Re: Re: Muslim Brotherhood: Israel failing to honor peace ...

[Guest guest]

Good points.

What we might see with oil isn't just a shortage but an actual scarcity. A shortage means that there isn't enough of a thing to go around at a given price. This can mean that the price is too low and supplies are quickly gobbled up or prices can be too high meaning that even though the things are there people don't deem them worth the high price and thus don't buy. Scarcity is when there just isn't any to be had.

Economics at its core deals with scarcity and uses price to distribute scarce goods and services. In this case, oil faces shortages because the really easily oil is already gone or being worked. If oil prices fall too low, then some fields become unprofitable and are no longer worked. This creates a shortage, a price issue, which in normal conditions would drive price back up and make those field profitable again. What would happen now is that many oil fields could either go out of production completely or the oil could only be sold to non-Western nations like China. In either case this would mean an increase in scarcity to the West and particularly the US. We might be able to buy some as resale from China, but that would be at a mark up and also might result in China being Cut off so they might stop. Also, with all the regulations in the US and the rigs moving off elsewhere, it would take years to get fields up and running again to restore capacity in the US.

As for timber prices, they haven't really dropped that much in the last few years. Instead they are flat. There are small fluctuations in price based on weather and which plants are open but overall the price has remained flat at low levels. This is a problem because the industry has already thinned out as much as it could. By that I mean the high gas prices of a few years ago knocked out about half of the timber crews and closed some mills. If gas prices go up again, it could seriously damage the industry unless the loggers and truckers get help with fuel costs. We did what we could last time to help them, but only so much could be done because timber prices were coming down.

Now, there have been some efforts at product diversification but they have faced problems. One was a plan to convert wood pulp to ethanol to help run one of the bigger mills and reduce energy costs. Some college boy screwed that up really badly and the project has been delayed for years. Another option was creating wood pellets to burn in powerplants. While it works and is clean, it can't compete with oil at current prices and so was potentially going to be subsidized for a while. However, that was lost when the greenies who had been saying that burning wood pellets was clean and great suddenly changed course and said it was the worst thing since Hitler and want all kinds of expensive new stuff added to the process. As a result, the plants that were operating are probably going to shut down, if they haven't already, and the planned ones have been shelved.

I think we're going to be regretting that very soon, not having that extra capacity. After all, just look at Texas and other part of the country now. Texas has had to do rolling blackouts during the harsh winter weather and other places like Arizona and even parts of California have had issues with natural gas supply. Obviously the system is being overtaxed and in large part because government has refused to permit new power plants to be built, especially nuclear plants. Instead they've been wasting billions on windmills which don't work very well in the cold and rarely supply the advertised power. This summer, if it is hot, is going to be very harsh on the power supply. If oil also becomes scarce, expect nastiness that will make the era look genteel.

Mind you that the era was a shortage issue, not scarcity. The actual amount of gas sold during the crisis was only a few percentage points less than before the crisis. The shortages came because of price controls. Simply put prices were controlled by the government and this meant gas could not be shipped from where there was a local surplus to places of scarcity. So a small town station might be awash with gasoline, but the city nearby could be in famine. At the same time, stations reduced their hours. Why stay open 12 hours when you could work only 4? They go away with this because of the above mention supply issues. Locals knew when the station would be open and instead of stopping by after work, they would go line up for the stated business hours instead. This is why there were lines because of the hours set by the stations and the supply issues caused by government meddling. Without government "help" prices would have seen oil be transferred to where it was needed. Prices might have been a little higher, but since overall supply was only slightly less than in the past, it wouldn't have been much.

In a message dated 2/4/2011 1:47:08 A.M. Eastern Standard Time, no_reply writes:

We are on the cusp of seeing very violent activity in Egypt tonight, and if many deaths occur in the next day or two, that may be all it takes to cross the point of no return. Administrator