$4 gas, free market, tax burden question

[Arraya]

Arraya, you are kidding right?

Let me break it down:

A barrel of oil contains 42 gallons. It can be made into about 20 gallons of gasoline (give or take, depending on the grade of the oil). Each gallon of gasoline contains about 36 kilowatt-hours of chemical energy (kilowatt-hours are the number of kilowatts, a measure of power, times the number of hours, yielding a measure of energy). An efficient internal combustion engine turns about one quarter of that energy into useful work, with the rest lost as heat. One horsepower is equivalent to about 3/4 of a kilowatt. However, one human working hard continuously can only put out about 1/10 to 1/5 of a kilowatt (compare the power output of a human to a one-horsepower horse). A recent article in Bicycling on the Tour de France showed that the average power output (during the several hours per day of the race) of a top-finishing bike racer, Floyd Landis, was 0.23 kilowatts, or about 1/3 horsepower, continuous. In a 75 minute time trial, the same cyclist was able to put out 0.38 kilowatts continuously — a full 1/2 horsepower!

The 20 gallons of gasoline made from one barrel of oil contains about 180 useful kilowatt-hours. If we divide that by say, 1/8 of a kilowatt — a generous continuous output for a fit person — we get 1440 hours of hard human work. Let’s assume that a person can put out this 1/8 of a kilowatt for 6 hours per day. That is, half of the output of a top Tour de France cyclist for a continuous 6 hours (not counting breaks) per day. This means that you would need 240 days to get 180 kilowatt-hours (or more, if you are a dimmer bulb), which is minimally equivalent to one year of 5-days-a-week very hard labor by a fit human. This boils down conveniently to: ONE BARREL of oil = ONE YEAR of hard human labor.

Couple this with the fact that for the first time in history we are about to have not enough go around. Yeah, I’d say it was underpriced, the market has just not figured it out yet.

[sdduuuude]

arraya – you have done an excellent job of spelling out the upper bound of the value of oil.

Sadly, this has little to do with the price.

[sdduuuude]

arraya – you have done an excellent job of spelling out the upper bound of the value of oil.

Sadly, this has little to do with the price.

[sdduuuude]

arraya – you have done an excellent job of spelling out the upper bound of the value of oil.

Sadly, this has little to do with the price.

[sdduuuude]

arraya – you have done an excellent job of spelling out the upper bound of the value of oil.

Sadly, this has little to do with the price.

[sdduuuude]

arraya – you have done an excellent job of spelling out the upper bound of the value of oil.

Sadly, this has little to do with the price.

[DWCAP]

Sdduuuude,

My point wasnt that we are not sensitive to oil prices. We most certainly are. My point was that relative to Tech stocks, the demand curve is alot higher. We double the price of a gallon of gas and most people will still pay. (2000 proved that isnt true of stocks) They will cut back, some, but they will still pay most of the time. Housing is even steeper than oil because we dont all need gasoline (we all use oil in someway, everyday) look at people in downtown areas that are close to work. Many just bike or walk. We all do need some form of housing. (I know all about delivery trucks and moving vans and such, but I am talking about peoples personal decisions to buy, not macroeconomic interactions)
But those with big houses in the country that have to commute will still have to pay, they just may cut back on that ski trip to mammoth or that fishing trip. So demand will fall, but not as much as other things would.
Food is even a steeper demand curve. We may trade down from Steak to hamburger, but we still need to buy SOMETHING.

I dont have to buy your stock, I can move to cheaper areas if I dont like your housing, I can ride a bike if I dont want to pay for gas, but I have to eat something. No matter if it is processed grains themselves or something we fed grains too and then processed, we still have to eat.

[DWCAP]

Sdduuuude,

My point wasnt that we are not sensitive to oil prices. We most certainly are. My point was that relative to Tech stocks, the demand curve is alot higher. We double the price of a gallon of gas and most people will still pay. (2000 proved that isnt true of stocks) They will cut back, some, but they will still pay most of the time. Housing is even steeper than oil because we dont all need gasoline (we all use oil in someway, everyday) look at people in downtown areas that are close to work. Many just bike or walk. We all do need some form of housing. (I know all about delivery trucks and moving vans and such, but I am talking about peoples personal decisions to buy, not macroeconomic interactions)
But those with big houses in the country that have to commute will still have to pay, they just may cut back on that ski trip to mammoth or that fishing trip. So demand will fall, but not as much as other things would.
Food is even a steeper demand curve. We may trade down from Steak to hamburger, but we still need to buy SOMETHING.

