Is rationing the answer to high fuel prices?

November 8, 2007 8:58 PM

Is there anything that individuals can do to bring down the price of oil? If gas and oil were rationed would that bring down prices? Will high prices or shortages make rationing necessary?

Isn't it wrong for everyone to suffer from high prices because so many are guzzling more than they should? I heard one of the commentators on television state that it's really beginning to catch his attention when he sees a big SUV flying by when he has ditched his Tahoe for a hybrid. The thought struck me that maybe each person should be allotted a certain amount of gas and if they want to use it up in a couple of days, so be it.

Is my thinking skewed on this issue? I'd like to hear from others.

posted by msbaby to home & garden (27 comments total)

No. It's a finite resource. You could ration gold, but that wouldn't bring down the price since someone would have to give up their ration in order for someone else to get more, hence the increase in price.
posted by furtive at 9:10 PM on November 8, 2007

Is there anything that individuals can do to bring down the price of oil?

Scarcity increases prices. In contrast, reducing energy usage in turn reduces energy demand. As demand decreases, prices drop.

People here and there buying hybrids probably won't affect overall gasoline usage. But a country motivated to buy fuel efficient cars will affect oil prices, due to lower gasoline demand.

The US alloted a supply to its citizens during World War II and the 1979 energy crisis. Other forms of motivation could be through tax breaks for purchase and use of energy efficient technology, as was done in 1979.

Gas prices did dip as energy efficiency slowly propagated through US society post-1979.
posted by Blazecock Pileon at 9:31 PM on November 8, 2007

Rationing would reduce the supply, which would drive the price up, not down.
posted by JiBB at 9:32 PM on November 8, 2007

The best thing that can be done right now to lower the price of gasoline is to build new refineries. The price of crude is not the only thing that's driving up the cost of gasoline.

If you want to help reduce the price of gas, go out and start demonstrating in favor of building new refineries and against severe environmental regulations which are used by environmental activists to impede development. Write to your congressman and say you want to loosen the restrictions on such development.
posted by Steven C. Den Beste at 9:44 PM on November 8, 2007

Prices cannot, and have never been successfully controlled by "price controls" (rationing, etc), at best they create an temporary artificial bubble which usually leads to hyperinflation. The ONLY way to reduce the price of something is to either:

reduce the demand

increase the supply
While the free-market can be a cruel mistress, it's the only system that can work over the long run. Free market capitalism is NOT some wacky ideology that someone chose and applied to the world, it is the most accurate and useful description of economic reality.

posted by blue_beetle at 9:57 PM on November 8, 2007

Isn't it wrong for everyone to suffer from high prices because so many are guzzling more than they should?

This is not the reason prices are increasing. But if you wish to subscribe to that line of thinking, you should bear in mind that the United States (where I assume you are) consumes more than 25% of world oil production while producing less than 10%. At the same time (old data here, but my point stands), Americans pay less than most other nations for their gasoline.

Ask yourself the same question from a global perspective.

Is there anything that individuals can do to bring down the price of oil?

No.

If gas and oil were rationed would that bring down prices?

No.

Will high prices or shortages make rationing necessary?

I'm no peak-oil ranter, but prices will get higher, shortages will happen, and rationing will return, inevitably, in places that do not produce enough oil to supply their own domestic needs. The only question is as to when -- next year or 10 years from now. But there is no linear causal relationship between high oil prices and shortages/rationing.
posted by stavrosthewonderchicken at 10:02 PM on November 8, 2007

Is there anything that individuals can do to bring down the price of oil?

Oh, and buy your food locally, where you can. Incredible amounts of petrochemical energy are expended not only in agriculture, but in transporting food to your neighborhood grocers. Buying local is more energetically sustainable in the long-term, and it strengthens your local economy by letting others do more with less energy.
posted by Blazecock Pileon at 10:03 PM on November 8, 2007 [1 favorite]

Isn't it wrong for everyone to suffer from high prices because so many are guzzling more than they should?

A significant factor in the high prices is economic growth in China and India that is driving demand. Since those two countries have a combined per capita GDP of about $10,000, while the U.S. alone has a per capita GDP well north of $40,000, they don't think they're "guzzling more than they should."

