9/04/2005

Oil reserves

President Bush is releasing oil reserves in hopes that gas prices will go down (http://www.mytelus.com/news/article.do?pageID=cbc/business_home&articleID=2017980). Will that really help? The nation is in panic over an energy crisis, meaning that demand is soaring, and we will pay high gas prices and high heating costs this winter. Although the price per barrel has been dropping since the release of the reserves, we are at the mercy of the oil companies, who have increased their profits to over 50%. Will the people see any relief in gas prices, or will the oil companies keep it all? There is only one way to decrease demand: increase prices.

9 comments:

maddy said...

Even though the reserves of oil have been released it will not help the "average joes" nor the victims as long as the gas companies are out to make the highest profit possible. http://www.sun-sentinel.com/news/opinion/letters/sfl-pbmail984sep05,0,7157585.story?coll=sfla-news-letters As consumers do there best to support those who have lost so much there will come a point when they will have to choose to donate to the cause or drop a few more dollars in the gas tank in order to sustain their own living standard, work, raise a family, etc. As a student I find it difficult to both support my education as well as donate to such a needy cause. Many Americans will have similar choices if their disposable income is poured into the pumps.

ethan said...
This comment has been removed by a blog administrator.
ethan said...

Fuel is a resource that when the price goes up the demand tends not to change. The government found this out and put a huge tax on fuel. They make more tax money and the damand stays the same what could be better? I guess we better start riding our bikes.

Liz said...

Oil runs this country. It's amazing to see how fast a natural disaster can send our country scrambling for oil. Oil prices and the supply of oil controls the economy. Prices of food, clothing, and anything else that needs to be shipped must go up in order to cover the cost of fuel to ship them. We all are paying for it now. Lets just hope that Bush's plan to use reserves will bring some releif or we all may be spending a little less in the stores and a lot more in our tanks.

Connor said...

Can the oil companies really justify the current cost of oil? I understand that the demand has increased dramatically, however I do not agree with them increasing their profits to over 50%. I am feeling this heat in our shipping costs at work. It is simply ridiculous. How do we as citizens make a change in such an enormous industry?

Nate said...

By opening up the oil reserves, President Bush was only trying to calm the fears that the public were expressing. This really did nothing to cut the cost of gas or increase the amount that was really available.

Dr. Tufte said...

-1 on Ann's post for a poorly formatted link. I'd also like to see Maddy's link formatted, but that is tougher in comments (I'll put something on my webpage about how to do that).

-1 on Liz's comment for spelling errors.

I'm not really sure I understand the argument that Ann is making. In what sense are we "at the mercy" of the oil companies? They can't raise prices if we won't pay. I also think the figure of 50% seems improbably or misstated. Then the last sentence notes that increased prices will reduce demand - but that seems to be a problem earlier in the paragraph.

There's a lot of hyperbole about oil prices, and business students really ought to know better. (I don't want to discourage your voicing of them, I just want to steer you towards more rational views). The arguments being made, here and elsewhere, are not a whole lot deeper than buyers deserve to have a get-out-of-a-price-rise-free card.

carter said...

Dr. Tufte made an argument that I agree with that we are not at the mercy of the gas companies. They can only raise prices until we won't pay. So really it is just a market and the consumer surplus is going down as prices go up.

Dr. Tufte said...

Inelasticity is really about personal flexibility. I'm not sure we should feel sorry for the inflexible.