Oil prices justified? Yes or No?
Driving home and listening to the radio today, the economists all agreed that the $11 spike in a barrel of oil in one day was completely unrelated to market fundamentals of supply and demand, which really didn't change today. They mentioned two factors - the drop of the dollar, and speculators.
Between the producer and the consumer lies the commodity futures market. The amount of money going into the futures market has shot through the ceiling in the past decade. People know that if they buy oil future contracts, and the price keeps going up, they can turn a nice profit when the contract matures. Just like buying a house on speculation - pay $X now, sell for $1.5X when the house is finished.
Of course, the price of oil may not keep going up forever, and we may see a lot of investors get burned. In the mean time, increased demand (by speculators) is driving up the price of oil, just as increased demand drove the price of houses up. Towards the end of the housing bubble, some financial advisors were suggesting that people might rent instead of buying - and that was good advice. So, assuming that the price of oil will eventually collapse back to its equillibrium price, I am advising you to postpone filling your tank. Renting gasoline is not an option, but the bus, the bicycle, and sleeping in your cubicle may be needed until the most fair and rational market system imaginable corrects itself. Judging by the dot-com bubble and the housing bubble, you shouldn't have to wait more than a few years, maybe less.
Last edited by monty on 06 Jun 2008, 11:45 pm, edited 1 time in total.
Capitalism can still allow for public provision of such things. Adam Smith advocated that in Wealth of Nations.
Not very commonly, no. And laissez-faire capitalism is the best method for generating enough prosperity to lift even the poorest members of society out of the worst troubles.
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MR_BOGAN
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Demand has out stripped supply, so the price goes up.
As the oil runs out it is just going to get more expensive.
To those who say we should trust to "the market", "the market" is just as big a tyrant as a dictatorship. You need some government intervention to protect people from being ripped off by large corporations and bosses.
Government intervention invading was invading Iraq.
http://en.wikipedia.org/wiki/Peak_oil
Lots of predictions say we are reaching peck oil production. I hate to break it to you it is running out.
I agree so far. I got quite the reaction in my AP World History class when I defended child labor in third-world sweatshops.
OK. Those types of things are why I'm a minarchist, rather than an anarchist like AG. I take a more Smithian view where I acknowledge the usefulness of government in certain specific spheres, such as military, justice, and public works/infrastructure. Even so, I'll side more with AG in these debates because we both want more liberty than there currently is, so the differences between the two of us are relatively minor in practical terms.
_________________
WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH
What happened in Nicaragua? Or are you referring to Chile under Pinochet?
Roughly the same thing that happened to Chile, except democracy stayed around for longer and things went comparitively worse. It's a better example of Friedman's economics being applied in a stupid idealistic way IMO then Chile is. If you can stand to read the Shock Doctrine, there's a pretty good summary in there.
What happened in Nicaragua? Or are you referring to Chile under Pinochet?
Roughly the same thing that happened to Chile, except democracy stayed around for longer and things went comparitively worse. It's a better example of Friedman's economics being applied in a stupid idealistic way IMO then Chile is. If you can stand to read the Shock Doctrine, there's a pretty good summary in there.
Lucky me, I'm not a Friedmanite. I tend to be more Vienna than Chicago.
Dunno what it is about Latin America, but no system they try ever seems to work. I think the issue may be more in the political instability than in the actual theory of the systems they are trying to implement. They've written constitutions that codify democratic republican forms of government and still failed, but this doesn't necessarily refute republicanism. It just means Latin America did a poor job of implementing it.
_________________
WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH