Supply and Demand

[BodybyFisher]

In college and post college studies, I crossed paths with supply and demand and the supply/demand curve. Ebay is built on Supply and Demand, common things are selling for pennies and rare IN DEMAND items are driven up in price.

When things are rare, say a 1962 Corvette Split-Window couple, they sell for more. Anyone notice what has happened to the price of SUVs lately? Anyone notice that GM and FORD have postponed/suspended production of SUVs and pick-ups? NO DEMAND.

Why haven't our representatives in DC learned about SUPPLY and DEMAND when it comes to OIL prices?

I am sure that WE are all familiar with it but, here is a quick primer on Supply and Demand, look at what happens to the supply and demand curve when supply is increased (under supply curve shifts)

<a href="http://en.wikipedia.org/wiki/Supply_and_demand" target="_blank">http://en.wikipedia.org/wiki/Supply_and_demand</a>

This is a good article also >> <a href="http://www.theoildrum.com/node/2899" target="_blank">http://www.theoildrum.com/node/2899</a>

Nowhere is this clearer than in the study of the results of the 1970s oil shocks. In the US the government responded by introducing a 56mph national speed limit, and mandating strict new efficieny standards. In 1975, the average American new car had 136 horsepower under its hood; by 1982, that number had fallen to under 100. Consumers shifted to more fuel efficient cars (a boon for Japanese makers, and a bane for Detroit), and the demand curve moved to the left. Similarly, electricity generators chose to build nuclear or coal-fired power stations rather than oil-fired ones. EDF, France’s national generator, now supplies the vast majority of its electricity from nuclear power stations.

In the three years following the first oil shock in 1973, oil consumption continued to rise – despite soaring prices. Yet from a peak in 1976, consumption began to fall, dropping eventually 15% from its highs. And, again, consumption continued falling for three years, even after oil prices peaked in 1980 and after the world economy began recovering. Moves towards energy efficiency and towards alternative power sources are slow to ramp up, but their effect on the demand curve cannot be over-stated.

Rising prices had another effect in the 1970s, they spurred investment in exploration and production in areas that had previously not been cost efficient. Building rigs in the hostile waters of the North Sea, or in the wilds of Alaska, made little sense while Saudi crude was available for $3 a barrel. But if the Saudi’s oil was restricted, and the price had shot up north of $30, then a lot of new oil suddenly became competitive. And because the key expenses are upfront – building the infrastructure in the first place – then once the new oil came on stream then it was unlikely to be removed, irrespective of the price of oil. The oil supply curve moved to the right.

The impact of a supply curve that moved right (more supply at any given price), and a demand curve that moved left (less demand at any given price) was a collapse in the market clearing price. By 1985, the oil price had fallen back to $10. On an inflation-adjusted basis, oil was as cheap as it had been before the 1973 oil shock.

The lesson here is simple: there is no “over” or “under” supply, there is only the price at which the market clears. And over the long-term, high oil prices will tend to encourage consumers to either reduce energy consumption or shift to other forms of energy. Similarly, investment in either inhospitable areas or in developing technologies will result in greater quantities of oil or synthetic crude coming on to the market. Each boom in the oil price sows the seeds of its own destruction.

THE ANSWER? START DRILLING!!!!!!!!!!!!!!!!!! GET MORE SUPPLY, CHINA and INDIA have increased DEMAND, we/the world needs to MEET that demand...

[BodybyFisher]

More info on our NATIONAL problem

<a href="http://www.rushlimbaugh.com/home/daily/sit...5108.guest.html" target="_blank">http://www.rushlimbaugh.com/home/daily/sit...5108.guest.html</a>

The stupidity is shocking, a WINDFALL PROFITS TAX will be passed on to consumers, PERIOD. DRILL! GET SUPPLY! Someone once told me, when someone you are arguing with digs in ILLOGICALLY, there is a HIDDEN AGENDA or MOTIVE. Someone with some brains needs to STAND UP and educate these clowns. We need a Ross Perot type with his graphs to stand up!

RIVALS TURN UP HEAT IN OIL WAR

By CARL CAMPANILE

June 18, 2008 --

John McCain and Barack Obama drilled each over energy yesterday. McCain called Obama a Jimmy Carter clone for proposing an oil-profits tax, while Obama blasted McCain as a toady of oil barons.

Speaking in Houston, where many energy companies are headquartered, McCain said of Obama, "He supports new taxes on oil producers. He wants a windfall-profits tax on oil, to go along with the new taxes he also plans for coal and natural gas.

"If the plan sounds familiar, it's because that was President Jimmy Carter's big-idea tool - and a lot of good it did us.

"I'm all for recycling - but it's better applied to paper and plastic than to the failed policies of the 1970s."

At the same time, McCain tried to show he's an environmentally friendly Republican, unveiling a TV campaign ad that boasts he "stood up" to President Bush five years ago by pushing for legislation to address climate change.

But positions of opposing drilling in the Alaska National Wildlife Arctic Reserve - while supporting more offshore drilling to boost domestic production and reduce reliance on foreign oil - drew fire from liberal critics who said he's contradicting himself.

Obama opposes offshore drilling and defended his proposed tax, saying he believes in a "windfall profits tax . . . to ease the burden of higher energy costs on working families."

"Instead of giving oil executives another way to boost their record profits, I believe we should put in place a windfall-profits tax that will . . . ease the burden of higher energy costs on working families," he said.

Meanwhile, McCain's campaign accused Obama of having a dangerous and naive "Sept. 10" mindset toward terrorism because the Democrat spoke out against the detention of terror suspects at Guantanamo Bay.

Team McCain released a statement from Rudy Giuliani, who said, "Barack Obama appears to believe that terrorists should be treated like criminals - a belief that underscores his fundamental lack of judgment regarding our national security. In a post-9/11 world, we need to remain on offense."

Obama said the GOP was practicing the politics of fear.

carl.campanile@nypost.com

[BodybyFisher]

Where we are headed becomes more clear when you read about Marx. His theory of Surplus Value states:

Marx's solution was to distinguish between labor-time worked and labor power. A worker who is sufficiently productive can produce an output value greater than what it costs to hire him. Although his wage seems to be based on hours worked, in an economic sense this wage does not reflect the full value of what the worker produces. Effectively it is not labour which the worker sells, but his capacity to work.

Imagine a worker who is hired for an hour and paid $10. Once in the capitalist's employ, the capitalist can have him operate a boot-making machine using which the worker produces $10 worth of work every fifteen minutes. Every hour, the capitalist receives $40 worth of work and only pays the worker $10, capturing the remaining $30 which, after deduction of costs (the leather, depreciation of the machine, etc.) leaves a residual, i.e. surplus value or profit.

The worker cannot capture this benefit directly because he has no claim to the means of production (e.g. the boot-making machine) or to its products, and his capacity to bargain over wages is restricted by laws and the supply/demand for wage labour. Hence the rise of trade unions which aim to create a more favourable bargaining position through collective action by workers

What right does a worker have to the profit, the worker assumes no risk, he does not own the equipment or building, does not market, advertise, distribute or worry about selling the goods. If the worker wanted to make that profit he is free to start his own business.

Because of Obama's Marxist ideals, I wanted to understand Marx better, so I began to read up >> http://en.wikipedia.org/wiki/Karl_marx

This is the way, liberals and democrats are viewing oil companies today, that they are not allowed to make any profit. So their answer is a windfall profits tax or to nationalize the oil companies (think Hugo Chavez).

[BodybyFisher]

Here is streaming audio on the subject

http://marklevinshow.com/wp-content/themes...in06202008a.mp3