Fuel prices MEGATHREAD

[alchresearch]

We seem to be forgetting the high rate of duty on fuel. If it wasn't the 80% or whatever it is fuel would be much more affordable. If you don't include that I'd say a litre of fuel is excellent value for money.

 

I noticed the roads were very quiet on Sunday and Monday. A result of the shops closed, or people not being able to afford a day out?

[Number Six]

We seem to be forgetting the high rate of duty on fuel. If it wasn't the 80% or whatever it is fuel would be much more affordable. If you don't include that I'd say a litre of fuel is excellent value for money.

 

No we're not - my previous post explains that although fuel duty is high and is a factor in the price we pay, the underlying cost of fuel will inevitably rise over time regardless.

[Cyclone]

I tried to make it clear in my OP that I'm not that interested how much of it is tax - clearly it is a lot.

 

However you cannot escape the basic principle that:

 

1) we are using oil quicker than it is being created therefore

Yes, but we have been since the day we discovered it, if by created you mean by geological processes.

No, if you mean the rate at which we extract it, we have never exceeded the supply.

2) the amount of oil available to us is falling (reduction in supply)

No it is not.

3) the amount of oil we are using is increasing as countries become more affluent (e.g. India and China) and start consuming more (increase in demand)

That's true.

4) the evidence seems to be that demand for fuel is relatively price inelastic in the short term (increase in price doesn't affect demand that much)

Also agreed.

 

When you have a reduction in supply, the price tends to go up.

Supply has been artificially moderated by OPEC for at least 40 years, nothing fundamental has changed.

When you have increased demand, either the price will rise, or the supply will rise. As supply cannot rise indefinitely (oil is a finite resource) prices will rise.

Supply can rise though, OPEC artificially limit the amount they produce, this has the effect of causing price rises (of crude oil).

 

This is slightly complicated by the supply being variable in the short to medium term - the oil companies can choose to pump more or less out of their wells each month - but ultimately there is only so much they can get out, so in that sense the supply is fixed.

Yes, but we've never reached the upper limit.

You also ignore alternative sources of oil such as oil sands which as the price rises become economically viable for extraction and thus stop further price rises.

 

So - regardless of taxes, the price of petrol and diesel is going to go up, and eventually those price increases are going to affect all of us - be it through increased costs of travel, or increased costs of goods and services that have been delivered.

The price of petrol and diesel is higher now than it was the last time oil had the price it has today. That is not because of supply and demand, it's because of sharp practice.

 

I think it's going to present some interesting economic choices - as I say, low interest rates, high fuel prices, high road tax and minimal house price inflation mean that for the first time it might actually make sense for me to sell my house and rent rather than commute, for example.

 

You ignore the effect of exchange rates on oil prices. The exchange rate is as volatile as the futures market on crude and depending on how it changes can overwhelm, dampen or exacerbate any change in the price of the underlying commodity.l

[Cyclone]

No we're not - my previous post explains that although fuel duty is high and is a factor in the price we pay, the underlying cost of fuel will inevitably rise over time regardless.

 

You seem to be implicitly referring to peak oil as if it has been reached, there is no evidence that it has or that we are close to reaching it.

 

In which case the distortion caused by taxation, exchange rates and oligopolistic behaviour are all of great interest when considering petrol prices.

[truman]

2) the amount of oil available to us is falling (reduction in supply)

.

 

Are you sure...some people have other suggestions

[Number Six]

You also ignore alternative sources of oil such as oil sands which as the price rises become economically viable for extraction and thus stop further price rises.

 

Quite - the price will rise, making another limited resource economically viable, until that too becomes scarce.

 

I understand that the majority of what I pay for petrol is tax, and that I'm buying it with income I've already been taxed on, and that when I buy fuel I pay tax (VAT) on tax (fuel duty).

 

None of that changes the fact that supply is limited in the long term, short of technological innovation, and that demand is increasing.

 

Thus, ultimately fuel is going to get more costly. One day there will be a litre of petrol left, and billions of people wanting to buy it. It'll cost a darn sight more than £1.15. Each day we get slightly closer to that situation prices will creep up - and I don't doubt the fuel companies, aware they are selling something they will run out of are making the most of it and maximising their profits. That doesn't change the supply and demand situation either.

 

The question that interests me is whether the current price of fuel, or it's assumed direction (up) is affecting people in interesting and new ways yet.

 

If their is a solution to this problem I feel it has to be an alternative fuel that can be used in existing cars - there are too many engines out there for them all to be simply replaced. I don't understand why the government isn't pumping money in to the bacteria that excrete petrol or diesel and are fed on kitchen waste. Surely that's a win/win - less waste, carbon neutral fuel and you can use your existing car? And if we get the tech right we can licence it to replace the income lost when the North Sea wells run dry.

[GordonBennet]

Even with the costs of road tax and insurance. Four people in a car travelling to scarborough for the day - works out at £11 in fuel; a couple of pounds in tax and insurance (I'll let someone else do the math); and still does not work out that expensive. How much is it for a single person to go by coach or train?

 

It costs me a couple of pounds to go to Sheffield and visit my relatives. If I used public transport - aside from the time it takes waiting for buses and trams and then the walking involved, I would have to pay a very minimum £3-£5

 

How is it that people complain about the cost of using a car and claim that public transport is cheaper and more efficient?

 

Because you're assuming petrol is the only cost of your journey. What about the cost of buying the car in the first place, depreciation, taxes, insurance, parking and all that?

 

I get the bus into town - I don't have to buy the bus first before I can use it therefore it's cheaper than making the same journey by car!

[Number Six]

Are you sure...some people have other suggestions

 

Aw blimey - not seen that, very interesting (but not had time to read it all)

 

I hope it's wring though - a constant supply of oil would be pretty bad for the environment - I was kind of hoping the pressures on supply might force us to adopt more environmentally friendly solutions.

[Agent Orange]

I walk to work and catch the train to travel further afield. It works fine for me and it saves me a fortune.

[Number Six]

Are you sure...some people have other suggestions

 

Phew - turns out the scienece suggesting this is nonsense is more compelling. http://www.fromthewilderness.com/free/ww3/011205_no_free_pt2.shtml