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  • Panic over! Everyone can go back to crying now…

    by Sunny
    15th September, 2005 at 3:32 am    

    And they will continue to do so, if fuel prices remain so high. At least, because the fuel protest failed so miserably yesterday, the panic-buying of petrol will stop now.

    The problem has not gone away. China’s economic growth is not slowing down, American refineries post-Katrina won’t come back up to speed for a few months, and fuel production is running flat out. Gordon Brown is back to making ineffectual statements.

    Two of America’s biggest airlines, Delta and Northwest, filed for bankruptcy yesterday. They join United and US Airways. Reason? Yeah you guessed it. And no, it’s not the MCB’s fault.

    Petrol prices may fall slightly, but not significantly. But I see that as a good thing. Firstly, it will spur development of renewable energy. It may get people to off their fat arses and walk to the local supermarket. The roads become less congested, the air cleaner. Ahhh… happy days are here. Until the glaciers melt of course, then we’re truly fucked.

    Incidentally, marching penguins are the latest craze in America. I’m telling you - it’s a sign of things to come.

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    Filed in: Economics,The World

    22 Comments below   |  

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    1. Oblogatory Anecdotes

      Delta Airlines, Bankrupt In Every Way Possible!

      It wasnÂ’t the price of jet fuel, or market forces that brought down Delta Airlines. It was a culture of arrogance among management and an adversarial relationship with the equally arrogant pilots. The management at Delta believed their own rhetoric t…

    1. Al-Hack — on 15th September, 2005 at 1:42 pm  

      I really would like to watch the March of the Penguins film now. Anyone know when it’s coming to the UK?

    2. Simon — on 15th September, 2005 at 2:43 pm  

      At last someone has mentioned ecology in relation to fuel prices. Well done, Sunny! As soon as a few “divine right to low-cost fuel” protestors start waving their ams around, the media suddenly forgets the existence of the environment altogether, and colludes with the assuimption that the West should go on consuming unaffected by bits of the global reality it finds inconvenient. All this and cute penguins, too…

    3. rizwand — on 15th September, 2005 at 2:43 pm  

      March of the Penguins does look amazing. Recently in the UK, the BBC screened the film version of the Deep Blue that contained some amazing penguin footage…these animals are too cool !

      I agree that the fundamental factors driving high oil/petrol demand are likely to remain in play, and keep oil prices elevated for a while yet.

      However, I’m not sure if Gordon Brown has a full grasp of the problem. The spike in petrol is not necessarily due to high crude prices. The whole refinery process is old and creaking and even if OPEC pumps more the bottleneck at the refining level means it may not translate to lower petrol prices. Indeed, didn’t several tankers carrying crude have to turn back from the US because they didn’t have the processing capacity following Katrina?

      On the plus side, the oil and petrol prices are elevated across the curve, suggesting that high prices are already factored in, so we may have reached the pain barrier in terms of higher prices. Personally I think everybody and his dog think oil/petrol prices are going to stay high and at times like this it may be wise to bet the other way.

      High oil prices are boosting investment in oil plants and fields but this will take a long time to come on stream. Nevertheless, the high prices should, and most likely will, encourage research in to alternatives, which have come a long way in the past decade. Think about it. The basic combustion engine, which drives almost all of our land and air vehicles, is fundamentally unchanged in well over 50 years. Time we moved on. On a personal level, I do regret trading up to an Audi 2.0 when my old Micra that used nearly half the petrol!

    4. jamal — on 15th September, 2005 at 11:19 pm  

      Yes the response was weak. I think the people have finally woken up and realised that these protests are useless. The oil companies dont even flinch at these types of protests. In fact they probably look forward to the huge sale of petrol pre and post protest.. I think there is a motive of the organisers of these protests, and its not to help the motorist!

    5. jamal — on 15th September, 2005 at 11:21 pm  

      This is ‘my’ solution.