Their demands will only go up, driving up prices even further.

Is there anything that individuals can do to bring down the price of oil?

Encourage the use of alternative fuels in order to reduce demand. Or encourage additional oil exploration in order to increase supply.
posted by Cool Papa Bell at 10:25 PM on November 8, 2007

The thought struck me that maybe each person should be allotted a certain amount of gas and if they want to use it up in a couple of days, so be it.

Well, that's a philosophy, but it's the opposite of the idea of a free market (which is what we sort of have). The free market theory says the price of a commodity should be related to the supply and demand. In this case, demand is very high, supply is just barely matching that demand. Demand continues to rise, and the supply (in terms of barrels produced per day) hasn't increased in a few years. Some think it's about to start decreasing.

So, there are two inputs to the price equation. You don't have any control over the discovery or production of oil, so you have no control over the supply side. You have very little control over demand -- but not zero control: you can control your own demand. You can talk to others and influence their demand. A large group of people buying food locally, riding bicycles, using public transit, avoiding stupid products like bottled water, can do something to reduce the demand, and therefore the price.

On the other hand, imposing price controls at a government level creates problems. The countries selling us oil will continue to charge what the oil is worth in the global market. If our country requires gas stations to charge no more than $3.00/gal, but it costs them $4.00 for a gallon of gas, they no longer have any incentive to sell you gas. It would cost them money to provide it to you, they're better off sticking with the convenience store and shutting down their pumps. The state of Hawaii actually did something this stupid a couple years ago.

If you decide to lock the price of oil, but you still have to buy it from foreign countries at market prices, then someone has to eat the difference. If the federal government did, it just ends up on the taxpayers anyway.
posted by knave at 1:46 AM on November 9, 2007

Another point -- the high price of oil can be a good thing. It will encourage research into energy sources that may have been too expensive to justify when oil was $20/bbl. The result of $100/bbl oil is a lot of people looking for alternatives.
posted by knave at 1:47 AM on November 9, 2007

A little perspective on the price of gas

Gas in the US is far cheaper than the rest of the western world. Higher prices encourage more efficient cars (in theory). In the UK petrol is heavily taxed - the theory being if its so expensive we'll drive less and/or get more fuel efficent cars or hybrids. In reality what it means is the government gets a lot of tax money to spend on public services - its a win-win situation (in theory)

Large taxes on inefficent vehicles and tax breaks on hybrids and fuel efficent cars would go some way to easing the situation - but some people are rich enough not to care. A guy flying by in his SUV can afford the high fuel prices. But saying everyone has x amount of fuel and if you use it up - tough shit you can't go anywhere - the country would grind to a halt.
posted by missmagenta at 2:59 AM on November 9, 2007

It's artificial scarcity and gasoline speculation that drive up prices. There is no scarcity, we are NOT at peak oil, and oil production and shipment is nowhere near capacity. The sky is NOT falling. Fear and rumors drive up prices, and that's the story now and for the near future. The big refiners have set record making profit marks each year for the last 5 years, all while spending hundreds of millions in speculative R and D that they know full well isn't going anywhere. There has been some word of legislative checks and balances being put into fruition to control consumer oil prices, but until someone can afford to pay their legislators more than the oil companies, it's not going to happen.

Oil will not stay at $100/barrel for long, if for no other reason than that Russia is just about to get their massive production up and running and add a serious chunk of supply to the international market. I should say oil will not stay at 100/barrel so long as we don't invade Iran, but that's not going to happen either.

Now, if you want a safe investment, put some money into cellulasic ethanol R and D, into enzyme companies and such. Ethanol from switchgrass is our only possibly legitimate alternative fuel source in the near future, and it IS happening.
posted by TomMelee at 5:04 AM on November 9, 2007

we are NOT at peak oil

Cool! Do you have stats on that? Pretty much everything I've read has alluded to the fact that demand will continue to increase faster than supply. In places like Venezuela and Norway, supply is slowing. Nobody is sure how much oil the OPEC nations have. But I'd love to see some stats that show that the world has lots of oil left.
posted by billysumday at 5:45 AM on November 9, 2007

Also, in response to the question: Is there anything that individuals can do to bring down the price of oil?...I heard one of the commentators on television state that it's really beginning to catch his attention when he sees a big SUV flying by when he has ditched his Tahoe for a hybrid.

