Peak Oil Is Here!

[Leafless]

The law of supply and demand is serving us well for the most part. There is a shortage of supply in the west because China and India are increasing demand and are willing to pay a higher price to fill it. If we wish to maintain our supply or increase it we must pay the competitive price.

And that new competitive price in the U.S. is and that much worse here in Canada:

Oil tops $129 for first time, heads for $130

Latest surge comes after OPEC president says won’t raise output

Video

Four bucks and counting

May 19: For the first time some major U.S. cities are seeing gas selling for over $4 per gallon.

http://www.msnbc.msn.com/id/12400801/

But not to fear Pliny, experts have predicted the demand will lessen when oil reaches $182.00 barrel and unless new sources of oil are not found by 2015, will leave the world short by about 60-million barrels of oil a day.

Buyt I won't quote sources since you believe all are only opinions.

[GostHacked]

Having "spare capacity" is not indicative of peak oil. I would conclude that the author of the wealthdaily article took the statement "the world is consuming more oil than it is producing" out of context. And how could we consume more oil than we produce unless we were utilizing reserves which would be soon depleted.

We can have all the spare capacity we want. But to refine the product through a static number of facilities, you still have the bottleneck of production. You simply cannot refine more oil than what the current number of refineries can deal with. Demand and use is going up, refinement cannot keep up with the ever growing demand unless new refineries are built. Since they are not getting built, we will have a static amount of oil that can be refined to meet the demand.

The refinement of oil has been static for 30 years. It is not hard to see that since demand is going up, and you have a limited static output for the last 20 to 30 years, it is not hard to see that a cruch is going to happen.

http://en.wikipedia.org/wiki/OPEC

OPEC's influence on the market has been negatively criticized. Several members of OPEC alarmed the world and triggered high inflation across both the developing and developed world when they used oil embargoes in the 1973 oil crisis. OPEC's ability to control the price of oil has diminished somewhat since then, due to the subsequent discovery and development of large oil reserves in the Gulf of Mexico and the North Sea, the opening up of Russia, and market modernization. OPEC nations still account for two-thirds of the world's oil reserves, and, as of March 2008, 35.6% of the world's oil production, affording them considerable control over the global market. The next largest group of producers, members of the OECD and the Post-Soviet states produced only 23.8% and 14.8%, respectively, of the world's total oil production.[4] As early as 2003, concerns that OPEC members had little excess pumping capacity sparked speculation that their influence on crude oil prices would begin to slip.[5][6]

Any doubt about them influencing price?

[Pliny]

We can have all the spare capacity we want. But to refine the product through a static number of facilities, you still have the bottleneck of production. You simply cannot refine more oil than what the current number of refineries can deal with. Demand and use is going up, refinement cannot keep up with the ever growing demand unless new refineries are built. Since they are not getting built, we will have a static amount of oil that can be refined to meet the demand.

The refinement of oil has been static for 30 years. It is not hard to see that since demand is going up, and you have a limited static output for the last 20 to 30 years, it is not hard to see that a cruch is going to happen.

Indeed this is a bottleneck. And a result of government intervention that made the development of refineries unprofitable.

http://en.wikipedia.org/wiki/OPEC

Any doubt about them influencing price?

Here is what I said about them influencing price.

So is that setting the price or is that attempting to manipulate supply. Nowhere is there a direct assignment or manipulation of prices beyond what supply and demand dictate. Admittedly there are parameters around that which is called bartering or dealing. All sides attempt to win in the outcome.

[Pliny]

With government subsidies. We have to compete against these in addition to their lower labour costs and environmental standards. I thought all this subsidizing business was illegal now, in any case why hasn't the almighty market corrected this artifical distortion all on its own?

Artificial distortions require removal but usually develop into more artificial distortions being introduced.

Then there should be nothing to justify the high price we're paying or the downturn in the economy that we're experiencing as a result. Why does the law of supply and demand seem to be broken?

We could introduce some more distortions but I would suggest removing some existing ones.

Given the constitutional hysteria that nationalizing Alberta's oil industry would cause, I concede it would probably only make things worse. Can we not at least impose duties on imported goods from countries that are subsidizing their economies at our expence? Given the price increases accruing to speculation I would also propose a hefty tax on oil stock profits. These could be used to offset personal income taxes.

Ahh.. a new tax.. an excellent political solution.

