Comments on: Creeping Floor Price of Oil

By: Jon K

Jon K — Fri, 28 Aug 2009 16:55:17 +0000

While reducing the fluctuations in oil prices and more accurately reflecting the cost to society of their use seem like excellent undertakings and goals worth pursuing, I have to ask, once suppliers – foreign and domestic – realize that the demand is inelastic for oil at any price under the set floor, what is to prevent them from pricing at whatever the floor is? We use taxes and credits as a method to encourage or discourage certain types of behavior while providing revenue to the government, so shifting the tax burden to oil consumption while reducing it elsewhere is just a method of altering behavior. But if we use a price floor as opposed to a percentage tax, how would we keep the increased revenue going to the government to offset a tax decrease elsewhere as opposed to the oil producers and refiners?

By: Justin Choi

Justin Choi — Fri, 07 Aug 2009 23:44:57 +0000

An extra $1,200 per year may not mean much to someone with a great living and millions of dollars in the bank but for many people, $1,200 a year would have a material negative impact on their quality of life. The final cost would be much greater than this since oil is used in toys, computers, gel caps for medicine, etc. It would cause inflation across the board.

You would greatly reduce economic activity to funnel more money into government hands. Since US consumption is a major driver of global economic activity, you would affect the lives of billions in a negative way by slowing the growth of their economies and keeping more people in poverty than there otherwise would be.

There will undoubtedly be break thrus in alternative energies whether the price of oil is $100 or $40. Sure, it will happen faster at a sustained $100 per barrel but after the last price shock (caused by speculation and greed), I think that there is enough attention on the matter to drive continued innovation in the alternative energy space.

By: Steve Colley

Steve Colley — Wed, 15 Jul 2009 01:08:56 +0000

Holy Moly! Price controls? Last time I checked, that pretty much works… never. That’s just nuts. Back to Economics 101 for you.

By: Jack

Jack — Sat, 11 Jul 2009 17:10:46 +0000

Interesting theory, but just that: theory. “Creep up the floor price” would just become a ticket for someone else’s “special project” funding. Thus, just more tax and spend. If you think in 200+ years of being a country that we’ve learned to adhere to the seemingly simple idea of not spending an offset but returning it as promised, go hang out in congress for a few minutes. They just can’t do it.

Of course, we continue to elect people who want to execute such brilliant ideas as making “green energy” more ‘appealing’ by inserting regulation and taxes that raise the cost of conventional energy to obscene levels. Kind of like encouraging you to buy $10 a gallon bottled water by raising your tap water bill to $3000 a month.

When you introduce poltics into the equation, you always get more than you bargained for. Or, maybe…less.

By: anon

anon — Thu, 09 Jul 2009 22:05:06 +0000

I realize this blog isnt updated very often, but worth a shot, bill, what do you think about desertec:

http://www.desertec.org/en/concept/technologies/

is it viable?

By: Torang

Torang — Wed, 03 Jun 2009 23:57:05 +0000

Bill,
I agree with you that the price of gasoline does not matter. Gasoline prices have been very unpredictable and no one has a good explanation for that – it has certainly not followed the supply-and-demand model since 2007. Gasoline price is also very closely related to market volatility as well as dollar value. However, we ought to stabilize the use of gasoline as an ‘asset class’ in order to stabilize its price. To that end, manufacturers should pay attention to the price of generating alternative fuels and not just concentrate on the price of gasoline and how to predict it.

By: Jessica

Jessica — Mon, 01 Jun 2009 20:19:40 +0000

Gee Bill, for a reasonably smart guy, that has got to be the dumbest idea I’ve heard yet surrounding the energy debate. Your premise of price stability is good but your solution borders on the asinine. The price of gasoline has historically been reasonably stable. The wild market gyrations of the past couple of years was purely due to rampant market speculation by traders that had even less scruples than the criminals involved in the sub-prime debacle. If you want price stability (with a gradual increase due to rising market demand and dwindling supply) advocate for the imposition of some common sense regulations on the energy trading market. I’m a free market zealot but completely unrestricted markets do produce undesirable consequences that shouldn’t
be corrected with entirely artificial means. Perhaps your investments in
electric cars and alternative energy has clouded your judgment as a
capitalist?

By: Dave

Dave — Thu, 14 May 2009 12:06:31 +0000

I do believe that your idea would be good for the auto industry, but we have seen in the recent past that higher fuel prices don’t really do anything for the individual person ( purchaser ). While we had the higher fuel prices, the country was starting head long into the depression that we are now in. While the prices do help a little when higher for the people , they don’t seem to be the cure. I just have a hard time seeing how steadily increasing the price per barrel can help out the country as you say.

By: prasoon

prasoon — Tue, 12 May 2009 18:40:11 +0000

Hello Bill,

I saw your presentation on TED.I am interested getting that device for me.Can you tell me how can I buy one of those.I am from india.

By: John Wolpert

John Wolpert — Sun, 10 May 2009 22:51:05 +0000

Bill, what I love about your stuff is that you seamlessly integrate business concept innovation and technology. The future of energy is going to be all about that. This issue of pricing – if one starts thinking through what would be required to make it really happen – also requires a focus on another problem with innovation: cooperative innovation between legally separate entities. This one isn’t going to be solved without a holistic approach understanding the intentions of many different players. Maddeningly complex.

Working on this issue over http://thethreepercent.com.

Keep up the provocative posts, Bill.