RE: [OPE] Reflections on the oil price controversy

From: Anders Ekeland (
Date: Thu Jul 17 2008 - 02:35:05 EDT

At 15:32 16.07.2008, Jerry wrote:
>Hi Anders and Jurriaan:
>A relatively inelastic demand curve for oil (and oil
>derivatives, including gasoline) wouldn't negate the
>role of speculation. Indeed, it tends to reinforce it!
>The speculation on oil is  primarily about how much
>prices will increase, not what the level of demand
>will be: speculators take for granted that the
>price elasticity of demand for oil is relatively inelastic.

I do not deny that speculation is going on, but in the material 
Jurriaan referred too - speculation was put forward as the only 
explanation of such a quick and big rise - and that is not necessarily true.

> > 4) In my opinion oil has not been priced
> > competitively for a long time.
>Cyrus has written about this quite a bit and has
>suggested (and here I paraphrase) and the oil
>industry has been a lot more competitive and
>there has been a lot more competitive pricing
>than is commonly appreciated.

This was badly formulated by me. What I meant was that OPEC++ had not 
taken out the consumer surplus. OPEC were afraid of backstop 
technologies, they were already drowning in money, they had to take 
the "reaction" from the US into consideration etc. The point is that 
there was for decades an enormous consumer surplus. I mean - one 
dollar a gallon - that's extremely low for "the work" that a galleon 
of petrol does. Since I believe in the LTV I have an inner 
ahistorical measure of the value (;-) of oil telling me that it was 
grossly underpriced. I am convinced that we will see people adjusting 
to prices three to four times higher - before major changes in 
heating systems, transportation habits etc. etc.

Now consumers in most parts of the world has been protected from the 
full impact of the high prices.

That the rising price highlights the totally unjust income 
distribution under capitalism (poor vs. rich domestically, North vs. 
South internationally) but I cannot go into these very burning issues 
just now.

>You didn't mention "peak oil".
>What do you (and others on the list) think about
>the "peak oil" hypothesis and its relevance to this

I do not think peal oil is very interesting. Oil will peak of course. 
But in a situation were dramatic cuts in CO2 emissions are needed - 
the best would be if the fossil fuel resources would have been 
completely depleted already.

There is enough coal to destroy the kind of climate that are need for 
humans. That's a risk I am not willing to take. We know that fossil 
fuel is finite. We know that in some hundred years we have to be 
based on renewable energy. If CO2 (and other gasses) were not 
greenhouse gases the only problem would be that capitalism is 
squandering resources it has taken Nature millions of years to build 
up. But since they are greenhouse gases we have to short-cut the road 
to the fossil free society - in a couple of decades.

The "Transitional program" has to be profoundly rewritten in light of 
this challenge to humanity.

Anders Ekeland

>In solidarity, Jerry
>ope mailing list

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