      For the rest of this year, DON’T purchase ANY petrol from the two biggest oil companies (which now are one), ESSO and BP. If they are not selling any petrol, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit. But to have an impact, we need to reach literally millions of Esso and BP petrol buyers who will hold out until the price reaches the 69p a litre range. It’s really as simple as that!! So buy your petrol at Shell, Asda, Tesco, Sainsburys, Morrisons Jet etc, and BOYCOTT BP and Esso.

      (Disclaimer to BP/Esso representatives. This is not actually my idea, I am just repeating it)

    6. rizwand — on 16th September, 2005 at 12:17 am  

      jamal, at the end of the fiasco car users may have used up a little more petrol in going to the petrol stations but they were going to fill up their tanks sooner or later…i think the impact on profit is negligible.

      …and don’t we want to do the opposite and make petrol prices go higher? The government can subsidise all the emergency services etc with the extra tax revenue. When our pockets are truly hurting, which they may already be doing, so the incentive for fuel efficiency and alternatives becomes greater.

    7. Sunny — on 16th September, 2005 at 1:41 am  

      Cheers Simon - I’m much more sympathetic to ecological issues than these constant protests about oil and ful prices :)

      Rizwan - I didn’t even get why Brown actually made that speech to OPEC asking them to increase production. He knows they have to invest over years for that to happen and that they’ve been running at full capacity almost.

      It’s not like the Saudis are going to give up an opportunity to sell oil at 60-70 dollars a barrel. That’s almost like printing money.
      Imagine only two years ago we were at 10 bucks and the Economist was predicting $5. Lol

    8. Nush — on 16th September, 2005 at 1:55 am  

      I still think that people power can work in protesting against these oil barons!

      As for the ecological aspect, I agree perhaps now it can spur people to think of renewable ebergy sources.

      I was in just inMiami and met a family who you solar powered panels to heat their home, air condition it and warm the water for th house. Infact it is such an effective method especially where they are in miami the the solar power they collect over heats their domestic water and they warn people! They even stopped use of one whole panel.

      Off topic but I would love to see new housing developments in the UK using Solar Power, we have enough daylight for it to be a viable solution!

      In the Bahamas, where I also was petrol per gallon was $6 and in Miami it was $3.11 the last time I conciously remember…

      trust me prices have yet to escalate

    9. jamal — on 16th September, 2005 at 1:55 am  

      Riz.. Im a basic guy, representing basic people, who need basic explanations, particularly at this time of night when ive got work in the morning.

      All they need to do is lower the price, whether its companies lowering the price or the govt lowering the tax. Im sure theres enough oil ventures, Saudi backhanders and stolen oil to do this.

    10. Sunny — on 16th September, 2005 at 2:17 am  

      Jamal - Heh, I’m not so sure. Remember Oil is publicly traded by barrels and the price there is fairly efficiently priced. Plus take into account refining and transportation costs - I don’t see much elasticity in price.

      The only big variable here is govt tax. I’m assuming Brown made that speech to give everyone the impression that the price rises are the fault of OPEC.
      If you want someone to blame - the Chinese.

      Nush - solar power is the way to go for sure!

    11. Guvnor — on 16th September, 2005 at 2:41 am  

      Haha, had to laugh when it was a complete washout. More because of the idiots panic buying than anything else.

    12. Keynes — on 16th September, 2005 at 9:39 am  

      Greetings all - great website Sunny!

      I was not surprised to see the fuel protest a complete washout - there was no way that Blair would allow the farmers humiliate him again. And given the draconian laws he has introduced you really don’t want to be protesting too loudly anymore - 3 months in jail without charge anyone?!

      I also could not believe Brown’s stupid comment that lack of OPEC production was driving prices - this guy is supposed to be the countries foremost economist. OPEC is running flat out with inventories actually rising.

      As pointed out above the key problem is inadequate refining capacity – Europe is paying around 10% more on oil compared to the US as our refineries can not process the low quality stuff very well.

    13. Don — on 16th September, 2005 at 10:59 am  


      ‘there was no way that Blair would allow the farmers humiliate him again’

      I’m confused. What are you saying Blair did to dissuade protestors from showing up?

      In what way did he ‘not allow’ it?

