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I'm not sure I see how reducing supply is 'evidently counter-productive'. For example reducing capital available to oil/gas companies -> reduces supply -> incr

by zacmps 4y ago

I'm not sure I see how reducing supply is 'evidently counter-productive'. For example reducing capital available to oil/gas companies -> reduces supply -> increases price -> drives reduction in consumption / switches to alternatives. What am I missing?

_8j50 4y ago
You're missing the global nature of the market. If every oil producer agreed to reduce supply it might work. But less US oil means others step in and make more refineries and dig more oil wells to meet the demand. Price isn't set based on demand only either, opec basically fixes the price. The oil price will go up for a few months and then stabilize. I mean have you seen oil prices this year? They surpassed prices in apocalyptic movies and people are still using fossil fuels just the same. Maybe tariffs on oil can help hike foreign oil prices but what politician want to be responsible for increasing gas prices? The result will be when you eventually have widespread EVs and charging stations short of supermajority popular support, you will need to beg saudi, russia,etc... to reduce supply or increase prices so people actually switch to EVs. I for example, almost never drive but at the same time I will not get EVs unless you force me because they are unreliable for long distance, I hate queues (for charging stations) and living in apartments means either they get dozens of chargers for the complex or I have to drive somewhere and wait like an hour to charge (if I can make it to the station). So you really have to twist my arm to get anything short of a hybrid. That said, I am only responding to your question I don't support or oppose oil subsidies since I am not informed enough on the subject
- zacmps 4y ago
  Thanks for your thoughts. If I'm understanding correctly your argument basically comes down to arguing there is a high elasticity of supply and a low elasticity of demand. I guess I'll look into the estimates and see. One thing I would say is that reductions in supply in one jurisdiction will compound with restrictions in other jurisdictions. For example NZ banned new oil and gas exploration a while ago but some parties want to repeal it with the same argument as yours, someone else will sell it. But if it happens in NZ, then the US, then ... I think you reach a point where there is a non-trivial challenge to increasing supply. Then these measures will have stronger effects at increasing prices and hence reducing consumption.
  - _8j50 4y ago
    Reducing supply without reducing it enough does more harm than good and reducing it enough without political backfiring is not possible. On the demand side, people mostly live viable alternatives like Tesla cars for example so that is where rhe focus should be. Cars aside, airlines are not going to convert their fleet to a yet non-existent electric commercial planes because of low supply, matter of fact, if all of US stopped extracting and refining oil, they will use it as an excuse to hike prices but in reality that will may not change prices because at the end of the day it costs what people are willing to pay for it, there will not be a global oil shortage, just a temporary logistics nightmare. On the other hand, cruise ships are by far the most notirious class of polluters. So perhaps targeted taxation of oil is what you need. If I can compare it to something it would be trying to get a heroin addict (or even serious alcoholic) to stop using. If you succeed in cutting off all supply right away, they die. If you cut off supply locally, they will get it somewhere else where you can't help them get rehabilitated. Half measures are almost always worse than not doing anything.

by zacmps 4y ago

_8j50 4y ago

You're missing the global nature of the market. If every oil producer agreed to reduce supply it might work. But less US oil means others step in and make more refineries and dig more oil wells to meet the demand. Price isn't set based on demand only either, opec basically fixes the price. The oil price will go up for a few months and then stabilize. I mean have you seen oil prices this year? They surpassed prices in apocalyptic movies and people are still using fossil fuels just the same. Maybe tariffs on oil can help hike foreign oil prices but what politician want to be responsible for increasing gas prices? The result will be when you eventually have widespread EVs and charging stations short of supermajority popular support, you will need to beg saudi, russia,etc... to reduce supply or increase prices so people actually switch to EVs. I for example, almost never drive but at the same time I will not get EVs unless you force me because they are unreliable for long distance, I hate queues (for charging stations) and living in apartments means either they get dozens of chargers for the complex or I have to drive somewhere and wait like an hour to charge (if I can make it to the station). So you really have to twist my arm to get anything short of a hybrid. That said, I am only responding to your question I don't support or oppose oil subsidies since I am not informed enough on the subject

zacmps 4y ago
Thanks for your thoughts. If I'm understanding correctly your argument basically comes down to arguing there is a high elasticity of supply and a low elasticity of demand. I guess I'll look into the estimates and see. One thing I would say is that reductions in supply in one jurisdiction will compound with restrictions in other jurisdictions. For example NZ banned new oil and gas exploration a while ago but some parties want to repeal it with the same argument as yours, someone else will sell it. But if it happens in NZ, then the US, then ... I think you reach a point where there is a non-trivial challenge to increasing supply. Then these measures will have stronger effects at increasing prices and hence reducing consumption.
- _8j50 4y ago
  Reducing supply without reducing it enough does more harm than good and reducing it enough without political backfiring is not possible. On the demand side, people mostly live viable alternatives like Tesla cars for example so that is where rhe focus should be. Cars aside, airlines are not going to convert their fleet to a yet non-existent electric commercial planes because of low supply, matter of fact, if all of US stopped extracting and refining oil, they will use it as an excuse to hike prices but in reality that will may not change prices because at the end of the day it costs what people are willing to pay for it, there will not be a global oil shortage, just a temporary logistics nightmare. On the other hand, cruise ships are by far the most notirious class of polluters. So perhaps targeted taxation of oil is what you need. If I can compare it to something it would be trying to get a heroin addict (or even serious alcoholic) to stop using. If you succeed in cutting off all supply right away, they die. If you cut off supply locally, they will get it somewhere else where you can't help them get rehabilitated. Half measures are almost always worse than not doing anything.