http://mises.org/story/389
Summary
The article I read about is from the Daily Arcticle by Mark Brandly. This article talks about the reason for the huge increase in oil prices and solutions to decrease oil prices. In truth, the government is responsible for the high cost of oil. The article states that there is too much government involvement in the oil industry. OPEC responded with price controls, heavy taxes, and massive government meddling in energy markets in the past to keep prices down. As a result, producers produce less oil which becomes insufficient to meet the demand causing oil prices to increase even more. This time, OPEC decided to decrease regulations and taxations for oil producers. By doing so, it makes oil production more profitable and will increase production driving oil and fuel prices down. Generally the article states that government involvement drives up prices and creates inefficiencies in oil production. The solution to decreasing oil prices lies within tax cuts and less regulations on oil producers since such actions drives them to produce more for a greater profit could be obtained.
Connection
I believe the connection of this article to our text is the effects of government intervention in the free market. In this case, too much government involvement in the oil industry caused the price of oil to increase over the past years. OPEC has always manipulated the oil price market. As a result, a price ceiling situation has occured. In such a situation, a shortage of oil supply is created and the only way to solve the problem is to shift the supply or demand curve. This is only possible by the factors of Supply and Demand we learned in chapter 2. However, such actions will just result in further government intervention in the market which means more money needs to be spent inorder to solve the problem. Moreover, excise tax is placed on oil industries which increases the cost of oil even more. When control is established, equilibrium in the market is destroyed resulting a situation where price and quantity cannot be determined unless through further government intervention. If the government is not involve in the first place and allows the market to function naturally, such problems will not happen.
Reflection
I believe that the government has taken the correct action in reducing the taxation and regulations of oil. However, there has not been much change from the year 2000 to present day. Few months ago, oil prices were as high as $1.50 a litre. However, its only at $0.98 a litre now not due to the decrease in governement involvement, but of the poor economy at the time being. The stock market affected the economy globally. Because people have less to spend, the demand for oil and other resources decrease world wide. A decrease in demand decreases the price causing oil price to become less expensive. In truth, I believe that the government did not take any actions listed in the article to reduce oil prices during the pass 8 years. Because they want to make a profit through the heavy taxations and regulations, they didn't care about the poeple's suffering of high oil prices. All this time oil prices only increased. It proves to show that the government cannot be trusted for it is filled with empty promises. In the end, it was the free market system itself that decrease the price of oil by shifting the demand curve through hurting the stock market.
Sunday, November 23, 2008
Monday, October 27, 2008
Chapter 2 .Effects of Supply and Demand
the article:http://www.tradingtoday.com/26-oil-supply-demand
Summary:
The article I read about is an economic report from " Trading Today". In the article, it states that the demand for oil will continue to increase despite the high prices of oil. This is because that major economic powers such as China and India are industrializing at an incredible rate. The economic growth of these two countries impacted oil demands greatly. However, as the demand for oil continue to rise, the supply has reached a point where it can no longer keep up with the demand. In many countries, their have been reports that the production of oil will decrease as the years progress. 2008 reports confirmed that the Cantarell fields in Mexico will only be able to produce 1 million barrel a day which is a steep decline for it was able to produce a lot more years before. Moreover, Canada has oil fields that contains 1.6 trillion barrels of oil. However, the extraction process is too expensive. Hence the article suggest we must turn our attention to using an alterantive to substitute for oil.
Connections:
I believe the connection of this article to our text is Supply and Demand. If we look at Demand alone, the factors affecting oil prices are the price of substitute, demographic of population and income. Electrical energy is a substitute for oil. However, because the battery's life span is short and expensive, it is hard to increase the demand for the substitute. Also, people find it more convenient to use oil for their cars. As for demographic of population, the worlds population continues to increase. China and India have population in the billions. Hence the demand for oil will only increase because with more people, there will be a greater consumption of the resource. Lastly, China and India are strong economic powers.They have strong income which allows them to spend on resources causing an increase in demand. When we look at Supply alone, factors affecting it are technology and production cost. Becuase technology has not reach a standard where it may meet the demand of the production of oil, supply decreases as time progresses. Also, because it is too costly to extract oil deep in the oil fields, production cost cause supply to decrease.
Reflection
I agree that oil prices have been increasing for the passed few months. However as of right now, the demand for oil has decreased. As the world economy crumbles, the demand for resources such as oil also decrease because people have less income to spend. China and India are not affected as much because they are an industrial base country. Hence, their focus is primarily base on the exchange of goods not finance and stocks. However, countries like America and parts of Europe focuses on service base that includes the stock market. Hence, when the stock market recesses, there economy is hurt. As of right now, oil prices are moderate; about a dollar a litre. I predict the value of oil will continue to decrease becase people are buying less oil and suppliers continue to produce the same amount per day. In order to prevent oil price from decreasing too much, they should reduce the production to balance out the current demand.
Summary:
The article I read about is an economic report from " Trading Today". In the article, it states that the demand for oil will continue to increase despite the high prices of oil. This is because that major economic powers such as China and India are industrializing at an incredible rate. The economic growth of these two countries impacted oil demands greatly. However, as the demand for oil continue to rise, the supply has reached a point where it can no longer keep up with the demand. In many countries, their have been reports that the production of oil will decrease as the years progress. 2008 reports confirmed that the Cantarell fields in Mexico will only be able to produce 1 million barrel a day which is a steep decline for it was able to produce a lot more years before. Moreover, Canada has oil fields that contains 1.6 trillion barrels of oil. However, the extraction process is too expensive. Hence the article suggest we must turn our attention to using an alterantive to substitute for oil.