As for carbon taxes...the wind has shifted, growing numbers of people do not believe that we need to do anything to reduce carbon emmissions and until recently governments have neglected and resisted doing anything about them, so why drive prices up even farther with them? Why now when AGW skepticism appears to be on such a roll?

Carbon taxes...excellent political solution.

The fact is that demand has never been higher and production has not kept up with demand. The OPEC countries are also playing around with the supply which affects prices. Note I did not say they were playing around with the prices.

[Pliny]

http://www.msnbc.msn.com/id/12400801/

But not to fear Pliny, experts have predicted the demand will lessen when oil reaches $182.00 barrel and unless new sources of oil are not found by 2015, will leave the world short by about 60-million barrels of oil a day.

Buyt I won't quote sources since you believe all are only opinions.

It is those pesky OPEC countries playing around with the prices. Supply and demand aren't important. Isn't that your opinion?

For the most part they are opinion. Some have merit, some are selling a bill of goods. Some are predicting the sky is falling.

Edited May 21, 2008 by Pliny

[GostHacked]

It is those pesky OPEC countries playing around with the prices. Supply and demand aren't important. Isn't that your opinion?

For the most part they are opinion. Some have merit, some are selling a bill of goods. Some are predicting the sky is falling.

It's who is demanding the oil. And who is supplying the oil. Going to the highest bidder. Shifting the selling to a booming China. Europe, North America has to compete with the growing of China. China can right now, probably buy more oil than the US and Europe because of all the technology the west has invested in China. To make cheap stuff for us. Because the west has invested manufacturing in China to make stuff so cheap for us, they benefited largely, and a middle class it seems emerged out of nowhere and took hold in China. And with that, they wanted the creature comforts that new money could afford. China is using more oil than they ever were, and it is continualy growing very fast, outpacing everyones expectations.

Now how will this play with the Petro American dollar? Oil is only traded in US dollars correct? If so, you can now see how much China has actually invested in the US and it's currency. If China ever wanted to trade in those dollars, the US economy would crash hard.

[Pliny]

It's who is demanding the oil. And who is supplying the oil. Going to the highest bidder. Shifting the selling to a booming China. Europe, North America has to compete with the growing of China. China can right now, probably buy more oil than the US and Europe because of all the technology the west has invested in China. To make cheap stuff for us. Because the west has invested manufacturing in China to make stuff so cheap for us, they benefited largely, and a middle class it seems emerged out of nowhere and took hold in China. And with that, they wanted the creature comforts that new money could afford. China is using more oil than they ever were, and it is continualy growing very fast, outpacing everyones expectations.

Now how will this play with the Petro American dollar? Oil is only traded in US dollars correct? If so, you can now see how much China has actually invested in the US and it's currency. If China ever wanted to trade in those dollars, the US economy would crash hard.

Well, it is my opinion you have a better understanding of economics than someone asking why the price of oil is so high in Canada.

Iraq was the first to sell it's oil in Euros in 2000. It wasn't a good decision by Saddam. Iran as of April 30, 2008 no longer trades its oil in US dollars. Chavez has made an arrangement of barter for oil with other Latin American countries and the rest of the world continues to sell oil in American dollars as far as I know.

China is indeed holding a lot of American dollars. What do you mean by "trade in those dollars"? For what?

If the US dollar collapses China is left with a lot of paper. It is in their interests to support the American dollar as the world's reserve currency and to even buy oil in American dollars, at least until it's reserves are more diversified. Iran has said it will accept Yuan in exchange for oil along with Euros. Iran is not very economically sophisticated, in my opinion, and will, because of it's differences with the US, wind up hurting itself economically. They are not playing at the same level as the big boys. They will not be able to upset the apple cart and will consequently be taken for a ride. I don't think China will want to buy it's oil in Yuan at this time. They are probably more interested in spending some of their US dollars first, while they still hold some value.

But who knows for certain what the big boys are doing? I would be quite well off if I did. I think there is interest among movers and shakers in having a North American common currency. The question has at least been fielded for polling purposes. I believe Americans would see too much loss of sovereignty in doing that but who knows what the collapse of the dollar would bring, if it did collapse? Economic convenience and concern for stability has been seen to override similar concerns in Europe; with any apparent instability ignored or explained away as transitional in nature. There is confidence in numbers, meaning the more people that support a common currency the stronger the currency will be and the more economic security seems assured. Safety in numbers is the apparency.

