Who or what is responsible for high gas prices?

Discussion in 'Current Affairs, News and Analysis' started by Devil_Dog, Jul 20, 2008.

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  1. Everybody says it is the so-called speculators.

    I say that somebody somewhere is trying to raise as much money as possible before G W Bush gets out of office.

    What is your take?
  2. Where's the problem for the US?



    On the otherhand, for Europeans, the hike in gas price is simply due to Gasprom profiteering off the back of high oil prices.
  3. Almost 2 years ago I was sent to huge electric power station in Southern Russia (Novocherkassk, 2400 MW). It utilises local coal (poor quality btw). However, the station is able to work using natural gas. It would be even more efficient and ecologically pure.

    That time only 4 block (from 8) were at work. I asked why. I was told that it is due to shortage in coal (the station must have sufficient reserves of coal for Winter time). I mentioned gas, said that apparently there is a lot of gas in Russia. But it appears that there are strict limits on usage of gas for power generation because it is more profitable to sell it abroad.

    So if European customers would demand lower gas prices from Gazprom then (at least partly) it would be consumed inside Russia. Also Gazprom is not the only supplier of natural gas in Europe. Norway sells gas using the same price. Its calculation is very simple. We get market price on a tonn of fuel oil and get its energetic equivalent in natural gas. This method is fair. In this situation any consumer would prefer gas as more ecologically pure fuel.

    As for prices for natural gas in the UK then Gazprom is barred from having a distribution net in Great Britain. However in this case profits of British gas resellers would be excluded and gas prices for consumers be lowered. Also, I believe that Gazprom run gas distribution firms would not cut gas supplies for the old, for pensioners. Financial burden for Gazprom would be almost invisible but from political point of view it would be very profitable for Gazprom to claim that no one was frozen to the death in the UK being supplied from Gazprom pipes directly.

    Who or what is responsible for high gas prices?

    First of all we may exclude the first word from this question. There is one main cause - high oil prices. Why they are so high? I believe that mainly due to growing Chinese and Indian economies. And other contries consume more and more oil. It is sufficient to say that Russia now is the biggest car market in Eurepe. Number of new cars sold in Russia during the first half of this year is bigger that one in Germany.
  4. I'm afraid KGB_resident, you missed the joke completely.

    Devil_Dog wants to discuss the price of petrol - which he calls "gas".
  5. You mean one single person working alone? And raise money for what? What has the end of Bush's term got to do with oil prices? What's your logic for this thread?
  6. I was wondering what he was talking about. Gas which we call petrol, Gas which we call wind or Gas which we call Gas?

    If it's petrol, must be a septic so he definitely can't complain about the price of that which is about the same for a gallon as we pay for a litre.
    If it's the stuff that comes out of your backside, well, even Gordon the Grabber hasn't found a way of taxing that (yet).
    If it's gas that heats your water or homes, bloody hell! Seen your gas bill lately? Cost of gas overtook my standing charge for the first time ever. I thought we had enough in this country to last for centuries. Could this be another government cock-up to rival the great gold giveaway?
    Me? I'm too busy trying to pay the council tax which may (or may not) pay for my dustbins to get emptied in the future. Glad I'll be in Spain from next month where the bins are emptied every day, unlike UK where it's once a fortnight if you're really lucky!!!!
  7. Personally I blame the OPEC countries for operating a cartel and deliberately not matching supply with demand.
  8. Low value of the USD means the price goes up. Hurts the US but hurts China even more, because the US is now mainly a service economy whilst China is a manufacturing economy. Maybe it's all a big cynical plan to reduce China's USD holdings?

    I'll get my tin-foil hat...
  9. Only for so long as they use their dollar holdings to buy stuff rather than sit on them until things get better. Their other two biggest trading partners are EU and Japan - they've got massive holdings of Euro and Yen that they can use for international purchases.

    If it was a deliberate plan to hurt China, it could very easily backfire. Apart from removing the restraining factor of self-interest in supporting dollar value, it'll just encourage them to a) move their holdings to a different currency such as Euro (given the scale of purchases, that could hammer a pretty big nail in $ coffin); and b) find someone else to trade with, i.e. domestic or regional. America isn't the only game in town.

    Incidentally, who is it that the US economy is servicing?
  10. Yes, our American friends frequently use the word in this context. Indeed I missed the point.

    So to correct my mistake I would like to say that cost of "gas" in Russia is more that half Pound per liter and about 55-60% from this price are taxes. Is there anybody who likes to pay taxes? Unlikely. But many institutions including armed forces exists and fuction thanks to taxes.

    In theory petrol prices could be reduced but as a result many public spendings have to be reduced as a result.
  11. But crude prices dropped this week, leading supermarkets to cut their forecourt prices.

    Finally a reason to go to my local Sainsbury's other than to get robbed blind at the check out...
  12. i believe there are 4 parts to the reason:

    1) FX - 25% or thereabouts of the rise is due to the USD falling in value versus other currencies. Expect this to continue. The US fed thinks it can just print new money to meet its debts but every new dollar makes the last one more worthless. They stopped publishing M3 money supply figures just over 2 years ago [alarm bells sounding - whoop whoop whoop!]

    2) Inflation - governments having been understating real inflation for years. An interesting fact is that if you take the oil price of 13usd in 1978 and apply the real rate of inflation for the past 30 years as calculated by shadowstats.com then oil comes out about 133usd. Not so far away from where we are now. So the real question would be more like why was oil so lowly priced for so long rather than why is it so high now?

    3) Supply and demand - compare the amount of cars etc.. on the road now compared to 30 years ago now that the chinese and indians drive rather than ride bikes and donkeys and the supply situation is much much tighter. On the flipside then there have been no new significant oil discoveries recently, while the OPEC countries generally state there reserves are the same as they were in the 80s. Thats because its in their interest for OPEC voting and quotas to have bigger reserves. So apparently these magic oil fields never deplete. Somebody is lying...

    4) Speculation - yes, to top it all off alot of hedge funds and banks have alot of spare cash lying around because of the credit crunch. It means they dont trust each other to lend to each other and the public, but they will invest in commodity trading. And because of the reasons above it still seems like a very good bet that prices will be higher still and they are falling over each other to be 'long' oil. As with all bubbles it will pop at some point as everybody falls over each other to take profits but it could be a while yet.

    Thats my 2p worth anyway