Wednesday, June 11, 2008

Is unethical behavior to blame for gas prices?

This poll indicates that 62% of Americans are blaming unethical behavior by companies and other industry players for high gas prices. While no industry is perfect, firms and countries controlling resources aren't obligated to continue to supply Americans with cheap gas if the economics don't make sense.

I guess people still don’t realize that gas is cheap at $4 a gallon. A gallon of gas is the same (less around here) than a gallon of orange juice. The poll doesn't have real insight except to point out Americans continue to be naive about gas prices.

I hold to my view that the gas price shocks are good. They will reduce long-term demand and demand efficiency from consumers and producers of petroleum based products.

Also, there is a massive amount of venture capital flooding into clean energy technologies. This is a fantastic thing. If industry players are acting unethically, their gain will be short-term. Allowing energy prices to remain this high is resulting in new technologies that will eventually replace oil. If it is a strategic move, it may not be a wise one for those who have vast oil reserves. Perhaps that's why you see Saudi Arabia more willing to come to the bargaining tables than others. The Saudis like the idea of a global economy dependent long-term on their oil resources because they don't see themselves running out anytime soon. They want steady and moderately high oil prices. Just low enough to keep out new technologies and just high enough for them to continue to get ridiculously wealthy.

Maybe it’s hurting the economy a bit, but long-term, this is accelerating the change that is necessary.


Ted Chan said...

Here's what I mean by Saudi Arabia understands this paradigm:

Anonymous said...

Related interview with the CEO of Chevron: