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TEX: Oil Price and GDP

hypocritexposer

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Tex, you can call them subsidies or tax credits, or whatever you like, but one thing is for sure, GDP is tied to oil price.

The higher the oil prices, the lower the GDP. It's all about balance.

"What tax credits can we provide for the oil industry, so as to keep the economy growing?"

If you give $5 Billion in tax credits to the oil industry, that results in $5 billion +1 in GDP growth, is that beneficial or detrimental to the citizens of a Country?




As with GDP and U3, there also is a historical relationship between oil price and GDP. According to the US Energy Information Administration, a ten-dollar change in crude oil price causes GDP to rise or fall by about 0.2 percent within a year and about 0.5 percent during the subsequent year. Therefore, Mr. Obama needs to have oil prices start falling now by about $30-40 in order to get the GDP up 0.75 percent by next June. That should be enough growth to get U3 down 0.3 percentage points by September 2012.

http://www.americanthinker.com/2011/06/2012_is_not_about_unemployment_its_about_oil.html


What % of GDP growth equals the same % of employment/job growth? What does that job growth mean for tax revenue?
 

Tex

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hypocritexposer said:
Tex, you can call them subsidies or tax credits, or whatever you like, but one thing is for sure, GDP is tied to oil price.

The higher the oil prices, the lower the GDP. It's all about balance.

"What tax credits can we provide for the oil industry, so as to keep the economy growing?"

If you give $5 Billion in tax credits to the oil industry, that results in $5 billion +1 in GDP growth, is that beneficial or detrimental to the citizens of a Country?




As with GDP and U3, there also is a historical relationship between oil price and GDP. According to the US Energy Information Administration, a ten-dollar change in crude oil price causes GDP to rise or fall by about 0.2 percent within a year and about 0.5 percent during the subsequent year. Therefore, Mr. Obama needs to have oil prices start falling now by about $30-40 in order to get the GDP up 0.75 percent by next June. That should be enough growth to get U3 down 0.3 percentage points by September 2012.

http://www.americanthinker.com/2011/06/2012_is_not_about_unemployment_its_about_oil.html


What % of GDP growth equals the same % of employment/job growth? What does that job growth mean for tax revenue?

There is no doubt that GDP is tied to oil.

Taxing domestic production a little more (the oil companies say they own about what 5-10 percent of the reserves?) Will Not increase the price of gas substantially. Giving tax breaks so the oil companies can keep more money will not necessarily produce more oil, nor will it affect the price unless the oil companies are using market power to extract that from the economy. It is hard to argue that 5 to 10 percent of the oil supply divided by companies who are supposed to be competing with each other will be able to be passed on. Those things are controlled, as the gas and oil industry says, by global factors. You can't have it both ways in that argument.

I wish oil were cheaper. It isn't. It is because we have gone through the cheap oil and now the oil is concentrated in the hands of the few global players who have a cartel to control its value to the rest of the world.

This will happen with energy until we come up with substitutes because there is limited supply controlled largely by a cartel.

Giving domestic producer tax incentives to produce domestically will not affect the over all price more than the revenues by the tax. It seems to just give them another tax break to take money home and bank it.

One day we may need to give some kind of subsidy to kick start the shale oil extraction or other forms of energy we have just as we have with ethanol or nuclear. Right now, it is the strategic plan to use the supply from the rest of the world until supplies and hence prices, kick in the substitutes. In the mean time, we should be working on getting a head start on the substitutes, which we are. If we had kept up Carter's program, we would be way ahead of the rest of the world but OPEC saw what was happening with substitutes and produced more and lowered the price. Reagan took the bait. We are further behind now because of it.

Free oil would be great for the economy, but that is not the reality with limited world resources. We have to develop alternatives to the grip the mid east's oil supplies has on the price of our energy. That part of the world is too unstable. We need a better strategic plan.

Tex
 

Whitewing

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Oil is still relatively inexpensive. Once it's recognized that we're on the downside of bell curve, prices will climb without stop and our world will change dramatically.