    14. Turbanator — on 16th September, 2005 at 12:04 pm  

      campaigners accused the police of intimidating potential protesters. Intelligence officers in unmarked cars had been posted near refineries and plants with video equipment and there were allegations that mail had been intercepted in the past week.

      At many sites demonstrators were outnumbered by members of the media

      And Today . .

      A major fuel protest convoy threatening to paralyse the M4 in Wales with a go-slow has been thrown into confusion before it even began.every driver taking part was first served with a police notice under Section 12 of the Public Order Act 1986.It set out a 10-point list of conditions that all protesters must follow, requiring all protest vehicles to drive at the minimum of 40mph.

      Meanwhile . . supermarkets are cutting petrol prices following falls in the wholesale cost of fuel. Both Asda and Tesco are cutting up to 4p a litre off the price of petrol.

    15. Keynes — on 16th September, 2005 at 12:09 pm  

      Let’s face it, the events of 2000 represented a serious challenge to the Blair government. So once it was over the usual knee jerk reaction kicked in and legislation was introduced to prevent would-be protestors from similar civil disobedience.

      Before the protests started the government had told the police, in no uncertain terms, to ensure that fuel supply was not disrupted again. I think it is clear from the way the police treat the few protestors that did turn up that they took this order very seriously! I guess I just meant that there was no way that the govt would allow anyone to cause the mayhem of the previous demonstration.

      Of course why more peaceful demonstrators did not turn up is difficult to say, apathy maybe, or acceptance that the problem was an international one and not the govt’s fault. I suspect that it was probably not being able to afford the petrol to go!

    16. Sunny — on 16th September, 2005 at 1:03 pm  

      Thanks Kenyes. Yeah you’re right, Tony would not allow it to happen again and I bet some intimidation tactics were used.

      The only thing that will worry this govt is inflation. If that suddenly rises as a result of high oil prices, the Govt would be in deep shit and then would probably have to reduce taxes on the stuff.

      But for some reason, various factors probably, inflation hasn’t taken a hit… hmm…

    17. rizwand — on 16th September, 2005 at 1:22 pm  

      CPI has skyrocketed recently and is running above target. I believe the Bank of England have factored in a short-term blip in the CPI, but if this feeds in to future wage negotiations these second-level effects will have a more direct impact on prices and could prompt higher rates down the line.

      nobody wants that!

      PS - Before everyone looks at the supermarket as heroes of the common man, bear in mind that less tax spent on petrol means more money to spend in the supermarket.

    18. Sunny — on 16th September, 2005 at 2:15 pm  

      Wow, the CPI has sky-rocketed? I didn’t know that… I thought inflation was within target. I wonder if that means interest rates will be reduced now.

    19. Keynes — on 16th September, 2005 at 3:19 pm  

      I think if you take out oil and other energy related components, inflation actually fell last month. As to interest rates, I think it is really uncertain at the moment. The housing market is still in the doldrums and consumer confidence remains weak. However, manufacturing is doing better than expected and inflation is rising. So what does this mean for interest rates? Buggered if I know!

    20. Sunny — on 16th September, 2005 at 5:03 pm  

      Not doing your job well as the son-of-Keynes well are you then?? I’m surprised manufacturing is doing well considering the rise and rise of the Chinese juggernaut.

    21. rizwand — on 16th September, 2005 at 6:48 pm  

      Keynes, its true that so-called core inflation is not so pronounced. However, and I have had this debate many a time…does it make sense to strip out these components out of inflation just because they are volatile etc? They are still prices, and important prices at that…take for example the increasing gas prices…you telling me people are not feeling the pain?

      Either way, everyone apart from me things energy will stay elevated, so its all the more important to factor it in to CPI thinking.

      Where interest rates go next is anyone’s guess, but as you say Keynes, the housing market is cooling, and retailers are saying this is the worst period in over a decade. The problem of what to do with rates depends on your view on the importance of all these imbalances.

      Why do I have the feeling that (by coincidence?) the world is going to fall apart shortly after Greenspan quits office.

      : )

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