uncle Sam would have more, the tariff would transfer money from them to us."

Your abuse doesn't hide the fact that you have yet to respond to this point. So the question:

0) Would increased oil tariffs lower imported oil demand? (And note, I want us *also* to: drill govt lands, drill offshore, drill ANWR; build nukes; push for energy alternatives and conservation)
1) Would the world market price of oil be higher or lower due to US oil import tariff?
2) Would this price change help or hurt the OPEC oil dictatorships?

3) Would higher taxes on oil imports, coupled with lower taxes on capital gains, income, and payrolls by the same amount harm or help US economic competitive performance?
(hint: quit pretending all taxes are equally bad and think about taxes that impact production vs taxes that impact consumption)

4) Why would Norway's oil minister consider the taxation of crude oil a shift of wealth from oil producers to oil consumers? What does that mean for the #1 consumer of oil in the world?

[WOSG]

"I passed your idea by a director at CfG on Sunday and he thinks its "whacko""

Final parting shot on the club-for-growth angle on this: Pass *this* idea to him -
ABOLISH the capital gains tax and replace it with a tax on imported oil. Have him crunch the numbers on that.

If he's a "FAIR tax" kind of guy, he probably will "get it".

[fallujah-nuker]

OK, I'm feed (sic) up. Quit trying to use grade school, John Kerry, debating tactics. Learn something from me. I am giving you a lesson in economics for a fraction of what I charge my clients. Learn and profit.

Ah, this should be interesting.

Cheaper than us you dolt. If we put a tax on the oil we use then people that do not have the tax will have CHEAPER OIL THAN US BY THE AMOUNT OF THE TAX (approximately). Taxing imported oil will cause all oil to go up for US consumers. Do you have a clue as to why? In effect we are subsidizing industrial production of the REST OF THE WORLD. Can you grasp that?

As we already do by securing the flow of oil from the Mideast, you have yet to address that issue.

Either you or the other economic moron took the barrel of oil and divided it by gallons to get the increase in price of gas at the pump directly arithmetically from your per barrel tax. If you had a clue you would know that a gallon of crude does not translate into a gallon of gasoline. AND you can't go use linear math for g----sake. You have to look at the marginal impact. A 5% decrease in availability of anything at current market prices could raise market prices double. If you had a clue you would know by now about the supply/demand CURVES not LINES. Buy a highschool math book while you are at it. My 13 year old eighth grader knows better.

There is more to a barrel of oil than gasoline, none of it goes to waste.

About 19.5 gallons of 87 octane gasoline can be made from a barrel of oil. The fifteen dollar tariff is not on the gasoline, it is on the oil.

Your economics textbook must have interesting curves to show that a reduction in demand will lead an increase in the price received by the seller. From post# 399, "A tariff helps opec. because world prices will go up."

Did you go to public school?

Yes, one that taught spelling, grammar and proper punctuation.

Look if you want to screw the mulahs don't screw us in the short term. By the way you do have support from you idea in two places; Dorgan the idiot. and the friggen Canadian liberal party. 'nugh said. I refuse to waste my time on you any more until you read a book by Tom Sowell. Or chech (sic) with any respected conservative ecnomists. I took your dopey comments Sunday night to about a dozen and they all think your idea is wacky. It would improve your outlook on life.

I look forward to seeing you win the Nobel Prize for Economics. I might suggest using the spell-check function when you compose your acceptance speech. I'd hate to see you saying something like "OK, I'm feed up" when your speech is televised from Stockholm. Your inferiors here at Free Republic will be more overawed by your intellectual superiority if you can avoid such a faux pas.

[fallujah-nuker]

...If you want real whacko, here is whacko: Spending billions of dollars researching more expensive sources of energy than oil, without making the final prices balance out so those alternatives are cheaper. Then we wonder why we are 'addicted' to the cheapest form of energy.

Yes, the "Hydrogen Highway" that aims to convert us over to a fuel that has half as many Btu's per gallon as gasoline, and requires cryogenic storage!

[fallujah-nuker]

Thanks for the cover, I provided a graph in post# 496 that shows the breakdown of a barrel of oil, I'm not sure how he interprets a tariff on oil as applying only to the gasoline, the entire barrel is used.

P.S. I loved this part: "(hint: quit pretending all taxes are equally bad and think about taxes that impact production vs taxes that impact consumption)."

Bingo!