Economics 101: The Price of Gas
Gas prices are up and oil executives are once again testifying before Congress. Clearly, many politicians, pundits, and consumers lament the rising cost of gas. Before we join them in their chorus, let us take a step back and ask this question: Are gas prices really all that high?
A change in price can be a result of inflation, taxes, changes in supply and demand, or any combination of the three.
Those who want the government to step in and do something about the high price of gas are either forgetful of recent history or too young to remember the oil crisis of 1979. During that time, restrictions on the price of gasoline led to the inability of some to find gas at all. Price ceilings always lead to shortages. The only thing worse than having to pay "too much" for gas is not being able to find gas at any price. FULL ARTICLE
Comments (78)
The only thing worse than having to pay "too much" for gas is not being able to find gas at any price.
There are a couple of things that are worse.
It's worse when you're not able to find gas at any price while also finding yourself in an urban environment that is controlled by a government that has decided that we plebeians shall be car-dependent.
When the government controls the placement, size and type of the roads; the location, size and type of every building that may be built on the land between the roads; and the types of businesses that may be operated on that land, AND THEN they manipulate the price of gasoline to the point where it can't be bought at any price, then I'd say they have you where they want you.
Published: April 22, 2008 8:15 AM
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Generally, oil companies have not behaved ethically.
For an overview of UNETHICAL CAPITALISM:
Corporate America: What Went Wrong?
http://corporateamericawhatwentwrong.blogspot.com/
"Greedy oil companies" is an applicable appellation.
Hundreds of articles have been posted on the Web
about how oil companies manipulate markets
through underhanded means. Here's one of them:
http://www.rense.com/general67/PRICE.HTM
Regarding oil-related rising cost of food:
Population Bomb and China
http://foundersamerica72.blogspot.com/
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Published: April 22, 2008 9:33 AM
I'm not sure the facts are right here. I remember being on family vacations in the early 1960s when gas prices were 24 cents a gallon; the 30-cent figure from a decade and a half earlier seems suspect.
Further, unlike most items, gas tax is usually sold with a tax per-unit, rather than as a percentage of sale price. Certainly, the federal portion of that tax is uniformly assessed per-unit.
Average tax, last time I checked (which was just over a year ago), was about 44 cents a gallon -- which is of course a higher percentage of the price a year ago than now. I remember having my students check; it was about 40 cents a gallon ten years ago, when we saw sub-buck gas for the last time.
If you'd like to see fuel taxes get recognized, you could lobby for truth in pricing: have gasoline prices, as-displayed, be the price of gas WITHOUT tax, like everything else that we buy. Then have the pump's computer give a detailed receipt... and listen to the sounds of revolution.
Published: April 22, 2008 10:14 AM
Overall, this is a fine article. I do have several comments:
* Inflations impact on individual goods defies measurement since it does not impact all goods uniformly. The author's inflation calculation is fine as a benchmark, but a disclaimer is probably warranted.
* I'm leery of comparing accounting numbers of companies in different industries. The claim that oil company profit margins are not actually exorbitant are probably true, but I would be careful in making the comparison.
* Gasoline taxes are surely wasteful. However, we should remember that they do go toward road construction and maintenance. While I believe that free markets would provide lower cost, more efficient roads, they would not be free. Some of the taxes represent expenses that most of us would willingly incur.
* Oil companies are hardly blameless. While criticizing their profit margins may be inappropriate, they have long benefitted from interventionist policies that assured them little competition and provided outright subsidies. I think of the current scrutiny as being the part of price they pay for making deals with the devil.
Published: April 22, 2008 11:20 AM
> As for gas prices, in 1950 the price of gas was approximately 30 cents per gallon.
Actually it was lower than that, which makes the other points of the article even more valid. I remember as a child in the '50's diesel was 17.9 cents/gallon, regular gasoline was 19.9 & "ethyl" (premium) was 21.9. And when I started driving in the late '60's, I could get Sunoco 260, the highest octane gasoline there was, for 23.9 cents/gallon.
Published: April 22, 2008 11:29 AM
Good points made so far.
However, I would think it is more instructive to look at "inflation" from the point of view of the value of the money unit itself, not some arbitrary CPI index.
Until 1964, the American currency was effectively on a silver standard, whereby the dollar was guaranteed to be worth at least ~0.7 ounces of silver, even for American citizens. An actual dollar in silver coin from 1950 would buy about $12.50 today, which coincides more closely with the somewhat greater actual rise in gas price than is reported in the article.
Maybe more so because I'm vested in silver, but in any case, I try to use this value in every day life when evaluating prices of goods offered.
Published: April 22, 2008 12:02 PM
Well, I was going to point out how the government has subsidized roads and made us car-dependent, but George beat me to it, and did a better job than I would have done. Thanks, George.
Published: April 22, 2008 12:46 PM
OK, in the 60's the price of gas was around 10% of the average wage. These days 10% of the average wage is between $3 and $4?
Published: April 22, 2008 12:57 PM
Quote from Joe Stoutenburg: "Gasoline taxes are surely wasteful. However, we should remember that they do go toward road construction and maintenance. While I believe that free markets would provide lower cost, more efficient roads, they would not be free. Some of the taxes represent expenses that most of us would willingly incur."
How are the roads free, if they're being paid for with taxes from fuel?
Published: April 22, 2008 12:57 PM
Re Price of Gas, two comments to Economics 101:
History 101 : The gas in the 1950's was around 17 cents, not 30. I remember, as opposed to the author, a grad student who wasn't even alive at that time. As a Hungarian freedomfighter I came to the US in 1957, and remember the rea lprice. So, following the author's logic, the gas should be under $2.00.
Economics 102: The author forgot to mention the market system the oil industry uses. I believe in free markets, as the Von Mises group does. So why hide the fact that raw oil prices are set by a cartel, and the speculators at the oil burse. If the oil industry follows the free market, there would be competition, and it would chech gas prices too.
This is, of course, in addition to the factors mentioned in the article, but is an important factor that somebody writing for the Mises Institute should not sweep under the rug!
Sandor Balogh, Ph. D., Prof emeritus
Published: April 22, 2008 1:03 PM
Re Price of Gas, two comments to Economics 101:
History 101 : The gas in the 1950's was around 17 cents, not 30. I remember, as opposed to the author, a grad student who wasn't even alive at that time. As a Hungarian freedomfighter I came to the US in 1957, and remember the rea lprice. So, following the author's logic, the gas should be under $2.00.
Economics 102: The author forgot to mention the market system the oil industry uses. I believe in free markets, as the Von Mises group does. So why hide the fact that raw oil prices are set by a cartel, and the speculators at the oil burse. If the oil industry follows the free market, there would be competition, and it would chech gas prices too.
This is, of course, in addition to the factors mentioned in the article, but is an important factor that somebody writing for the Mises Institute should not sweep under the rug!
Sandor Balogh, Ph. D., Prof emeritus
Published: April 22, 2008 1:03 PM
Mr. Terrell's article is in response to the question: Why are people so outraged at the high price of oil? His response is that they shouldn't be because on an inflation- and tax-adjusted basis gas costs the same now as it did in 1950.
But Mr. Terrell is missing the point. People are outraged today because gas is so much more expensive today than it was 5 years ago. To compare 2008 gas prices to 1950 gas prices is disingenuous. Even taking into consideration the inflation rate and the tax rate, gas is hugely more expensive than it was 5 years ago. As he notes, demand is up but he doesn’t give any facts to determine whether demand (and minimal inflation) justifies the increase from 2003.
He does give an interesting piece of information--profit margins. One question I would like answered is how the profit margin for the major integrated oil and gas companies has changed from 1950 and from 2003, on both a relative basis and an absolute basis. That would tell us whether the oil companies are greedy or not.
Finally (for now), I would be curious to know what index he used to determine the inflation rate? My guess is he used CPI or some other index of which a major component is energy, which begs the question. Of course gas is at about the same price today as it was in 1950 when you adjust for the inflation rate of gas.
Published: April 22, 2008 1:07 PM
I agree with most everyone above, the article in general is good, but needs to have a few disclaimers attached. I'm not going to repeat what commenters before critiqued on, I'm just more interested in why gas prices are not higher than they are.
Today I posted a brief response on my blog, as well as my thoughts on the prices.
I do like Tim Kern's idea about posting the price of gas separate from the final price with tax. I think this would help a lot of us consumers to understand the true price of gasoline, enabling us to make much better informed purchasing decisions.
Published: April 22, 2008 1:16 PM
Mr. Bee pointed out the relationship to silver - and he is correct. In 1964 (the last year of silver US coinage), gas was around 25 cents per gallon meaning that your silver Washington quarter bought you a gallon of gas.
That same Washington quarter today is worth around three dollars so it will still (almost) buy you a gallon of gasoline.
Published: April 22, 2008 1:29 PM
Reply to Keith:
I may have poorly expressed myself. I did not mean that roads are currently free. To the contrary, that roads funded by money coercively collected brings costs beyond the nominal money spent on them. I meant that a complete repeal of the gasoline tax would not return all of that money to us if we wished to continue to build and maintain roads.
My comment also probably suffered from being a little tangential. I guess that I'm just pushing on what I perceive to be conventional wisdom that all taxations are 100% waste. While I believe that voluntary funding methods would be superior in every case, I also think that some small portion of my taxes pays for services that I actually desire (though rarely in the form that I would have wanted).
Published: April 22, 2008 2:36 PM
I guess that I'm just pushing on what I perceive to be conventional wisdom that all taxations are 100% waste.
Trying to gauge the quantity of waste is a mistake. It's not economic thinking. It is impossible to assess the degree of government waste in terms of a simple percentage of the amount of overlap between what you would have done privately and what the government does by force. There's no such thing as 10% or 80% waste in the building of government roads, or anything else.
Roads have a multi-layered, repercussive (i.e., economic) effect on everyone and everything in their midst. How can anyone possibly know what would have happened if Road X had been built privately? If it were shorter, or longer, or narrower, or more straight, or less straight, or put in a completely different spot? Or if the land beside it were parceled out in different dimensions? What businesses and homes would have been built there instead? What people would have moved in or out of a neighborhood because of the existence or non-existence of those businesses or homes? As a result of these population changes, what people would have been born or not born? What technologies would have been invented or not invented? What would have been done with the money that was taken via taxation to pay for building these roads?
Then try to answer these questions for every single road built in America for the last 150 years, and determine how life today would different if the roads were all built privately.
None of the alternative histories can be known, because they never happened. The government intervention in the road-building process changed the entire economy, and thus permanently altered the course of each region's economic history.
At what point can anyone say, "The market would have done that anyway"? That sort of thing is completely unknowable.
Published: April 22, 2008 3:48 PM
While there were some interesting thing in here, I can't being myself to say the article was "good". The methodology used was suspect as several other people have pointed out. More importantly, the third paragraph shows a fundamental misunderstanding of the monetary system and monetary policy that brings everything else into question. First, the Federal Reserve does not print money, the Treasury does. Second, inflation is a byproduct of a fiat monetary system. Inflationary pressure occurs in such a system independent of the presence of a central bank. The Federal Reserve "printing too much money" is an observation that's frankly unacceptable for someone at the doctorate level of economics to make. As for the remainder of the article, the points are interesting but the work is limited, something that an hour on Google could have turned up, and it fails to consider and counter any potential criticisms to the assertions made. I hate to be so harsh, but the article at this point is incomplete enough to be considered misinformation and shouldn't be offered without a healthy set of qualifications concerning its drawbacks.
Published: April 22, 2008 6:06 PM
I'm in the camp that thinks gas prices were much lower than thirty cents per gallon in 1950. I remember paying around twenty-five cents to twenty-nine cents per gallon during my senior year of high school, which was 1972. This was in Northern California, so I have no idea what the rest of the country paid.
I do understand the argument that government taxation is one reason for high gas prices. With additional taxes such as municipal, county, state etc., my current extortion rate is around seventy cents per gallon.
If I were to pay the 1.5% tax as noted in 1950, my gas per gallon would be around $2.85 per gallon.
"Populists" like Bill O'reilly and his ilk should learn some basic math before ranting to the American public about how oil company executives should appear before congress, to explain why their profit margin is perfectly in sync with other industries--especially when government has no investment in overhead, and makes a slick twenty plus per cent profit, without producing a single thing.
Published: April 22, 2008 6:14 PM
I think the 9.5% profit margin for oil companies might be a little misleading. Sure, it might cost an oil company $3.00 (net of crude, refinery costs, shipping ,etc.) that they sell for $3.30 or so.
But, petroleum is one of the classic vertical industries. Who owns the distribution networks that get the gas from the refinery to the station? Who owns the refinery that's getting some of the $3.00? Who owns the ships that brought the crude over? Who either got paid to extract the crude or had a concession for the field? In most cases, the answers will be wholy owned subsidaries of major oil companies. Trust me, there's a lot more than 30 cents of profit coming out of a $3.30 gallon of gasoline.
That being said, I'm not one to blame corporate greed. Petroleum is a fairly competitive industry, and the right price for an oil company to charge is as much as they can get.
Published: April 22, 2008 6:15 PM
As far as "9% profit margins" go, how do you explain the top 6 Oil companies making a profit of over 150 BILLION DOLLARS in 3 months? That's what happens when your profit margin is "9%" of $1.5 trillion. Why not cut that down to 3% profit? What industry cannot live on $200 Billion profit a year? That would mean a $2 dollar drop in price and instant relief on the struggling, receding economy.
When it comes to a commodity that we are all forced to use, it is criminal to let the rich corrupt the system into a monopoly. The oil companies lobby (read: pay off) Congress, and install an ex-oilman as President, who pushes us into a false war to drive up the prices and expand their $600 Billion profits.
At least the countries of Europe, with the high taxes on petrol, have an excuse; the extra cost goes back into the government, into the people. For us in America, the extra profit goes into the pockets of the elite.
To make a difference, go to
Gas Boycott 2008
Published: April 22, 2008 6:35 PM
Just a question:
How is "profit" being calculated in this article? And, what is the proper way to calculate "profit"?
In lay terms, profit is often thought to mean the percentage of revenue kept by the owners of the corporation, not spend on operations. But from an investor's point of view, profits are only meaningful as annual earnings calculated as a percentage of the investment made; revenue is irrelevant. "Greediness" certainly can not then be calculated from the point of view of revenue!
If the second measure is the proper one, are capital gains included? Surely they must be, but how in the world can we actually calculate the value of capital? New capital is constantly bought while old capital is being used up. What about "political" capital, (ie, (un?)favorable regulations that would significantly affect the corporation's value)?
Any monetary value of capital (ie, the price of the corporation's stock) is of little use since the value of the money unit is subjective. If we could somehow calculate the change in value of money, do profit rates need to be adjusted for this annual change or is this done so already? If so, by what measure?
If we are to adjust for inflation, we would need to know what portion of profit is represented by capital gains as opposed to dividends. A 5% dividend is 5% of the value of the stock regardless what the value of the monetary unit is. Any year over year capital gain, however, could be partially or entirely illusory.
Furthermore, what about employees of a corporation who are also shareholders. Are salaries counted as profits? What about the CEO or single-owner who's salary might be reported as profits or who's profits might be reported as salary?
I'm so confused, would someone please help? Most sincere thanks! :-)
Published: April 22, 2008 6:35 PM
Mr. Terrell's cross-industry statistics on profits may be hurting his case.
It doesn't help that of his ten industries, two of them (periodicals and software) get their profits from a business model based on "intellectual property" monopolies. Shipping and tobacco are heavily subsidized. Regulated utilities are the textbook example of guaranteed profits based on cost-plus pricing. With drugstores, it's a combination of occupational licensing cartels and other market entry barriers, and state-funded drug benefits. Hospitals, likewise, depend heavily on occupational licensing, insurance cartels, and government funding (about half the average hospital's revenue stream).
In other words, all Terrell's list shows is that in a list of the top ten corporate welfare queens, Big Oil's profits are slightly less exhorbitant than those of the other bloodsuckers. He might as well have compared oil profits to those of Boeing, McDonnell-Douglas, and Grumman-Northrop.
Published: April 22, 2008 6:37 PM
"At least the countries of Europe, with the high taxes on petrol, have an excuse; the extra cost goes back into the government, into the people. For us in America, the extra profit goes into the pockets of the elite."
Are you KIDDING me? No, the money goes right into the pockets of the eurocrats. Europe has as little excuse as the US has, if not even less. Maybe you're one of those people who think the government should determine how much one or the other industry should profit though...
Published: April 22, 2008 7:31 PM
I was born in 1953 and at 16 which would make it 1969
I purchased gas for 18 cents per gallon and this fact makes this story way off base. If inflation was 3% per year then the cost would be around 2.10 a gallon plus tax today
Published: April 22, 2008 7:58 PM
I suspect that it isn't so much the price of gas that gets people upset. Rather it is the "change" in the price of gas.
Take a look at:
http://www.atlantagasprices.com/retail_price_chart.aspx
and generate you own retail us average price chart.
A quick look shows the us average price of a gallon of gas has gone from $2.99 to $3.51 in the last 3 months :(
Published: April 22, 2008 7:59 PM
I am always amazed at how easy the US is controlled by a utility item like gas. Check what China pays for fuel at the US dollar amount then see if you like your open trade system. Trading oil on open markets like pork bellies just doesn't fit. It's a utility like electric. Sorry US thats the high cost of a democracy.
I pay $2.03US at pump if you add US tax figure to my pump price when in China.
Published: April 22, 2008 8:00 PM
At first glance, your assessment seemed like an interesting one (part of me wanted to believe it...). However, I think you may have left out some important info to consider before one is able to arrive at an accurate conclusion:
Your post mentions profit margins (as a percentage), but does not include the aggregate dollar amounts. This can lead to inaccurate conclusions as it's possible that while the profit margins as a percentage for the water industry may be at around 20% and for gas, around 9%, but the total profits for the gas industry as a whole is significantly higher than that of water. So 9% of a significantly higher dollar amount is likely a lot more than 20% of a much smaller aggregate profit in dollars.
In short, you can't conclude anything on percentages alone.
Another area I found problematic is that you compared the water industry as a whole versus "major gas firms". What percentage of the gas industry is made up of these "major gas firms"? Are you referring specifically to two major gas firms vs. eight major gas firms?
Published: April 22, 2008 8:21 PM
"Let us not be swayed by politicians out for power or by reporters out to create news where none exists. Facts and economic logic should prevail rather than rhetoric."
Please tell me, dear author, that you see the hypocrisy in this closing remark as the conclusion to a rhetorically-charged piece advocating awareness about the state of oil prices.
Published: April 22, 2008 9:11 PM
Damn I totally digg this comment and spread it on my network, now its on the front page of the digg, and people are scrutinizing this article WAYYYY too much.
Published: April 22, 2008 9:19 PM
The article is being scrutinized because it's a pathetic attempt by a Texas Tech grad student who is unabashedly apologetic for the unscrupulous actions of Big Oil. His numbers don't jive with REALITY nor do they address the fact that the majority of the businesses he listed (other than hospitals and water companies) are luxury or business expenses, not necessities like gasoline.
People can skip buying that copy of Newsweek, but they can't skip the trip to the pump to get to work and back. Dugg down for being a crap argument which flies in the face of what we already know.
Big Oil has robbed this nation for a hundred years and it doesn't seem to be letting up steam. The only positive development I've seen is that since they hosed the people so mercilessly this time there is a significant backlash and maybe something can get done about it. Energy policy, anyone?
Published: April 22, 2008 10:55 PM
I must ask, having formerly worked for a large oil company, how you determined the oil company's profit margin.
Do you mean that is the profit they make on the wholesale price? What of the gas stations which are owned by the oil company? Certainly their profit on the refined gas is much higher there.
Surely you know that they make a great deal more than gasoline from a given barrel of oil. There is kerosene, asphalt, other industrial by products. Dozens of products. Gasoline is just the one we're all buying. Bu thte margin they are making on that refined barrel of oil is much, MUCH, higher than %9.
Now, this doesn't even get into the fact that most of these companies own the whole process, from exploration, to extration, to refinging, to transporting. They have profit at every step. It doesn't cost Exxon any more to extract oil when it's $30/B than it does now when it's over $100. That's pure profit for them, and it's many times %9.
You are either willfully ignorant of what you speak, or a liar.
Published: April 22, 2008 11:23 PM
I don't know how the margins were calculated, but these business are in this for a profit. Like it or not. If they only wanted to make 4% or 5%, the oil companies would have just put there money into savings accounts or CDs
Published: April 23, 2008 6:42 AM
I translated this in italian on: http://svolte-epocali.blogspot.com/2008/04/il-prezzo-della-benzina.html
Published: April 23, 2008 8:14 AM
Umm, for all those who are harping on about profit margins (minus Mr Carson, about the only person here to present a reasonable claim), do you have your own estimates to offer as counter-evidence? Moreover, objecting that percentages are given instead of total profits is silly. The oil industry is massive... even if it profited at 1% it'd have huge returns. So what? That is not the point the author is making, and anyone familiar with economics will know why percentages are what matter in this case.
Published: April 23, 2008 8:16 AM
You make a very good point here and I agree with most of what you are saying here.
However, I would like to know your sources for the quoted profit margins and the year this data is based on.
Now, where I disagree is when you say that Water Utilities (10.2%) have a higher profit margin than major oil and gas firms (9.5%).
Depending on the reliability of the source, 0.7% is not a significant difference, unless being tested by means of statistics.
This 0.7%, this rather small difference could be due to sampling error.
Published: April 23, 2008 11:10 AM
very interesting article, but what about the cost of gas could go down as oil companies find more effiecent ways of producing oil to gas? so as new technologies emerge shouldnt gas prices go down? like the prices of CPUs?
Published: April 23, 2008 11:12 AM
Hey Kevin_Carson: I just wanted to thank you for reminding me just how out of touch you are.
"Shipping and tobacco are heavily subsidized."
Tobacco is subsidized? Yeah, all those farmers getting fat welfare for their crops. Until you see the ENORMOUS TAXES ON CIGARETTES.
Shipping is subsidized? Yeah, until you see the ENORMOUS TARIFFS AND REGULATORY HASSLE YOU HAVE TO GO THROUGH TO BRING YOUR GOODS ACROSS ARBITRARY BORDERS.
Did you not work all that into your numbers when trying to shoehorn evidence into your worldview?
And now we have Kevin_Carson on record claiming that 10% profit rates (6% real) are "exhorbitant". But then, he also thinks mortgage rates of 5% (1% real) are "usury", so I guess that should be expected.
All of that will go out the window, of course, when we start looking at the capital yields of self-employed people.
I'm sorry, it's a weird combination of frustrating/funny to read your stuff.
Published: April 23, 2008 2:14 PM
Odd that this article fails to mention gasoline prices in any country other than the US. It's quite relevant to see how other nations' prices have shifted over time and what portion of their costs are taxes. It may be a bit much to expect profit margin data for businesses in other nations, but knowing how much a gallon of gas costs in another country sheds light on the 'real' cost of gas at home.
The overall message of the article, though, rings true. Gasoline prices in the US are surprisingly low compared to historical prices and even more so when compared to other nations.
Published: April 23, 2008 3:05 PM
A factual correction which changes all the numbers, please.
As I (accurately!) recall it, in 1950 gasoline was closer to 17 cents per gallon than 30 cents per gallon. In fact the range in New York State from Delaware County (Sidney, NY) to Monroe County (Rochester, NY) was within 1 cent more to 3 cents less than 17 cents per gallon, in 1950.
Best regards,
Craig
Published: April 23, 2008 7:41 PM
Gas prices should have been much higher in dollar terms if you factor in price inflation.
The CPI doesn't do any justice to the inflation effect on gas, because demand for many goods in the basket may fall but gas certainly is used more today than 50 years ago.
The basket of the CPI changes all the time but clearly the objective of the people who publish this number is to supress it. That is why there is now a new invention called core inflation which leaves out energy and food. Just to keep the nominal number small.
The reason gas isn't as high as it should be is the producitivity increase of the oil companies based on increasing capital and know how. Today oil companies are much more efficient in producing gas, thus both companies and comsumers benefit.
And the so called cartel is an illusion. It has no effect but it serves two purposes so nobody touches the idea.
It helps oil importer states so they can have a scape goat, so people don't blame the inflation tax and the regular taxes but the big bad cartel.
It helps the so called cartel member exporting states, because it gives the image of soveirgnity to their people against the claim of west stealing their natural resources.
Published: April 24, 2008 6:09 AM
I read the article and all of the comments. I sippose it was inevitable at this site that there was not a single mention that there might be a geological constraint to the production of oil.
To stay relevant, economists are going to have to come to grips with limits, both of resources and ecological services. They are also going to have to factor in energy economics (the laws of thermodynamics). Money is relevant, but only up to a point.
Some economists have made valiant efforts, notably Herman Daly; and it is significant that he was making his contribution around the time of the 1970's and 80's oil shocks.
Published: April 24, 2008 8:07 AM
I read the article and all of the comments. I sippose it was inevitable at this site that there was not a single mention that there might be a geological constraint to the production of oil.
To stay relevant, economists are going to have to come to grips with limits, both of resources and ecological services. They are also going to have to factor in energy economics (the laws of thermodynamics). Money is relevant, but only up to a point.
Some economists have made valiant efforts, notably Herman Daly; and it is significant that he was making his contribution around the time of the 1970's and 80's oil shocks.
Published: April 24, 2008 8:08 AM
Money is relevant, but only up to a point.
Money is always relevant.
If prices are not manipulated, then the prices will tell consumers and producers of oil and gasoline everything they need to know about the geological availability of oil. We don't need to know what the geologists know. We only need to know the genuine price of the commodity.
Here's how Hayek explained it, using tin as his example, but it works just as well for oil:
"Assume that some where in the world a new opportunity for the use of some raw material, say tin, has arisen, or that one of the sources of supply of tin has been eliminated. All that the users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere, and that in consequence they must economize tin. There is no need for the great majority of them even to know where the more urgent need has arisen, or in favor of what other needs they ought to husband the supply. If only some of them know directly of the new demand, and switch resources over to it, and if the people who are aware of the new gap thus created in turn fill it from still other sources, the effect will rapidly spread throughout the whole economic system and influence not only all the uses of tin but also those of its substitutes and the substitutes of these substitutes, the supply of all the things made of tin, and their substitutes, and 50 on; and all this without the great majority of those instrumental in bringing about these substitutions knowing anything at all about the original cause of these changes."
Published: April 24, 2008 10:11 AM
Rod: "To stay relevant, economists are going to have to come to grips with limits, both of resources and ecological services."
What difference would it make? Or how would admitting geological constraints change anything? The price of oil today reflects known geological constraints.
George, nice quote from Hayek. Where did it come from?
Published: April 24, 2008 12:34 PM
It's from an article called, "The Use of Knowledge in Society" which appeared in American Economic Review in 1945.
Published: April 24, 2008 12:43 PM
Craig,
Here is a chart from the DoE:
http://www1.eere.energy.gov/vehiclesandfuels/facts/2006_fcvt_fotw426.html
Published: April 24, 2008 2:06 PM
The problem George is that tin is not oil. Oil is unique. I know that you like to think that it isn't, I even know why you like to think oil isn't unique, but that does not change the fact that it is uniue. It is unique because it is the highest quality energy source there is. There are no substitutes. And technology (human ingenuity) is not oil, even though lots and lots of people think it is, or that it will somehow substitute, or that it will make some other substance as valuable as oil, such as tar or shale.
Oil's price has reflected its relative abundance, but not its value. It's value lies in its energy contribution to our species, which is now declining. Economists who are focused only on money miss this single essential point - man is ultimately ruled by the laws of thermodynamics - not money.
Published: April 24, 2008 8:13 PM
Oil's price has reflected its relative abundance, but not its value.
That makes no sense whatsoever.
Oil may be unique in terms of its physical properties, but it is a commodity just like every other commodity ever used, bought or sold.
As a commodity, as useful and unique and governed by the laws of thermodynamics as it may be, the buying and selling of it in the marketplace is and always will be subject to the laws of economics. They are just as immutable as the laws of thermodynamics.
Water is unique, too. But the distribution of water as a natural resource is still subject to the laws of economics. The price of oil, water, corn, meat, and everything else that is valued by people will always and forever be affected by the various economic factors that went into its production and consumption. The price of anything and everything will always function in the economy as a form of information, by operating as a signal to production and consumption.
This principle never changes, regardless of the level of governmental manipulation of those prices, or the type and utility of the goods in question.
Published: April 25, 2008 10:12 AM
Rod: "Oil is unique. I know that you like to think that it isn't, I even know why you like to think oil isn't unique, but that does not change the fact that it is uniue. It is unique because it is the highest quality energy source there is. There are no substitutes."
Funny thing, people once wrote the same thing about whale oil.
Published: April 25, 2008 11:23 AM
Quick someone call off all the research into new energy sources, Rod's logic has proven their efforts are worthless. Oil, and our current methods of extracting energy from it, are the pinnacle for mankind.
Published: April 25, 2008 12:07 PM
Does anyone happen to know where he got the profit margin statistics from the various industries?
Published: April 25, 2008 6:16 PM
Sorry Sterling, but I think you are an apologist for the oil and gas industry. Hard not to think so when I see you work at Texas A&M.
18 billion in profit for the oil industry when this country faces severe economic hardship is unconscionable. The industry should either be working to lower prices to stimulate the economy or taking those profits and building something with it. (like refineries). I realize the Eco Nazis have a lot to do with whether you can build a refinery, but the oil companies should be doing it somehow even if its building a refinery overseas and shipping to the US from there.
Bottled water has the highest profit margin of any product and well beyond gasoline. however bottled water is not a strategic fuel to the US economy.
Published: April 25, 2008 10:14 PM
That makes no sense whatsoever
Yes, the statement was provocative. Having received both ecology and economics training at a Masters level I am well aware of the enormous gulf that separates science and economics.
If economics pretends to be useful to explain the human condition perhaps we can overlay an objective into this discussion. This could be that "utility" (in science and psychology a meaningless tautology, but lets press on) remains at least constant. "Utility" is dependent on many things, but one of them is energy (this is not included in economics teaching, but is true nevertheless). Any decline in net energy will mean a decline in utility.
Oil, and our current methods of extracting energy from it, are the pinnacle for mankind. - True.
Published: April 25, 2008 10:53 PM
Like Art Northrup, Jr. I have some memories of growing up in the 50's, I was born in 1950. I remember being on trips with my parents as I was growing up and hearing my Dad talking about a gas war (frightening to a kid). If he could just make it 20 miles further he would only have to pay 17.9 instead of 18.9. The gas wars ended when the little independent station owners were run out of business by the oil companies.
God Bless America, God Save The Republic.
Published: April 25, 2008 11:10 PM
Read this:
http://www.simmonsco-intl.com/files/Connecticut%20College.pdf
Published: April 26, 2008 1:23 AM
I watched the Simmonsco slide show and it was interesting, but nothing new. Those of us who have followed this web site for very long have been through the "peak oil" debate several times. Rod is just the latest to bring it up.
Rod writes: ""Utility" is dependent on many things, but one of them is energy (this is not included in economics teaching, but is true nevertheless). Any decline in net energy will mean a decline in utility."
If you're going to communicate with Austrian economists, you'll have to use our definitions of terms and not make up your own. Utility is the satisfaction that people get from the use of goods. The utility of any good varies with time and circumstances for any individual. What I guess you're trying to say is that if we have reached the end of the total supply of oil on the planet, then our standard of living will decline as we pay more for a more scarce resourse. I don't think you'll find much disagreement with that. On the other hand, no one knows how much oil is left on the planet. We haven't found all of the gold after 5,000 years of mining it, and many of us doubt we have found all of the oil after only 150 years of searching.
But let's assume we have found all of the oil and not a single drop exists where we haven't looked. The transition to a non-oil society will be painful, but it will happen. Nuclear energy and hydrogen will become far more important. What separates Austrians from others is the confidence in human ingenuity. I predict that the solutions to any energy problem that might develop will surprise everyone.
As the Simmonsco slide show makes clear, no one knows the size of current oil reserves because the data is poor. The supply problem could be one of pipeline infrastructure and not reserves.
No one can distinguish between value and price. Value is known only to each individual person. We can derive from a person's actions what he appears to value and that shows up as prices.
Commodities such as oil have no intrinsic value or price. That's early 19th century thinking. For over a century economists have known that value and prices are subjective and determined by the individual's choice of specific amounts of specific goods. Therefore, the value of oil can never be greater, or less than its price in the market.
No exploration has taken place in Iran or Iraq for over 30 years. If the governments ever change and become stable enough to allow exploration, we could find huge new reserves.
The continental US was thought to have been drained of oil, but huge new discoveries have been found in Nevada and North Dakota. The Caspian Sea has the potential to flood the world with oil, but lack of pipelines and politics hinders development. Russia alone could drown us in oil, but they continue to operate their oil companies as they did under communism--totally inefficiently. They spill more oil than they supply to the market. Russian oil companies are too stupid to produce much oil and too greedy to allow Western companies to help.
Published: April 26, 2008 9:06 AM
Eric: "18 billion in profit for the oil industry when this country faces severe economic hardship is unconscionable."
Where do you think that $18 billion goes? And don't say corporate executives, because profits are figured after paying the executives. Those profits go to pension funds, IRA's, mutual fund investors, insurance companies, and anyone else who has bought stock oil companies. Those profits enrich a large segment of the US population just as much as rising home prices.
Published: April 26, 2008 1:04 PM
Agreed there was nothing knew in the SimmonsCo presentation. It was useful to illustrate some of the issues.
Of course I understand utility in the context of this site. My point is that as a concept its value is questionable. As are some of the other foundations of economics, all of which derive their ideas from classical economics. Two of these are the concept of utility and another is the problem of non-renewable natural resources such as oil and gold. To get around the problem of limits early economists conveniently decided to side-step this thorny problem and declared that they are infinite! Modern economists believe these tautologies as articles of faith. As with faith generally I am an extreme sceptic.
I think if you check you will find that gold production peaked some years ago. That does not mean that more will not be found, but it seems unlikely.
Iraq could produce more oil if the security situation allowed, but that is the partly the point. The security problem above ground could be part of a human feedback loop connected with the scarcity of oil. Ditto Iran. Oil was discovered in "Mesopotamia" over 100 years ago. Since then the US and/or the UK have been at war with, or have ocupied some or all of the area for over 50 years, something like half the total time we have known oil was there.
Russia passed peak some years ago with inefficient communist production. I think if you check you will find that their oil field management techniques are now as good as anywhere else you will find in the world. This has allowed them to increased production to a second, lower peak, but that too seems exhausted. At least the president of Lukoil thinks so.
The Caspian has proved a massive dissappointment. The resevoirs are far harder to manage than ever thought possible and the oil is of very poor quality. As you say there are also very difficult geopgraphic and geo-political circumstances to overcome. Whatever. The oil is not available and price doesn't matter.
And I repeat: there are no substitutes. No combination of nuclear, solar, wind, biofuels, used french fry oil or anything else will make up for an oil supply that is no longer growing. Fusion no doubt could, but that is at least 50 years away; and has been for 50 years.
My general point is this modern economics is no longer relevant for the world we live in. It does not explain the human condition in the circimstances we are now in. It needs to adapt and grow, or it will die; and that will be pity.
Oil is a serious issue, but it is only one of several issues that are threatening us. The availability of potable water, climate change, species loss, global contamination with plastics and mercury derivatives and many other issues mean that "utility", ie human decision making, can non longer stand alone. We need other mechanisms, beyond price, that recognize the Tragedy of our Commons.
Published: April 26, 2008 8:10 PM
Of course I understand utility in the context of this site. My point is that as a concept its value is questionable. As are some of the other foundations of economics, all of which derive their ideas from classical economics. Two of these are the concept of utility and another is the problem of non-renewable natural resources such as oil and gold. To get around the problem of limits early economists conveniently decided to side-step this thorny problem and declared that they are infinite! Modern economists believe these tautologies as articles of faith. As with faith generally I am an extreme sceptic.
Hello! You may have studied "classical economics" in school, but how much have you read on Austrian economics in particular? Subjective value applies to any scarce resource, renewable or not. There ARE substitutes for petroleum oil, even if they are less "efficient". It's silly to say that there aren't. Nonetheless, inefficient or not, they will become cost effective if the price of oil and refining get high enough. Furthermore, higher fuel costs will also spur more research and development into alternative energy and fuels.
Yes, we might indeed suffer a decline in quality of life, I readily admit that, although "qality of life", like most values, are subjective. And while resources like oil and water are scarce as in finite, creativity has no known limits. It is not up to economists to decide what people value, or should value, only that they do place value on goods and services. This is why economics remains relevant, and always will be relevant as long as there are scarce resources that people value.
The main stumbling blocks to increased productivity and a better quality of life are government regulations, taxes, and other interventions, not economics or geophysics. Pricing information will prepare people for "declining" oil better than any "peak oil" warnings or rants.
Tragedy of the Commons issues could also be solved if governments will get out of the way and let markets and property rights work as they should. Do you have any worhtwhile suggestions, or are you simply trying to spread doom and gloom?
Published: April 26, 2008 9:41 PM
If your experience with classical and neo-classical economics has led you to question the relevance of economics as a whole, then I suspect you haven't really studied Austrian economics at all.
You will find that Austrians treat utility in particular in substantially different ways than modern, mainstream economics.
Please read this: http://www.mises.org/story/2205
And this: http://www.mises.org/story/2610
Once you have digested these basic concepts, you might be in a better position to appreciate the importance of an unfettered, freely-functioning price system. The prices of oil and oil products in a free market (or even a market that is freer than the current one) can never be irrelevant, and they can never fail to convey the information that I was referring to in my earlier Hayek quote.
There is another critical factor of human adaptation and decision-making that neither you nor any of the other peak oil doom-and-gloomers ever seem to touch on -- roads. Governments build all the roads, and lay out all the cities. This dictates oil-usage patterns.
In a freer market, these patterns of housing and business construction would change in reaction to sharp price fluctuations caused by, for example, the exhaustion of oil. Let's say there is no substitute, for the sake of argument, and personal cars cannot function once oil runs out. Fine. What do we do? Cities have to be rebuilt. The businesses we operate have to be re-configured. People would live closer to work. Unfortunately, government-implemented urban development plans prevent that from happening most of the time.
Governmental urban planning is only one part of the problems associated with peak oil. Do you realize how much the government subsidizes trucking? Air travel? Jets use a lot more gasoline than I will in my lifetime. But we have government-sponsored airports in every city, to promote and facilitate air travel. But air travel might be grotesquely inefficient and economically destructive. It may be wholly unsustainable in a free market, particularly if the real price of oil were paid by its actual consumers. A free market would then lead people to stop using these wasteful methods and look for alternatives. But artificially low prices deceive producers and consumers into thinking no change in behavior is needed.
Austrian economics predicts and explains all of this perfectly, if you take the time to understand it.
Published: April 26, 2008 10:47 PM
P.S. Tragedies are caused by the commons.
In other words, there would be no tragedy if there were no commons.
The Tragedy of the Commons is perfectly understandable once you understand Mises's Calculation Problem, which posits that, outside of a system where private property is freely exchanged in a market, economic calculation is impossible.
Therefore, the very existence of a commons (where there is no private ownership of physical goods) deprives producers and consumers of the ability to calculate when, how, how much and how fast to produce, use or consume those goods.
In other words, the very existence of a commons necessarily means that wasteful economic decision-making (and thus behavior) is inevitable.
Published: April 26, 2008 11:00 PM
It's always interesting, no, make that mind-boggling, when one starts to consider the biggies of society like transportation, communication, and such, and see all the different interventions that have taken place, and how they end up affecting society. Where would trains be now if the Feds hadn't developed the Interstate Highway system or interfered in passenger train pricing? Where would TV and radio be if the FCC hadn't come along and restricted use of the EM spectrum? How would our cities be different without restrictive zoning and building regulations, or city-maintained roads and infrastructure?
We could have been living in a very different world, and still could, without these interventions.
Published: April 26, 2008 11:13 PM
Actually if Peak Oil does occur in a Mad Max way then this would actually be a boon for Libertarians. When Ancient Rome collapsed the Roman powers-that-be and the associated hierarchies went with it meaning the average person now could live in self-ruled villages. Maybe my concern (similar to RDR's) is that the 'alternative' technologies always seem to years away (such as fusion) or, even worse, are very reliant on government subsidies (ethanol, hydrogen).
Published: April 27, 2008 12:07 AM
"Tobacco is subsidized? Yeah, all those farmers getting fat welfare for their crops. Until you see the ENORMOUS TAXES ON CIGARETTES.
Shipping is subsidized? Yeah, until you see the ENORMOUS TARIFFS AND REGULATORY HASSLE YOU HAVE TO GO THROUGH TO BRING YOUR GOODS ACROSS ARBITRARY BORDERS."
Sure, it's called a symbiotic criminal operation. Here you go, such-and-such business, since we're making a significant percentage of our ill-gotten tax revenues from consumers of your product, we'll kick back some of this fraudulent socialist robbery to you to help you stay in business & help us continue raking in those ill-gotten tax revenues.
Everyone wins, and by everyone I mean the criminal minority.
Published: April 27, 2008 2:05 PM
"18 billion in profit for the oil industry when this country faces severe economic hardship is unconscionable." --Eric
Yes, I agree they should stop doing whatever it is you find objectionable.
But why stop there?
Maybe you'll like my recommendation, which is they should cease operations altogether and liquidate all their assets. Then there will be no one producing petroleum for you to complain about.
Surely you'll be happy then--or would you then advocate they should be forced back into production at gunpoint?
Published: April 28, 2008 1:45 AM
Good point Josh M! I'm sure it's been pointed out elsewhere that why should any one complain about the price of petrol as they weren't involved in the drilling, shipping, refining, distribution, etc.
Published: April 28, 2008 2:08 AM
Thanks! I'm glad when a total layperson like me has something to contribute.
I suppose the fundamental point these complainers fail and refuse to grasp is that just because their demand curves for a particular product are (relatively speaking) inelastic, does NOT automatically confer to them some type of special, magical privilege to skew a voluntary transaction between buyers and sellers of a product, in favor of the buyer.
Published: April 28, 2008 2:41 AM
In other words, the very existence of a commons necessarily means that wasteful economic decision-making (and thus behavior) is inevitable. - The air and the oceans by consent and law are perhaps the most important commons we have. No one can own them, yet via an astounding and complex process they provide us with the most vital of ecological services, oxygen and fresh water.
Yet they are the worlds dump. A smoke stack in Shanghai, Sydney or Syracuse imposes costs on individuals around the world in various measures. These costs are what economists call externalities - a cost that is imposed on an individual not party to the original transaction. Austrian School economists only grudgingly accept the concept of externalities, maybe only because the principle is so obvious.
I am not sure how many readers on this site have crossed the oceans on a yacht. I have. The middle of the great oceans contains what is known as a gyre - a great refuse heap of floating garbage, much of it plastic that can take a couple of days to sail across. The one in the Northern Pacific is as big as Texas. I personally can testify to this mess, as I can to the dreadful mess along the tide line on countless otherwise pristine and far flung islands.
This plastic is breaking down, ultimately to the its molecular level where it nevertheless still exists, because it cannot be metabolised. It has entered the food chain and each of us have a cocktail of something like 100 different non-natural compounds in our blood stream.
These commons are just the most obvious, and climate change (lets not discuss this here - lets accept that it is a risk, what ever the percentage probability you personally can accept) and pollution are significant market failures that threaten us directly. There are countless other commons too.
To pretend otherwise is ridiculous and Austrian school economics has no answer for the commons or for finite natural resources. Resource and environmental economics as realtively new disciplines have some answers, but they are clumsy and virtually useless.
Published: April 28, 2008 6:55 AM
I don't know what any of this has to do with the informational content of prices and its effect on consumption and production behavior.
In any event, you seem to be proving my point -- the oceans, when treated as a commons, are dumped on and wasted, in this case with garbage.
In contrast, property that is privately OWNED is generally not dumped on indiscriminately, at least not where the owner's property rights are enforceable.
In other words, the elimination of the "commons" aspect, and a shift into private ownership, leads to less garbage-dumping.
And your comment about Austrians "grudging" acceptance of the concept of externalities is virtually nonsensical. Of course transactions between two parties can affect third parties. Austrians deal with these situations very simply -- by reference to property rights.
When someone pollutes the air or water, and that pollution damages your person or property, that's a property rights violation, and is dealt with as such. Remedies include injunctions, damages, restitution, etc.
The Chicago School has some bizarre ways of dealing with externalities, with all sorts of ridiculous calculations of utility, but these all fail miserably. All of these problems would be solved with a vigorous protection of property rights.
But socialists and other statists generally refuse to solve these supposedly intractable legal quandaries by resorting to property rights. Why? Because to do so would undermine their greater cause, which is to deny property rights in things like land, factories, businesses, one's body, etc. Statists generally use problems like pollution as an excuse to seize even MORE control over other people's property, when the better solution is to recognize the rights of individual property owners as autonomous and absolute. But they would never do that.
Austrian economics is all about finite natural resources. It has demonstrated that the best, most efficient, most equitable, most productive and least wasteful way of managing ANY natural resource is through private ownership and free markets. Always has been, and always will be.
Published: April 28, 2008 8:51 AM
Rod, since you're so familiar with Austrian econ, how about you tell us which articles by Austrian economists on these matters you've read, such that you have the ability to make such pronouncements? In fact, it seems you completely ignored the latest comments in response to you.
Published: April 28, 2008 12:14 PM
Comparing the cost of water with gas was the most irrelevant comparison I have ever read. Water doesn’t impact the world economy like gas does. Water falls for free when it rains. If gas prices go up everything from food to the buttons on your shirt goes up. The author of this article should feel very stupid and embarrassed. Next time you write and article like this get a lesson in Economics.
Published: April 28, 2008 4:11 PM
Could you perhaps quote the author comparing the cost of water with the cost of gas?
Published: April 28, 2008 5:58 PM
By far the most glaring inadequacy of this article is the use of the profit margins comparison - it needed more information because profit margins can refer to a number of things.
I suggest the main reason the author didn't put it in is because without the necessary qualification it would lose it's credibility.
In particular:
1. Profit margin as a percentage of what - assets? investment? revenues? Equity? Book Value?
2. Before or after - Taxes? Depreciation? Amortization?
3. What is the risk factor in each industry? Application software and periodical publishing strike me as potentially higher risk industries than oil and Gas (based on the existing proven reserves available for current Oil and Gas companies)
4. What was the basis for chosing these examples? It seems there is some skewed reason in order to prove his point.
5. Which year is it for? We may be looking at a time when some of those particular industries were in decline (e.g. possibly the software one) after overinvestments or just cyclical reasons.
Far too many questions for the article to be written alongside such shoddy presentation of statistics to be any good.
There could well be an argument for Oil and Gas making extremely excessive profits if you "sliced" those profit figures in different ways.
Published: April 29, 2008 6:22 AM
Owen: "Profit margin as a percentage of what - assets? investment? revenues? Equity? Book Value?"
Common-sense definitions suffice. "Profit margin" is widely understood to be operating profit margin, which is just a firm's net income, or revenue minus expenses. To express this as a percentage, we simply divide net income by total revenue. I do agree though, that it would help if the author would reveal the source of his numbers. This source actually shows a smaller profit margin:
http://fpc.state.gov/documents/organization/103679.pdf (see page 5)
Te Sung: "I am always amazed at how easy the US is controlled by a utility item like gas. Check what China pays for fuel at the US dollar amount then see if you like your open trade system. Trading oil on open markets like pork bellies just doesn't fit. It's a utility like electric. Sorry US thats the high cost of a democracy. I pay $2.03US at pump if you add US tax figure to my pump price when in China."
Enjoy it while you can. While your magnificent government planners hold down prices, your refineries are losing about $100 for every ton of crude oil they refine. Needless to say, such a shortfall is not sustainable. The best solution would be to free the market and allow prices to rise to reflect local and international demand.
Predictably, government will step in and subsidize the refineries, making up the lost profits with taxpayer money. What a wonderful solution! With the true cost of gas hidden from view, you will purchase more of it than you would have at the true market price, while the difference gets siphoned out of the economy through taxes. Fantastic!
Yes, Te Sung, sounds like you have a winning plan over there.
Published: April 29, 2008 11:55 AM
I'm really eager to find out which water utility makes $10 billion in profit per quarter. I'll wait for your follow up post on that one. Also, the profit margin on my lemonade stand is 80%! Clearly that makes me greedier than an oil company.