The television commentator is being an idiot. Because someone else could easily say it's really beginning to catch my attention when I see a hybrid flying by when I have ditched my Prius for a bike. It's sort of hard to complain about the price of gas when you drive a car (that's not run completely on electricity). The difference between a Tahoe and a hybrid isn't all that great in the scheme of things. And what if the Tahoe is driven 10 miles a week while the hybrid is driven 100 miles a week? Americans get cheap gas, so suck it up and pay for the privilege to burn fossil fuel at all. Otherwise, ride a bike, use public transportation, carpool.
posted by billysumday at 5:52 AM on November 9, 2007

I'm with billy. The figures I've seen indicate we're at a point where spare production capacity is very minimal (a few hundred thousand barrels a day). Oil and gasoline reserves are consistently below expected amounts, which is why the price goes up. No one said the sky's falling, but it's foolish to look at the current situation and say we're not at or near peak oil.
posted by knave at 6:06 AM on November 9, 2007

Individuals can't do much but groups can. Organize with other local, like-minded people to form car-pooling co-ops or joing Flexcar if there is a local branch.
posted by JJ86 at 6:09 AM on November 9, 2007

the thought struck me that maybe each person should be allotted a certain amount of gas

Here's what would happen if this were done: people who had too little gas for their needs would buy it from people who were not using their full allotment. The price for this would be about the same as today's gas price. Apart from creating a lot of fuss, nothing much would change.
posted by thijsk at 7:09 AM on November 9, 2007

"Is my thinking skewed on this issue?"

Yes. In an economy that pretends to be a fair market, "rationing" is achieved through pricing: prices keep going up until supply and demand are in equilibrium. You learn this on day 1 of Econ 101.

Instituting actual rationing (like the US had during WWII) would only drive the price up. Imagine if everyone gets 10 gal/week. You only need 8, but your neighbor needs (or wants) 20. He can't get the extra 10 at the pump for the going price, so he gets it on the black market. And the black market will be much more expensive.

But there's no way oil companies would let the US government limit the amount of product they could sell in the first place.

There would be three ways to lower the price of gas: reduce demand, institute price supports (like we have for some agricultural products. And in Turkmenistan, thanks to government price support, gas is free—but nobody can afford a car.), or reduce gas taxes. You personally can reduce your own demand for gas, but the effect this has on overall demand is, well, very very small. To effect the other two changes, you'd probably need to become a senator at least.
posted by adamrice at 7:13 AM on November 9, 2007

I've read that the Hedge funds have taken all of their speculation dollars out of the Real Estate and Stock market and have poured them into the commodities market causing an oil bubble. This is going to continue until these vampires find a new underpriced investment vehicle to suck the marrow out of. Lovely folks, I see them building their own feudal manors here in Westchester and CT.
posted by any major dude at 7:13 AM on November 9, 2007

This is very rapidly becoming chat filter instead of actually answering the question---but I'll elaborate. Gas prices have *nothing* to do with the cost of actually pulling oil out of the ground. Think about it economically: You're ExxonMobil. You've got derricks in Saudi Arabia, Iraq, Iran, Nigeria, Siberia, Central and South America. You're selling your oil for rediculous prices.

You could a) increase production and drop prices (bell shaped curve anyone?) b) drill more wells without actually pumping anything so that in the future you can increase production, thus artificially inflating your "operating costs" and thus what you can get away with selling your oil for more or c) do nothing at all.

Look at how oil is sold---it's speculated upon. It's FUTURES. You're an investor, do you want your oil to sell for $300 a barrel or $25 a barrel? Why would you BUY BUY BUY when prices go down? That's the price you'll make back LATER.

There's a lot of oil in US waters and lands, there's a crapload of oil in international waters. There's untouched oil in Siberia, and I recently read that recent geological exploration of the Atlantic reservoir shows that it's about 10x bigger than they thought it was. The thing is, why bother to tap it when the Saudis will continue to let us use theirs?

Talk to a US derrick operator or petroleum engineer---they drill through 2 layers of operable oil to reach the oil they boom, because that's what the government says they should do. The top 2 layers aren't allowed to be used. That's what they do around here, anyway.