Hubbert's Peak



Measured production to date:

 

Tex

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Whitewing said:
Oil is still relatively inexpensive. Once it's recognized that we're on the downside of bell curve, prices will climb without stop and our world will change dramatically.

Hubbert's Peak



Measured production to date:


Thanks, Whitewing. Those are some really good graphs.

I think the second one is good because it shows a little more uncertainty in the possibilities.

The find in shale gas was one of those uncertainties that may not be in oil, but certainly is in fossil fuel total peak.

That down curve after peak will be a lot more nasty if we don't prepare for it now.

Tex
 

Whitewing

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Tex, I'm not very optimistic about human beings preparing for the downcurve.

First off is just the fact of human nature. We don't seem to be very worried about the distant future. That's evidenced in almost everything going on around us these days....crumbling infrastructure, over-mortgaged homes, pensions and healthcare schemes that are way underfunded while politicans would rather play politics than address the problem now.

Secondly, exactly how does one prepare for the downcurve when our entire way of life, our homes, our transit systems, our economy are built on cheap oil.

Living in a country for years now where the average citizen gets by just fine with a fraction of what the average American feels they need to survive, has been an eye opener for me.

I've said it before but I'll say it again. Driving around sprawling cities like Houston where there are mile after mile of strip malls filled with Bed & Bath Shops, and all sorts of other specialty stores, I wonder how in the world those places can remain viable when the average family reaches the point of spending a major portion of their income on food and energy.

Each of those shops has an owner, employees, families. What happens to them when the doors close? It's a huge chain, the American economy, and when the weakest links begin to break, things are going to get really tough.

And finally, since the American economy is built around the personal automobile, what do we do to replace something so valuable as fossil fuel? What energy source is on the horizon that can replace something so powerful as a gallon of gasoline......a gallon of concentrated energy that can push a 3,000 lb vehicle at 60 miles an hour for over 20 miles. What else is out there that can replace that? And replace it all over the globe, because let's face it, we're living in a global economy these days.
 

Tex

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Whitewing said:
Tex, I'm not very optimistic about human beings preparing for the downcurve.

First off is just the fact of human nature. We don't seem to be very worried about the distant future. That's evidenced in almost everything going on around us these days....crumbling infrastructure, over-mortgaged homes, pensions and healthcare schemes that are way underfunded while politicans would rather play politics than address the problem now.

Secondly, exactly how does one prepare for the downcurve when our entire way of life, our homes, our transit systems, our economy are built on cheap oil.

Living in a country for years now where the average citizen gets by just fine with a fraction of what the average American feels they need to survive, has been an eye opener for me.

I've said it before but I'll say it again. Driving around sprawling cities like Houston where there are mile after mile of strip malls filled with Bed & Bath Shops, and all sorts of other specialty stores, I wonder how in the world those places can remain viable when the average family reaches the point of spending a major portion of their income on food and energy.

Each of those shops has an owner, employees, families. What happens to them when the doors close? It's a huge chain, the American economy, and when the weakest links begin to break, things are going to get really tough.

And finally, since the American economy is built around the personal automobile, what do we do to replace something so valuable as fossil fuel? What energy source is on the horizon that can replace something so powerful as a gallon of gasoline......a gallon of concentrated energy that can push a 3,000 lb vehicle at 60 miles an hour for over 20 miles. What else is out there that can replace that? And replace it all over the globe, because let's face it, we're living in a global economy these days.

I totally agree with you. While these are going to be the realities shortly, we have politicians who would rather argue with each other than to prepare the nation. It is all short term and get what you can grab mentality. It is going to catch up with us in a big way.

I hope the lithium battery revolution is viable and we can transition to it or something else.

We have wasted too much time on not doing energy saving when we had a good economy. The politicians are still in this stupid party to party fight over the little stuff and they are not getting their job done. They are just pandering to those who are feeding them spin and bribes.

