The gas shortages begin...

[BabyPeanut]

The problem is that demand destruction is job destruction. When Bob decides to fill up the tank rather than buy another doll for his daughter, the economy suffers and someone at the doll factory might be out of a job.

But does the Earth need another thousand plastic dolls in a landfill?

[Eli]

No ther world does not need more dolls in a landfil. But the world wants more baby dolls.

That is our system in a nut shell it is all about supplying and creating wants. If it was just about what we need to get by then it would be a very different system.

PO is going to make all of us ask what do I really need?

Bob might want to get a doll for his daughter but he needs is gas. And ya it is very important because people are going to loose there homes and whole sectors of the economy are going to be in deep trouble.

[MonteQuest]

PO is going to make all of us ask what do I really need?

Yes, and who gets to decide whose "job" is non-essential?

[DantesPeak]

And it's not just Indonesia that's doing things like that. India and China, the two fastest-growing oil importers, also subsidize oil. The Indians and Chinese are still paying 2003 prices.

That's why I'm not counting on too much demand destruction, at least not for awhile. The Westernized countries can afford the higher prices, and much of the developing world doesn't pay them.

Many countries believe in directly subsidizing the cost of energy. In the US, we also heavily but indirectly support the energy industry. On top of many favorable tax benefits accruing to the energy industry, the US spends money on patrolling the Persian Gulf for example (since 1987).

The oil depletion deduction, by which oil well owners get a tax deduction that may exceed their actual drilling costs, is just one example of how well the oil industry is treated - as least for smaller oil companies.

All these subsidies act to increase energy demand, but this comes at the expense of other taxes to pay for them - and when there isn't enough taxes to pay for them inflation results as side effect of budget and trade deficits .

[cube]

Gas prices in the US will never increase as much as what happened in Indonesia. The reason for this was b/c like most oil rich nations (or in this case former oil rich nation), Indonesia subsidized the cost of gasoline. I don't know by how much the Indonesian gov. used to subsidise gas but I read in Iran, gasoline costs about $0.50 a gallon

compare that to $2.50 in the US
Gasoline would cost roughly $1 a gallon assuming there were no taxes or subsidies. Every barrel of oil that gets sold domestically at a discount price is a barrel that could of fetched a premium on the open market. Add to the fact that the gasoline was being sold for less then "normal" market value you can see what happened. So where did the money to subsidise domestic gas consumption come from? Answer: oil exports. The party was over when Indonesia hit PO.

Once the subsidies ended gas costs shot up by 4 fold I believe???

When the rest of OPEC nations announce that they will end their fuel subsidies then that would be the "smoking gun" sign that the world has reached PO.

[BabyPeanut]

Bob might want to get a doll for his daughter

Then make one from rags not plastic.