Peak oil happened in 1979. It is happening now and it will probably be happening in 2015 and again in 2030 maybe it will really happen in 2040 but all things would have to remain equal.

I don't know if we are all talking about the same thing when we are talking about Peak oil. Peak oil is not a shortage in the supply of oil due to production problems or manipulating the supply. Peak oil is the time when the world production of oil equals consumption and supply cannot be increased to increase production, consequently, production can only drop. At least that is my understanding.

Edited May 21, 2008 by Pliny

[GostHacked]

Pliny

China is indeed holding a lot of American dollars. What do you mean by "trade in those dollars"? For what?

It is the same way large corporations offer stocks. Sell more stocks to invest in the company. When the company makes money, you can find people cashing in those stocks for the higher value that they are worth. When you have more people wanting to cash in a total amount that is higher than what the company can offer back, they end up looing big time.

Same thing with currency. China has invested in the American dollar. At this point, it might be good to actually invest in the US dollar, for it is at a very low price compared to other world currencies. Let's say that dollar goes up in value. If I invested in it, I would be making a nice profit because of the increase in the dollar's value. When you have a huge sell off, it can really affect the whole company/country to the core.

I work for Loblaws. I have seen two huge sell offs of our stock that drove the price down from 65CND/share to 28CND/share in a matter of days.

The stock price will fluctuate greaty when there is a huge sell off or buy in.

----

Iraq, Iran, and other countries have plenty of oil to sell. By giving the world another alternative to the US Petro dollar, a new Oil Bourse was to be set up by Iraq/Iran and other Gulf states. When they do that, they control their own price of oil, and can sell it cheaper than what is currently the OPEC/World standard.

But who knows for certain what the big boys are doing? I would be quite well off if I did. I think there is interest among movers and shakers in having a North American common currency.

Yeah this is more of the North American Union talk I hear going on all the time.

I don't know if we are all talking about the same thing when we are talking about Peak oil. Peak oil is not a shortage in the supply of oil due to production problems or manipulating the supply. Peak oil is the time when the world production of oil equals consumption and supply cannot be increased to increase production, consequently, production can only drop. At least that is my understanding.

This a good way to surmise it, this makes a lot of sense to me. I never really thought of it that way before, but it is correct.

[M.Dancer]

There's a big difference between currency trading, foreign reserves and capital markets.

If China wanted to devalue the US$ by selling off their entire reserve, they would hurt the US but they would also hurt themselves as their reserves would be devalued against what ever they are trading for.

Loblaws was over priced, it wasn't a sell off that lowered the share value, but a poorly performing company with iffy management.

Stock prices do fluctuate....but not because their is a lot being traded, in fact many companies with huge volumes of trade have risiong share prices because as many people want to own as their are those who want to cash in and take profits.

Take todays trading. Caspian Energy volume so far is 13,656,672 shares bought and sold. The % change in price is 0.

Another perhaps better example is suncor. 3,422,908 shares moved, net change is .08 cents.

And finally the Forzani Group. They traded only 53,620 shares but are down .88 cnets...

[GostHacked]

Take todays trading. Caspian Energy volume so far is 13,656,672 shares bought and sold. The % change in price is 0.

About the time the stock dropped, there was a major restructuring program just put into place prior to the sell off. Lots of staff changes happened. Yeah, you are right, Loblaws was in some trouble last year. The turn around really wont be noticed for a couple more years.

But comparing Loblaws stock which is a Canadian local, to an international oil producer does not seem like a good comparison when you are talking about sell offs. The sheer volume that an oil producer's trades creates on a daily basis far outnumbers anything we do here at Loblaws. The oil companies have more volume than we have stocks out there in existence. So it would take a lot more people when trading to affect oil markets.

Other factors here that you could mention are

Size of the company compared to stock price and how many people can influence it.

So the people that wanted out, got out. Sold off their stocks which in turn affected the overall stock price. The capitol gained from the high stock price was eaten up because of the payout the company had to do to those shareholders who wanted out. And yes, a company's performance will have an affect on the decision to trade.

http://www.canada.com/ottawacitizen/column...db-b2c10ce2bc77

Worse still, at a time when Christmas shoppers are filling his aisles, Mr. Weston, who owns 63 per cent of Loblaw's 274 million outstanding shares, does not believe that the immediate future looks too bright. The stock's plunge has wiped about $1.9 billion off his personal holding, but shareholders who have seen their investment tumble are just as peeved, particularly as Mr. Weston has few comforting words for them.