Connections:
I believe the connection of this article to our text is Supply and Demand. If we look at Demand alone, the factors affecting oil prices are the price of substitute, demographic of population and income. Electrical energy is a substitute for oil. However, because the battery's life span is short and expensive, it is hard to increase the demand for the substitute. Also, people find it more convenient to use oil for their cars. As for demographic of population, the worlds population continues to increase. China and India have population in the billions. Hence the demand for oil will only increase because with more people, there will be a greater consumption of the resource. Lastly, China and India are strong economic powers.They have strong income which allows them to spend on resources causing an increase in demand. When we look at Supply alone, factors affecting it are technology and production cost. Becuase technology has not reach a standard where it may meet the demand of the production of oil, supply decreases as time progresses. Also, because it is too costly to extract oil deep in the oil fields, production cost cause supply to decrease.
Reflection
I agree that oil prices have been increasing for the passed few months. However as of right now, the demand for oil has decreased. As the world economy crumbles, the demand for resources such as oil also decrease because people have less income to spend. China and India are not affected as much because they are an industrial base country. Hence, their focus is primarily base on the exchange of goods not finance and stocks. However, countries like America and parts of Europe focuses on service base that includes the stock market. Hence, when the stock market recesses, there economy is hurt. As of right now, oil prices are moderate; about a dollar a litre. I predict the value of oil will continue to decrease becase people are buying less oil and suppliers continue to produce the same amount per day. In order to prevent oil price from decreasing too much, they should reduce the production to balance out the current demand.
Sunday, September 21, 2008
Chapter 1. Scarce resource and Opportunity Cost
The article: http://www.abc.net.au/news/stories/2008.01/30/2149569.htm
Summary
The article I read about is a report from ABC news about the huge increase in the price of oil over the past couple years. Dr. Jim Buckee, retired president and chief of Talisman Energy states that the increase in the price of oil is due to the huge demands from people and the limited amount they can pump out with their resources. The world has been consuming 30 billion barrels of oil per year. However, oil rig companies can only pump out 7- 8 billion barrels per year. Though oil supplies have reached its peak, the concept of oil running out is incorrect. There is still plenty of oil in the world. However, we need to drill even deeper into the earth inorder to get the oil. Dr. Jim Buckee predict that oil prices will reach $200 per barrel by the third or fourth quarter of this year and prices will have to get this high before significant impacts will hurt the worlds economy.
Connections
I believe the connection of this article to our text is scarcity. I see scarcity as the infinite desires of people in a world where resources are finite. In this case, the huge difference in the supply and demand of oil has created a world scale problem. Humanity consumes gas at 30 billion barrels per year. Industries can only produce a maximum of 7-8 billion barrels per year. The huge difference in the supply of oil versus the demand creates the law of diminishing returns before us.World population will only increase while production of oil cannot keep up and is limited. Hence, I believe that oil prices are only going to increase as the years pass by as predicted by Dr.Jim Buckee. The problem can only be solved if we can find another source of energy and the rationing of oil supplies.
Reflection
I believe that the only way to decrease the price of oil is to find a substitute for the demand. We should focus on using renewable resources such as solar energy or magnetic energy to power our vehicles. This eases the strain on the earth and allows earth resources to rest and rejuvenate itself. Furthermore, because the supply of oil is controlled by American organizations. I believe that they should put their focus in finding a substitute for oil instead of spending billion of dollars on weaponry. If these two goals can be met in 10 or 20 years, we can save the world from an oil crisis because studies reveal that oil supplies can only last for another 60-70 years if there is no technological breakthrough.
Summary
The article I read about is a report from ABC news about the huge increase in the price of oil over the past couple years. Dr. Jim Buckee, retired president and chief of Talisman Energy states that the increase in the price of oil is due to the huge demands from people and the limited amount they can pump out with their resources. The world has been consuming 30 billion barrels of oil per year. However, oil rig companies can only pump out 7- 8 billion barrels per year. Though oil supplies have reached its peak, the concept of oil running out is incorrect. There is still plenty of oil in the world. However, we need to drill even deeper into the earth inorder to get the oil. Dr. Jim Buckee predict that oil prices will reach $200 per barrel by the third or fourth quarter of this year and prices will have to get this high before significant impacts will hurt the worlds economy.
Connections
I believe the connection of this article to our text is scarcity. I see scarcity as the infinite desires of people in a world where resources are finite. In this case, the huge difference in the supply and demand of oil has created a world scale problem. Humanity consumes gas at 30 billion barrels per year. Industries can only produce a maximum of 7-8 billion barrels per year. The huge difference in the supply of oil versus the demand creates the law of diminishing returns before us.World population will only increase while production of oil cannot keep up and is limited. Hence, I believe that oil prices are only going to increase as the years pass by as predicted by Dr.Jim Buckee. The problem can only be solved if we can find another source of energy and the rationing of oil supplies.
Reflection
I believe that the only way to decrease the price of oil is to find a substitute for the demand. We should focus on using renewable resources such as solar energy or magnetic energy to power our vehicles. This eases the strain on the earth and allows earth resources to rest and rejuvenate itself. Furthermore, because the supply of oil is controlled by American organizations. I believe that they should put their focus in finding a substitute for oil instead of spending billion of dollars on weaponry. If these two goals can be met in 10 or 20 years, we can save the world from an oil crisis because studies reveal that oil supplies can only last for another 60-70 years if there is no technological breakthrough.
Tuesday, September 9, 2008
Thursday, September 4, 2008
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