Published: May 2, 2008 11:33 AM
its not Gas prices that distroy the economy it is the diesel price -- boats, barges, planes, tractors, trucks,and all the world of cargo!
Published: May 2, 2008 2:28 PM
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And, even if someday, ...somehow, ...by some miracle, ...we become redeemed by not having to be ...milked ...at the pumps, don't you think that just the "environmental impact" alone of using this product makes it a worthy cause? Does anyone "really" care about "saving our planet"? Well, ...hell yes! I know I do. Don't "you"? I'm a grandpa now. I ""have"" to!
You can see certified documents on Bio Petro Improver along with the entire Bio Petro Improver company portfolio by clicking on the big "BLUE" link below. I must encourage you to get the facts! This is truly a significant movement in helping to save our environment and our money. In all honesty, I would never stake the reputation of my appliance repair company on this by connecting the names if I hadn't "actually" seen the results for myself.
If you're smart enough to be playin' with a computer, then, you're smart enough to be able to get the facts! Don't just take "my" word for it! See for yourself!! You don't have to be an expert in aero-space-dynamics or astro-physics to just ...scroll right on down there to the bottom of the page and click on that great big "BLUE" link down there!
Okay! So! How does it work? Well, ...it's called "enzyme technology"! Bio Petro Improver works in gasoline, diesel and fuel oil. It cleans the internal components of your motor and then it breaks down the combustible molocules of the fuel into smaller particles which, in turn, lowers the flash point and causes it to burn clean. It stretches the yeald of combustion of your fuel by "atomizing" the fuel more efficiently. Your motor runs cooler, cleaner, and burns your fuel more "completely". Bio Petro Improver comes in pills or powder. And, ....it smells great! Kind of like .....money! LOL
I have now experienced a "tremendous increase" in mileage, in a 1999 Buick Century with over 120,000 miles on it, by using this product, and, my motor runs quieter and smoother than it ever did without it, ...even when it was new! I've actually been running repair service out of "this" car for over 5 years now. Well, ...it's a good car. What can I say? LOL Anyway, I know what my car did "before" and "after" using this stuff! That's right! I'm telling you "it really freakin' works!" I have been testing this product for over 2 years in the same vehicle. It still runs beautifully and I've never had any problems with it. This stuff is cheap! It's easy to use! And, I save a lot of money on gas! Way more than enough to make it worth using! Now you can to!
Look! Why blow money out the tailpipe when you can burn it instead? Right? Save in the tank! Put your money in the bank! LOL How cheezy is that? LOL Well?
It's time to fight back!
People! This is a no brainer! LOL
And, ...by the way, ...Bio Petro Improver also offers a "top class" network marketing business opportunity. We are looking for more distributors. The amount of sales volume of this product is increasing at a "riveting" pace. I can tell you that, for me, and many others who are close to me, this company has completely changed our lives! It crushed every profit record margin ever set by any network marketing company in the entire world within the first 90 days of arriving here! You "don't" have to write a huge article ...like this one in order to make money with this company. All you need is a few friends and neighbors who might like to save money on their gasoline. When gas hits $5.00 per gallon, ...and it will, make no mistake about it, ...you are going to wish you were using this stuff! And, by then, ...you are going to be hearing about it by people who already have! Like me! LOL
"This campaign is the most valiant effort that I have ever personaly made toward any environmental cause! After 2 years of personally using BPI, I simply must recommend trying it for yourself."
It's time to fight back!
Folks, this "truly" is an emergency! Are we just going to sit back and watch the oil industry devastate the legacy of our children and our childrens' children or are we going to do something about this? "If we don't save ourselves from ourselves, ...someone else will." Do we really want ...that?
Think about it!
Now think some more!!
You all know what's going on here. Let's come together as one family and fight this thing. This is about the salvation of our future as "human beings" and as "Americans"!
This is not a fad or a gimmic! It's not just a passing phase! This is our "reality"! It's the wave of the future!
Do you want to be part of the wave of the future or do you want to just wave goodby to it?
You see?
This is "your" chance to fight back!
Now you can save on gas!
Save some money!
Save some dignity!
And, most importantly, ...you can help save our planet!
You are likely going to be seeing many articles and editorials on this subject in days and weeks to come. In fact, soon, you will likely be hearing about this by your very own neighbors. Keep in mind, in this case, it's all just a matter of opinion until you get all the facts. You don't know what you don't know until you "find out"! The best way to find out is to buy a bottle and check it out for yourself. There is a "world" of information available to you right here. Just click on the big "BLUE" link below.
There are conditioners. (bad) And there are additives. (good)
Bio Performance is a fuel "additive" and does not void "any" warrantees!
And, guess what folks! ....Yup! ....Exactly! ...It really freakin' works! That's right! Very good!! You got it!!! Pretty cool .....huh.
This product can be used in any oil based fuel application! Fuel oil furnaces, generators, lawn mowers, chainsaws, cars, trucks, 18 wheelers, tractors, combines, atvs, motorcycles, snowmobiles, recreational vehicles, water craft, airplanes, jets, missiles, rockets, spacecraft, flying saucers, and any other type of internal combustion application in which an oil based fuel is used except e-85! LOL Ok?
Now, ...think ...just as hard as you can!!!!
I say this with all due politeness and respect. If you are actually even remotely interested in learning the FACTS about any of this, please ..... CLICK on the big "BLUE" link below!
I thank you for taking the time to read "my" testimonial!
Buy a bottle and try it. Follow the instructions carefully. You will save on gas! If you like it, need a job, and want to become a distributor, contact me and I'll put you in the business. It's that simple!
This is the "BLUE" link that I told you about. "Please click here to get the facts!" Save on gas! This may be your last chance to help us "all"! Now! Go tell everybody before they tell you!
www.robojoe.mybpi.com
Thank you for taking the time to look at this. Seriously! Blessings to all of you who may, actually, .....you know, ......care.
If you would like to speak with me directly, you may call : 989-666-5023. Just ask for "Juk". Or, if you are more comfortable, you may e-mail me at:
RoboJoe1@peoplepc.com
Joseph "Juk" Green
RoboJoe Industries
www.upthemileage.com
And remember folks, "stay out of trouble"!
(Quote from Robo Cop.)
(Trying to be cute. LOL)
(Well, ...is it working?)
(Okay, ...well, maybe not.)
It's time to fight back!
Save on gas!
Published: May 5, 2008 12:30 AM
What struck me most about this article was the up to 18 times difference in profit margins between different industry sectors shown in the small table presented.
Where is the free market? In a free market, the true profit margins in all areas would be approximately the same, since entrepreneurs and investments would constantly move from sectors with lower profits into those with higher until equality obtained.
It would be good to see an article explaining how the distorting effects of government cause this inequality to be maintained, with examples and details for some particular sectors.
--Paul Wakfer
MoreLife for the rational - http://morelife.org
Reality based tools for more life in quantity and quality
The Self-Sovereign Individual Project - http://selfsip.org
Self-sovereignty, rational pursuit of optimal lifetime happiness,
individual responsibility, social preferencing & social contracting
Published: May 8, 2008 10:59 AM