Imagine 1.9 billion just dissapearing. Blows my mind.

Grocery chains are having a major problem with transportation costs. Fuel is expensive (diesle is even mroe expensive). 99% of our stock is moved by tractor-trailer. Food prices rise becuuse of it. ok digressing....

[eyeball]

Gas is still cheaper than bottled water

Its completely nuts isn't it?

Bottled water is virtually unnecesary, its a least 10000 times as expensive as tap water and usually no better in terms of quality. A fraction of the money spent globally in a year would be enough to provide everyone on the planet with safe drinking water and proper sanitation.

Link

Gasoline is far more necessary than bottled water so by rights it should be more expensive but it isn't. Perhaps its easier to see why I doubt the idea that the market is infallably rational.

The market appears irrational, the law of supply and demand seems to be broken, I wonder what else isn't what it appears to be in this Alice in Wonderland economy? You don't have to be a climatologist to be a credible AGW denier these days, nor do you have to be an economist to credibly wonder if the theories upon which our global economy are based are as completely out to lunch as people think GW theories are.

It hasn't taken too much doubt to make us think twice about policies that account for AGW but I suspect it will take way more doubt to make us do likewise with our economic policies.

Its completely nuts.

Edited May 22, 2008 by eyeball

[M.Dancer]

The market appears irrational, the law of supply and demand seems to be broken,

Not at all. There is great demand for bottled water and the consumer is willing to pay. If it were irrational, it would be expensive with no sales.....or cheap and they cn'y keep the shelves stocked....

Edited May 21, 2008 by M.Dancer

[Bryan]

Bottled water is virtually unnecesary, its a least 10000 times as expensive as tap water and usually no better in terms of quality. A fraction of the money spent globally in a year would be enough to provide everyone on the planet with safe drinking water and proper sanitation.

Yeah, but people don't usually buy 60 litres at a time of bottled water, at least not at the high price you're talking about. Bought in that kind of quantity, bottled water prices plunge down to 50c a litre or less. I can buy a 24 pack of 500 ml bottles for $3 at Home Depot. The cost involved at that point is simply the packaging and distribution so that you can have a convenient source of something to drink. Keep a case in the garage, and grab a bottle on your way out. I don't see the issue, other than the number of bottles getting recycled vs being thrown out.

[M.Dancer]

Yeah, but people don't usually buy 60 litres at a time of bottled water, at least not at the high price you're talking about. Bought in that kind of quantity, bottled water prices plunge down to 50c a litre or less. I can buy a 24 pack of 500 ml bottles for $3 at Home Depot. The cost involved at that point is simply the packaging and distribution so that you can have a convenient source of something to drink. Keep a case in the garage, and grab a bottle on your way out. I don't see the issue, other than the number of bottles getting recycled vs being thrown out.

I spmetimes by a case of Perrier....around $12 so a buck a bottle...but generally a bottle or 2 of san pelagrino. I never buy water water...what for? I have a tap in the kitchen, a reverse osmosis filtre and a brita in the fridge....homemade Dasani....

[Pliny]

Gasoline is far more necessary than bottled water so by rights it should be more expensive but it isn't. Perhaps its easier to see why I doubt the idea that the market is infallably rational.

The market appears irrational, the law of supply and demand seems to be broken, I wonder what else isn't what it appears to be in this Alice in Wonderland economy?

It is a trip!

Did you study anything about the banking system in school? Did you study anything in school about money, like fiat currencies, the gold standard, paper money? Did you study anything about how economies work?

Were you told in school that money was not an important thing in life and that being happy was more important, finding your niche in life, work that you enjoyed and caring relationships were most important?

Although the latter things may be important in life there really isn't an endeavour to have you understand how economies work. The economy as far as value for the dollar, inflation, the quantity of money in a society, foreign trade and investment, interest rates, fractional reserve banking, purchasing power, prices, wages, credit, Central Banking, government debt, taxes, all these things are tools of the bankers. If you know these things, I know very little really because I went to a public school and what I do know I had to learn myself, then you will have some understanding of the "Alice in Wonderland economy".

Right now, some actions are being taken by central banks and governments that throw a lot of instability into the economy. Most people with financial backgrounds are watching with care what is happening right now and I think most of them are not too optimistic. They are not optimistic because they don't know. If they knew they would be optimistic or at least be able to brace themselves or even take advantage of what they knew to avoid disaster. The current scenario is unusual and consequently there is a lot of uncertainty.