Now with all that said, I'm all for going green and have a personal company in biofuels that produces a fairly healthy chunk of non-petro fuel. It saddens me that nothing is said or done until some pundit starts chirping, and then the cattle start to panic. Not necessarily about peak oil---just about oil prices and energy futures.
posted by TomMelee at 7:31 AM on November 9, 2007

Allowing that an individual might have a minimum effect on oil prices by their own actions, the question was "what can an individual do ..." I amazed about how the individual solutions involve driving less, or changing vehicles but very little attention is paid to changing driving styles. In short: Just slow down. Notch your speed down and quit jackrabbit starts. The computations I've seen show that just by lowering your on-road aggressiveness you can realize gas savings of anywhere from 5-30%. Not to mention you'll make the roads saner for everyone. As tight is the bond between people and driving is, the bond between people and driving "cool" might be even tighter. But at least this way, you can still do all your driving and save a little gas. That might do something. (Oh, and get a Prius. We love, love, love ours if for no other reason than it seems like we buy gas oh, every six weeks or so.)
posted by lpsguy at 7:32 AM on November 9, 2007

There's a lot of oil in US waters and lands, there's a crapload of oil in international waters. There's untouched oil in Siberia, and I recently read that recent geological exploration of the Atlantic reservoir shows that it's about 10x bigger than they thought it was. The thing is, why bother to tap it when the Saudis will continue to let us use theirs?

The largest reserves have already been tapped and are depleting (depleted). In the future, there will need to be more machinery because there will be many more - and much smaller - reserves found in places where either the weather or the geography is harsh and difficult. Saying that there is no peak oil or that we are not past or dangerously close to peak oil is, frankly, dumb. In other words, with fingers in ears - lalalalalala, peak oil isn't real!!

Think about it economically: You're ExxonMobil. You've got derricks in Saudi Arabia, Iraq, Iran, Nigeria, Siberia, Central and South America. You're selling your oil for rediculous prices.

Think about it politically. You're ExxonMobil. You'd love to get your hands on more of the oil in SA, Iraq, Iran, Nigeria, Siberia, Central and South America. But since more and more countries are worried about the depleting supply of oil, they are nationalizing their oil industry and you, ExxonMobil, are having a difficult time getting your grubby paws on it.
posted by billysumday at 8:38 AM on November 9, 2007

I imagine that SDB's suggestion will lower prices for a couple years, if that. You can also lobby to have all gas taxes removed, which will lower the price significantly, but you'll be taxed in a different way to make up for it.
posted by damn dirty ape at 8:53 AM on November 9, 2007

You think countries nationalize fuel because of scarcity? SUCH the opposite. They nationalize it because it's they see it as their way to move from the periphery to the core, even though it just cements their position there. Look at Saudi Arabia and Kuwait---they have no shortage, use american machinery and labor to dig their oil, and live in basically welfare states financed by American oil interests. No shortage, all money. Alllll money.
posted by TomMelee at 10:38 AM on November 9, 2007

Oops, to add. Venezuela and Brazil are excellent examples...Brazil is the only country in the world that is energy-self-sufficient, because they realized that nationalizing their fuel system would yield cash for everyone and a sustainable economy. They have no concerns about supply shortages, it's all about who's pocket the money's going into.
posted by TomMelee at 10:40 AM on November 9, 2007 [1 favorite]

Aren't we saying the same thing? Oil is becoming more scarce in relation to demand, therefore its price is going up, and countries with large reserves seek to obtain as much national control of it as possible. Or is the difference in that I am saying supply is getting outpaced by demand and you are saying that high oil prices are simply the result of market irrationality and manipulation?
posted by billysumday at 11:22 AM on November 9, 2007

That's the thing though, it's really not more scarce. It's artificial scarcity. Supply isn't getting outpaced by demand, it's simply being hoarded because people know that hoarding it (and thus shutting off supply, which reduces supply and raises prices, yes) will give them more money. I'm saying that if there is a shortage of supply it's 100% choice and NOT that "zomg we're drinking more oil than we can pump."
posted by TomMelee at 6:21 PM on November 9, 2007