I dont have to buy your stock, I can move to cheaper areas if I dont like your housing, I can ride a bike if I dont want to pay for gas, but I have to eat something. No matter if it is processed grains themselves or something we fed grains too and then processed, we still have to eat.

[DWCAP]

Sdduuuude,

My point wasnt that we are not sensitive to oil prices. We most certainly are. My point was that relative to Tech stocks, the demand curve is alot higher. We double the price of a gallon of gas and most people will still pay. (2000 proved that isnt true of stocks) They will cut back, some, but they will still pay most of the time. Housing is even steeper than oil because we dont all need gasoline (we all use oil in someway, everyday) look at people in downtown areas that are close to work. Many just bike or walk. We all do need some form of housing. (I know all about delivery trucks and moving vans and such, but I am talking about peoples personal decisions to buy, not macroeconomic interactions)
But those with big houses in the country that have to commute will still have to pay, they just may cut back on that ski trip to mammoth or that fishing trip. So demand will fall, but not as much as other things would.
Food is even a steeper demand curve. We may trade down from Steak to hamburger, but we still need to buy SOMETHING.

I dont have to buy your stock, I can move to cheaper areas if I dont like your housing, I can ride a bike if I dont want to pay for gas, but I have to eat something. No matter if it is processed grains themselves or something we fed grains too and then processed, we still have to eat.

[DWCAP]

Sdduuuude,

My point wasnt that we are not sensitive to oil prices. We most certainly are. My point was that relative to Tech stocks, the demand curve is alot higher. We double the price of a gallon of gas and most people will still pay. (2000 proved that isnt true of stocks) They will cut back, some, but they will still pay most of the time. Housing is even steeper than oil because we dont all need gasoline (we all use oil in someway, everyday) look at people in downtown areas that are close to work. Many just bike or walk. We all do need some form of housing. (I know all about delivery trucks and moving vans and such, but I am talking about peoples personal decisions to buy, not macroeconomic interactions)
But those with big houses in the country that have to commute will still have to pay, they just may cut back on that ski trip to mammoth or that fishing trip. So demand will fall, but not as much as other things would.
Food is even a steeper demand curve. We may trade down from Steak to hamburger, but we still need to buy SOMETHING.

I dont have to buy your stock, I can move to cheaper areas if I dont like your housing, I can ride a bike if I dont want to pay for gas, but I have to eat something. No matter if it is processed grains themselves or something we fed grains too and then processed, we still have to eat.

[DWCAP]

Sdduuuude,

My point wasnt that we are not sensitive to oil prices. We most certainly are. My point was that relative to Tech stocks, the demand curve is alot higher. We double the price of a gallon of gas and most people will still pay. (2000 proved that isnt true of stocks) They will cut back, some, but they will still pay most of the time. Housing is even steeper than oil because we dont all need gasoline (we all use oil in someway, everyday) look at people in downtown areas that are close to work. Many just bike or walk. We all do need some form of housing. (I know all about delivery trucks and moving vans and such, but I am talking about peoples personal decisions to buy, not macroeconomic interactions)
But those with big houses in the country that have to commute will still have to pay, they just may cut back on that ski trip to mammoth or that fishing trip. So demand will fall, but not as much as other things would.
Food is even a steeper demand curve. We may trade down from Steak to hamburger, but we still need to buy SOMETHING.

I dont have to buy your stock, I can move to cheaper areas if I dont like your housing, I can ride a bike if I dont want to pay for gas, but I have to eat something. No matter if it is processed grains themselves or something we fed grains too and then processed, we still have to eat.

[sdduuuude]

DWCAP – my reply was to the original poster.

[sdduuuude]

DWCAP – my reply was to the original poster.

[sdduuuude]

DWCAP – my reply was to the original poster.

[sdduuuude]

DWCAP – my reply was to the original poster.

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