I will say as an example of having some knowledge of economics, and here I am just offering an opinion, but if China were not engaging in capitalist expansion North America would be experiencing inflation rates in perhaps the double digit levels. We would be going through a period of hyper-inflation. It would not just be gas that is going up. As it is we may still experience some high inflation levels. I am not certain what the direction of the central banks is but their policies have been to inflate the money supply and keep interest rates low, make easy credit. It ran away a bit in the States and there is a credit crunch there. Canada was not as exuberant as the US, a little more fiscally conservative, and has not been hit as hard economically.

Some economists see doom and gloom everywhere. Well, if they were economists that knew economics they would know what to direction to take not only for themselves but in their advices. One such Economist is a guy named Paul Krugman who writes a financial op-ed column for the New York Times. We are headed for catastrophe according to him. If he really had a clue he would just state that if we take this direction in our policy this will happen and if we take that direction that will happen but he doesn't. He mostly calls for government intervention and regulation, and they are his only solutions. The market, according to him, left to it's own devices would simply collapse.

There is a lot of government intervention in the economy and that enters in uncertainties as well as irregularities. We know that central banks have been inflating the money supply for the last decade. We don't know why exactly but we know what happens when the money supply is inflated. A general rise in prices occurs.

So why are they increasing the money supply? They are playing a little bit with the consumer price index, the CPI, which is basically an inflation index. I have heard several financial advisers mention that the governemnt lately has not been using correct statistics to calculate the CPI and are underestimating inflation. Why would they do that? It is their job to stabilize the economy and keep inflation at a manageable level. Are they just hiding ineptness? Or is their another reason they wish to portray the inflation level lower than it actually is? Or are the financial people just wrong?

If you knew these things, about credit, currencies, money, central banks, etc., it would all make more sense to you. But there are things that the general public is not allowed to know as well. There is a plan but it is not a conspiracy. I am not a conspiracy theorist. I will say that those in power do plan in their policies to maintain their power just the same as anyone plans to maintain their standard of living. Their decisions just affect a lot more people and sometimes they affect quite a few people adversely. I don't think for the most part that is their intent but sometimes I think they like people to know they are vulnerable.

An expert in financial planning will know what will occur under the circumstances. Knowing the circumstances is the expertize. All the circumstances at all times can't be known so the options must be known and the actions taken as soon as circumstances reveal themselves.

Gotta go!

[GostHacked]

Not at all. There is great demand for bottled water and the consumer is willing to pay. If it were irrational, it would be expensive with no sales.....or cheap and they cn'y keep the shelves stocked....

Blame marketing departments to make us want to buy something that we obviously do not need. This is why reusable/recycleable plastic, glass and metal bottles are the key. Not only that, some companies make the plastic bottles with a type of plastic that most cities recycling programs will not accept. So you now have garbage if you never plan to reuse it again.

Are you really too busy to grab some bottle from your cupboard, fill it with some tap water to take with you? It is about the laziness that is projected upon us buy those who want to sell bottled water. Now they are adding all sorts of crap to bottled water for flavour. I very much despise sugar substitutes like Splenda, Nutrisweet. Ingredients like potassium sorbate and aspratame absolutely ruin the taste of any sugar/glucose-fructose based drink out there. Give me real sugar.

Blame Marketing.

[GostHacked]

Pliny

Ecomonics has always confused me as well. Fractional reserves, fiat currency. Through Google Videos and Youtube, and various reads online, I have been way more informed than I ever was, and economics still does not make sense to me.

[Pliny]

Pliny

Ecomonics has always confused me as well. Fractional reserves, fiat currency. Through Google Videos and Youtube, and various reads online, I have been way more informed than I ever was, and economics still does not make sense to me.

My recommendation:

Economics in One Lesson by Henry Hazlitt

Although I think I have a good grasp of fundamentals there is still plenty for me to learn.

Edit: Sorry the book has the above title not Economics 101.

Edited May 23, 2008 by Pliny

[Pliny]

Blame marketing departments to make us want to buy something that we obviously do not need. This is why reusable/recycleable plastic, glass and metal bottles are the key. Not only that, some companies make the plastic bottles with a type of plastic that most cities recycling programs will not accept. So you now have garbage if you never plan to reuse it again.