Tex
 

okfarmer

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We do not have accountable politicians, but then the average American at this time is not accountable either.

Had the story of Weiner broke in the 50's, do you think he would still be fighting to keep his job? Personal accountability is being eroded morally, financially, and socially. With this individual erosion, there is decreasing moral standards expected of political leaders but increasing governmental social and financial dependence.

Human nature is cyclic and lessons are learned, forgotten and re-learned again. So I am not saying America is doomed, but it is in for a rough ride until the pendulum swings back in the direction of personal accountability.

I have a hard time validating predictions of future doom based only on our present situational understanding. How long ago was it that the cold war was going to end civilization, how long ago was it that we were doomed for another ice age, we saw the ozone layer shrinking and we were doomed again- except it reached a normal maximal size and then began closing again (normal seasonal changes) but the fear was based on true information we knew at that time (the ozone layer was changing), how many of us worry about cholera, bubonic plague, small pox?

Previous to 1994 who predicted the internet and the expansive effects it would have on the world? Who predicted nuclear energy prior to Albert?

With nuclear energy, hydroenergy, solar energy, wind energy, ethanol, etc we have options to turn to when petroleum becomes scarce. As we continue to gain knowledge, these forms of energy will likely be made available in a cheaper more usable form (to some degree at least), and who knows what other avenues will be discoverd. The peak of oil's cost will be limited by alternative energy sources. But until they make financial sense, it is detrimental to force our hand in their use. This will only create unfair trade. When everyone is on a level playing field, using alternative energies at a higher justifiable cost would make sense.

Fully understanding the circumstances and planning for the worst is always prudent. To not would be a fool. But I refuse to accept future predictions of failure for future times and future problems based solely on past circumstances and past knowledge.

I do put a lot of validity in the following: "Can all your worries add a single moment to your life? And why worry about your clothing? Look at the lilies of the field and how they grow. They don't work or make their clothing, yet Solomon in all his glory was not dressed as beautifully as they are."
 

Tex

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okfarmer said:
We do not have accountable politicians, but then the average American at this time is not accountable either.

Had the story of Weiner broke in the 50's, do you think he would still be fighting to keep his job? Personal accountability is being eroded morally, financially, and socially. With this individual erosion, there is decreasing moral standards expected of political leaders but increasing governmental social and financial dependence.

Human nature is cyclic and lessons are learned, forgotten and re-learned again. So I am not saying America is doomed, but it is in for a rough ride until the pendulum swings back in the direction of personal accountability.

I have a hard time validating predictions of future doom based only on our present situational understanding. How long ago was it that the cold war was going to end civilization, how long ago was it that we were doomed for another ice age, we saw the ozone layer shrinking and we were doomed again- except it reached a normal maximal size and then began closing again (normal seasonal changes) but the fear was based on true information we knew at that time (the ozone layer was changing), how many of us worry about cholera, bubonic plague, small pox?

Previous to 1994 who predicted the internet and the expansive effects it would have on the world? Who predicted nuclear energy prior to Albert?

With nuclear energy, hydroenergy, solar energy, wind energy, ethanol, etc we have options to turn to when petroleum becomes scarce. As we continue to gain knowledge, these forms of energy will likely be made available in a cheaper more usable form (to some degree at least), and who knows what other avenues will be discoverd. The peak of oil's cost will be limited by alternative energy sources. But until they make financial sense, it is detrimental to force our hand in their use. This will only create unfair trade. When everyone is on a level playing field, using alternative energies at a higher justifiable cost would make sense.

Fully understanding the circumstances and planning for the worst is always prudent. To not would be a fool. But I refuse to accept future predictions of failure for future times and future problems based solely on past circumstances and past knowledge.

I do put a lot of validity in the following: "Can all your worries add a single moment to your life? And why worry about your clothing? Look at the lilies of the field and how they grow. They don't work or make their clothing, yet Solomon in all his glory was not dressed as beautifully as they are."

I think we think alike, okfarmer. You said it well.

Tex
 

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