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TEQs & Fuel Price Control

 
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jo



Joined: 20 Oct 2007
Posts: 184
Location: London

PostPosted: Sun Jun 15, 2008 10:39 pm    Post subject: TEQs & Fuel Price Control Reply with quote

You know, we could be seeing something very interesting happening in the very near future :-

http://www.independent-bangladesh.com/200806156580/business/high-oil-prices-hitting-poor-nations-uk-minister.html

"Saudi Arabia has called an unprecedented one-day meeting of oil-producing and consuming nations in Jeddah on June 22, which could be attended by some heads of state. Britain's Prime Minister Gordon Brown has said he will be there."

I thought this would not happen until around 2012 or 2015, but I think we could be looking down the barrel (confused ?) of an international fuel price-fixing measure.

It is anathema to so many economists, politicians and analysts to even mention the idea of price control. Nobody wants to be accused of central government control. Everyone believes so strongly in the power of free trade fixing the optimum price for everything through markets.

But just look at the evidence that markets aren't working within the regime of oil scarcity :-

1. Saudi Arabia has had to offer to raise production again for the second time in a quarter (either 200,000 barrels a day or 300,000 bpd or 500,000 bpd depending on your sources).

2. There does not appear to have been sufficient drop in demand to bring prices coasting downwards.

3. Rising oil prices have a clear and calculable effect on hastening the coming recession.

There is no way that a combination of rising prices and continuing stress on supply can be absorbed by the world's economies.

One of these factors must become fixed.

Either we have price controls.

Or we bow to the medium-term inevitable : fuel rationing.
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clv101
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Joined: 24 Nov 2005
Posts: 8694

PostPosted: Sun Jun 15, 2008 11:06 pm    Post subject: Reply with quote

Price controls or fuel rationing? There's no way peak oil can be "absorbed by the world's economies." Why not just good old fashioned global recession and demand destruction? Surely that has to be the most likely choice.
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jo



Joined: 20 Oct 2007
Posts: 184
Location: London

PostPosted: Sun Jun 15, 2008 11:47 pm    Post subject: Avoiding Economic Instability Reply with quote

I would suggest that Gordon Brown, amongst others, is quite keen to prove that he can keep the Economy stable.

Personally, I would also want to have the financial situation as level as possible going forward, for myself as well as other people.

I think that Peak Oil is here, and that Peak Energy is not more than 3 years away.

It is still possible to maintain a rein on financial flows, as long as Energy prices are capped (price control), or Energy flows are capped (rationing).

I am going to express it in terms of probabilities (P = 1.0 is a 100% dead certainty from my point of view, P = 0 is it's not going to happen) :-

P = 1.0 Further requests will be made on OPEC to increase crude oil supply.

P = 1.0 Increased supplies of crude oil onto the financial markets will not stop the inexorable rise of the price.

P = 0.75 Between now and the end of the year (say about December 5th to avoid falling into the Christmas Vortex), I would expect to see some decision internationally about how we all have to face up to constraints on the flow of Energy into the markets.

P = 0.5 Price fixing occurs in Europe for transport fuel.

P = 0.25 Prices are fixed in the G8 for transport fuel.
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