Are you really too busy to grab some bottle from your cupboard, fill it with some tap water to take with you? It is about the laziness that is projected upon us buy those who want to sell bottled water. Now they are adding all sorts of crap to bottled water for flavour. I very much despise sugar substitutes like Splenda, Nutrisweet. Ingredients like potassium sorbate and aspratame absolutely ruin the taste of any sugar/glucose-fructose based drink out there. Give me real sugar.

Blame Marketing.

Why would you blame marketing departments for making us want to buy something? You should be asking why we are buying something we obviously don't need. Part of the answer is that we are quite affluent and spend some of our income on frivolous things. Another part is our perception of the value of money - it is not as rare a commodity as it was, which is perhaps also a symptom of affluence.

I rarely buy bottled water and it is wise in my estimation to not ingest things containing Aspartame or Nutrasweet (they are the same thing). Real sugar is bad as well.

[Leafless]

Gasoline is far more necessary than bottled water so by rights it should be more expensive but it isn't. Perhaps its easier to see why I doubt the idea that the market is infallably rational.

Who told you that?

In 1990 this was not the case and a bottle of Perrier water could also have been harmful to your health.

A barrel of crude American oil will run you almost $30. A barrel of Perrier will cost you over $300. In 1990, both contained benzene, a known carcinogen.

http://everything2.com/node/32591

[GostHacked]

Why would you blame marketing departments for making us want to buy something? You should be asking why we are buying something we obviously don't need. Part of the answer is that we are quite affluent and spend some of our income on frivolous things. Another part is our perception of the value of money - it is not as rare a commodity as it was, which is perhaps also a symptom of affluence.

I rarely buy bottled water and it is wise in my estimation to not ingest things containing Aspartame or Nutrasweet (they are the same thing). Real sugar is bad as well.

Why indeed. Ask yourself that. Why are you buying something you do not need? Then think about what influenced your decision to get said product.

Marketing creates an image that people want to be a part of. The same way marketing works to sell you the latest gas guzzlin SUV. It is all a matter of creating an atmosphere in which you think you crave and want these items. If you don't you are not cool. Through the images and text and sound on the ad, if you do not buy in, you are a looser.

You really do not need that huge gas guzzlin Ford Expedition. But you want it. And you pay your precious cash to have these comforts. All these creature comforts we have had in Europe and the West for so long and so cheap is comming to an end. Now that China has more cash to throw around, leisurly activities are becomming more affordable for them, you can see a shift in where oil goes.

For all the cheap labour China provides for an outsourced manufacturing sector, Europe and the West lose income capable people. This income challanged folks can no longer afford anything else but cheap ass products from China. Major shift in the world economy. Which demands a major shift in how resources get allocated. Oil being one of those resources..... money is to be made.

[August1991]

Its completely nuts isn't it?

Bottled water is virtually unnecesary, its a least 10000 times as expensive as tap water and usually no better in terms of quality. A fraction of the money spent globally in a year would be enough to provide everyone on the planet with safe drinking water and proper sanitation.

Link

Gasoline is far more necessary than bottled water so by rights it should be more expensive but it isn't. Perhaps its easier to see why I doubt the idea that the market is infallably rational.

Morris has wisely answered you above, eyeball, but I just couldn't let this one slide.

First of all, what gives you the right to judge what is more necessary, gasoline or bottled water? Value, needs and wants are in the eye of the beholder and not one single eyeball. I have always felt that behind many North American socialists is a moral, social engineer who wants to plan and organize everything.

Second, your suggestion that if we spent less on bottled water this would free up resources to provide water and sanitation to others. Your reasoning here is wrongly zero-sum and it misses entirely what makes the earth go round. (No, it's not money.) In simple terms, the wealth of the west does not come from the poverty of the Third World and if you tried to transfer our wealth to others, you would quickly discover that there would be no wealth to transfer.

Lastly, your water-gasoline conundrum reminds me of Adam Smith's water-diamond paradox. Smith wondered why water -essential for life- was so much cheaper than diamonds. Smith wrongly resolved the paradox and it took another century, and mathematics, to arrive at a correct answer. I mention all this because of your following comment:

Perhaps its easier to see why I doubt the idea that the market is infallably rational.

What follows applies equally to you eyeball as to some other posters in this thread. Before you criticize a discipline and doubt, for example, that markets are "infallably" rational, it is wise to have a good grasp of the discipline. Before you break rules of grammar, you should understand well what the rules are.

