Saud Clout

[Plane]

http://articles.moneycentral.msn.com/Investing/JubaksJournal/DoYouTrustTheSaudis.aspx


It's now Saudi Arabia that's trying to find a delicate balance. In the Organization of Petroleum Exporting Countries (OPEC), the Saudis are the swing producer -- the only major oil producer with enough extra production capacity to increase supply when the price of a barrel of crude soars, and the only major oil producer with the political will and foresight to cut supply when prices fall too low. Right now, the Saudis are producing at 8.5 million barrels a day. Depending on whose figures you believe, their production capacity is anywhere from 9 million to 11 million barrels a day.

If the Saudis allow oil prices to climb too high, then consumers will cut back on use, and energy alternatives will become sufficiently attractive to investors to cut into oil's share of the global energy market. Worst case: Oil prices will climb so high that they cause a global recession that will certainly cut demand.


If the Saudis allow oil prices to fall too much, they will reduce the revenue they get for oil and reduce their clout among those oil-producing countries that are only willing to follow the Saudi lead as long as it lines their pockets. Worst case: Revenue falls so far that the Saudis and other oil-producing countries don't have the cash to support their own plans for growing their economies and providing the jobs and subsidies that keep many oil-country governments in power.



The only thing that changes this game -- that redresses the balance between supplier economies and consumer economies -- is a change in the price signals that consumer economies send in response to price increases. As long as the response to an increase in the price of oil is an increase in consumption, then oil prices will drift higher at a pace set by the self-interest of oil producers. Those of us who live in the consuming economies will just have to hope that the Saudis and other oil producers efficiently milk consuming countries' cash-cow economies.

On the other hand, if higher prices lead to less consumption because consumers become permanently more efficient in the ways they use energy, and because consuming economies adopt lasting sources of alternative supply (and don't abandon them at the next dip in oil prices), then consuming countries have a chance to take back some degree of control over their own economies.

[Xavier_Onassis]

Cutting production somewhat would make more sense for the Saudis, since they will get almost as much money, and will have more oil to sell later, and at a higher price.

[The_Professor]

Better yet, let us wean ourselves off oil altogether. Sure, it would take decades perhaps, so let's get started. Let's give some SERIOUS tax credits for solar energy and energy conservation. BTW, Plane posted a link earlier to the IRS energy tax incentives and they are wimpy. I am adding two rooms onto our home (anyone wanna come and help?) and they don't help much. For example, I get a $500 tax credit on a qualifying heat pump unit. However, to get that unit costs me $2000 more. Hmmm, don't like that exchange.

Why not, as only one example, let large firms get a LARGE, say 50%, tax CREDIT on deploying solar energy and perhaps a 100% tax credit for homes. I propose that alone would start cutting down this dependence i na serious manner.

And, while we are at it, pursue similar avenues with geothermal, nuclear (offshore if necessary), wind power, etc.

And, you ask, where will the funds come from to pay for these tax credits? Dunno, but there is enough fecal matter continually floating around in the Federal Budget to handle it. Besides, do we really have any other choice?

[Plane]

Better yet, let us wean ourselves off oil altogether. Sure, it would take decades perhaps, so let's get started. Let's give some SERIOUS tax credits for solar energy and energy conservation. BTW, Plane posted a link earlier to the IRS energy tax incentives and they are wimpy. I am adding two rooms onto our home (anyone wanna come and help?) and they don't help much. For example, I get a $500 tax credit on a qualifying heat pump unit. However, to get that unit costs me $2000 more. Hmmm, don't like that exchange.

Why not, as only one example, let large firms get a LARGE, say 50%, tax CREDIT on deploying solar energy and perhaps a 100% tax credit for homes. I propose that alone would start cutting down this dependence i na serious manner.

And, while we are at it, pursue similar avenues with geothermal, nuclear (offshore if necessary), wind power, etc.

And, you ask, where will the funds come from to pay for these tax credits? Dunno, but there is enough fecal matter continually floating around in the Federal Budget to handle it. Besides, do we really have any other choice?

Presumeably the qualifying units are more energy effecient , might it use enough less power to pay you back in reasonable time?

[The_Professor]

Yes, but the timeframe I estimated to be around 11 years. Plus, you DO have to have the additional money up front, too.

Same as when my bride purchased her new Honda Civic last year. She said she had never purchased a new car before so we looked for a replacement for her poor Daewoo (anyone want  a car from a bankrupt firm? Anyone?) in the local new car shops. There was a Honda Civi cHybrid that got much better mileage in the city, but the time frame to pay off the iniital price difference ($4200) was simply too long. Now, if they had made it the SAME PRICE (due to a tax credit from the Government?), we would be dirving aorund a Honda Civic Hybrid. And thereby not contributing as heavily to the Saudi Royal Treasury.

[Xavier_Onassis]

Same as when my bride purchased her new Honda Civic last year. She said she had never purchased a new car before so we looked for a replacement for her poor Daewoo (anyone want  a car from a bankrupt firm? Anyone?) in the local new car shops. There was a Honda Civi cHybrid that got much better mileage in the city, but the time frame to pay off the iniital price difference ($4200) was simply too long. Now, if they had made it the SAME PRICE (due to a tax credit from the Government?), we would be dirving aorund a Honda Civic Hybrid. And thereby not contributing as heavily to the Saudi Royal Treasury.

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Of course, if you had been using your head, you would have bought a used VW Diesel and then you could run the thing on biodiesel and eliminate the Saudis from your budget altogether.

New cars are for suckers. Didn't they teach you anything?

[The_Professor]

I like new cars. I purchase them and then drive them for 10-12 years before I trade them in for a new one.

I have never purchased a VW in my life and doubt I ever would. Can we spell B-O-R-I-N-G?

It all depends upon what you want in a car, I suppsoe.

[Xavier_Onassis]

A VW is more boring than a Honda?

I find car payments to be the most tedious part of buying a new car. Not that I have ever bought one.

I made my last car payment in 1973.

A Diesel beetle, Jetta or Golf could run on biodiesel. That is not at all boring.

Or you could score a decent used Mercedes Diesel for half the price of a Honda.

[The_Professor]

Or, yu could get a cool looking Honda sportster and act way below your age! :-)

[Plane]

Same as when my bride purchased her new Honda Civic last year. She said she had never purchased a new car before so we looked for a replacement for her poor Daewoo (anyone want  a car from a bankrupt firm? Anyone?) in the local new car shops. There was a Honda Civi cHybrid that got much better mileage in the city, but the time frame to pay off the iniital price difference ($4200) was simply too long. Now, if they had made it the SAME PRICE (due to a tax credit from the Government?), we would be dirving aorund a Honda Civic Hybrid. And thereby not contributing as heavily to the Saudi Royal Treasury.

========================
Of course, if you had been using your head, you would have bought a used VW Diesel and then you could run the thing on biodiesel and eliminate the Saudis from your budget altogether.

New cars are for suckers. Didn't they teach you anything?

I had a Isuzu I-mark diesel once , I loved that car, the engine was dependble and the cost of fuel was a small advantage.

Unfortuneately I was hit from the side by a larger car and the I-mark was wrapped round the Buick's frount like a scarf , I was ot hurt but f I had ofhad a passenger they would have been hurt at last as badly as the crumpled passenger seat.