Markets are far from infallible and they frequently fail even to exist. The world oil market is far from perfect but if I were looking to argue against markets, I'd cite other situations.

Look, peak oil ain't here and OPEC is one reason to believe so. Why? OPEC is the friend of conservationists.

[Pliny]

Why indeed. Ask yourself that. Why are you buying something you do not need? Then think about what influenced your decision to get said product.

Marketing creates an image that people want to be a part of. The same way marketing works to sell you the latest gas guzzlin SUV. It is all a matter of creating an atmosphere in which you think you crave and want these items. If you don't you are not cool. Through the images and text and sound on the ad, if you do not buy in, you are a looser.

You really do not need that huge gas guzzlin Ford Expedition. But you want it. And you pay your precious cash to have these comforts. All these creature comforts we have had in Europe and the West for so long and so cheap is comming to an end. Now that China has more cash to throw around, leisurly activities are becomming more affordable for them, you can see a shift in where oil goes.

For all the cheap labour China provides for an outsourced manufacturing sector, Europe and the West lose income capable people. This income challanged folks can no longer afford anything else but cheap ass products from China. Major shift in the world economy. Which demands a major shift in how resources get allocated. Oil being one of those resources..... money is to be made.

In all transactions involving trade, barring fraud, there are two winners. The seller doesn't sell unless there is an advantage in doing so and the buyer doesn't buy unless he sees advantage in buying. August mentioned it was not a "zero-sum" game where one person loses and the other one wins. There is basically an increase in wealth in any trade. The wealth is not static because, as August also mentioned, the person buying something values it more than the person selling it and the seller values the money more than the item he sold.

An important point he makes also is that one person cannot be a judge of what another values. I don't need a chainsaw so would never buy one. As a third party you might wonder why I don't have a chainsaw and think everyone should have a chainsaw peoples who don't have a chainsaw are stupid. Because of this consideration you might think the world has gone crazy except for people who have their chain saw.

That may be a poor example because it is easy to understand that not everyone would have the need for a chainsaw but it illustrates the point that valuations are entirely subjective.

You may think it is marketing from water companies that is selling bottled water but the demand was there before the marketing. Marketing only attempts to grab a share of the market. There are other factors that create demands. Poor municipal water supplies. Every spring at runoff the water out of the tap doesn't taste the greatest. I imagine mishaps, like the one in Ontario a few years back where there was contamination from E coli and a few people died, did a lot more for bottled water sales than a good marketing campaign could have.

If people don't really want something marketing is of little value.

There is a shift in the world economy and a major one. I understand that poeple are wondering and complaining

about prices and the economy but the foundation is a little unsound, in my opinion with central banks able to create credit and cash virtually at will and at virtually no cost. This is "money" we are talking about, at least what people think of as money today. That is the most economically and socially destabilizing factor in the world today, in my opinion.

Thanks for the pointers, August!

[eyeball]

Go ask Alice...

Hard numbers: The economy is worse than you know

Let me stipulate: The deception arose gradually, at no stage stemming from any concerted or cynical scheme. There was no grand conspiracy, just accumulating opportunisms.

The political blame for the slow, piecemeal distortion is bipartisan — both Democratic and Republican administrations had a hand in the abetting of political dishonesty, reckless debt and a casino-like financial sector. To see how, we must revisit 40 years of economic and statistical dissembling.

Perhaps Alice and Wonderland are the wrong metaphors...the Sorcerers Apprentice came to mind but...I think I'll stick with the comparison to AGW theories.

It should come as no surprise to anyone that the Church of Global Economic Theory is almost entirely made up of AGW deniers.

[Leafless]

Morris has wisely answered you above, eyeball, but I just couldn't let this one slide.

First of all, what gives you the right to judge what is more necessary, gasoline or bottled water? Value, needs and wants are in the eye of the beholder and not one single eyeball. I have always felt that behind many North American socialists is a moral, social engineer who wants to plan and organize everything.

"Value, needs and wants are in the eye of the beholder."

What an illogical statement.

Gasoline and bottled water are not even related.

All of society requires gasoline to produce energy for a multitude of uses: i.e., 1-U.S. gallon of gasoline =115,000btu's.

1-h.p.=2545 BTU/hr.

1-litre of bottled water =0-BTU's and we don't need bottled water for survival.