There is some EXCELLENT LOGIC here in this e-mail I got! It's too bad the government doesn't use any logic.

OPEC sells oil for $130.00+ a barrel.
OPEC nations buy U.S. grain at $7.00 a bushel.
Solution: Sell grain for $128.00 a bushel.
You can't buy it?
Tough!
Eat your oil!

If only life were so simple.

Like much of what passes for email logic, it is short, to the point, packs an emotional punch and ignores facts that stand in its way.

OPEC alone does not set the price per barrel. Much of the spike in prices involves speculators in the market, betting on a continually rising price at the pump. The guilty party may be the multi-billionaire next door to you or the little old lady across the street whose pension fund is also betting heavily on the market.

The US may produce perhaps one third the world's crop of exported wheat but isn't, by far, the only game in town. Canada, Argentina, the EU, Australia and China would certainly love to see the US "make its point." The EU and Canada alone export more than the US. I wouldn't hazard a guess as to how many US wheat farmers would go under if we followed the "logic" but one would be too many.

Wayne

I feel so sorry for you Wayne. What ever happened to your sense of humor?

That said, I agree with you about the speculators in the market. They have as much to do with our pricing as anything.

And by the way, I live in Washington State wheat country and 100% of what we produce here goes to china. That’s right, 100%. Maybe they export some wheat but they buy every grain of the Washington State wheat they can get their hands on because our wheat makes the best noodles.

There's 42 gallons in a barrel, and 9.3 gallons in a Bushel.

So technically using the same measurement you're talking $32/barrel corn

(And in actuality, corn is actually sold by weight which is then fed through some formula to adjust for moisture content to determine "bushels" which will not not match the physical measure of volume...why am I cursed with Cliff Claven gene?)

Today's corn hit $6.67 which is the highest dollars ever, equivelant to early 1980s prices. The inflation-adjusted record in modern times in 1973...$14+ bushel. Those storms Mumsey's been posting about are hammering the heck out of the middle of the corn belt, and we're rapidly reaching the point they're estimating something like 5% of our corn acreage won't planted in corn since the season will be too short and/or not enough short-season corn seeds in stock.

Last I heard, the law of supply and demand had not been repealed. The demand for oil has proven to be inelastic; a 30% price increase has only contracted demand by 4%. The price will continue to rise as long as profits continue to rise, and if oil companies can sustaind profits on decreasing volume of product sold, they will do so.

It is interesting to note that in recent congressional testimony, both oil executives and environmentalists agreed that opening up drilling in the ANWR would have essentially NO impact on fuel prices.

The market is finally understanding that oil really IS a finite resource. Keeping the price high will allow those who control the supply to stretch out the length of time during which the sale of this commodity remains a steady revenue source.

Petroleum can be made in to thousands of durable and useful things, and in the years to come, our children will be flabbergasted that we wasted such a valuable material by buring it up as motor fuel.

Our children and grandchildren will be using just as much fossil fuels as we do (unless we embrace nuclear on a massive scale). It's finite. It's not that finite.

The oil companies aren't happy with the current prices -- their profits actually are down in recent months because they are paying more for crude and selling less refined product. Retail prices are being constrained by weakening demand.

The oil producers aren't happy. Saudis and the rest are complaining about the irrational prices because they know alternative resources will be brought online, and if the irrationally high prices continue much longer alternative sources like additional drilling in the U.S., tar sands, and coal liquification will start to come on line. They don't want a gross oversupply of crude like there was in the 90s that kept prices at historical (inflation adjusted) lows for most of the decade.

My guess is prices will settle back into $2-3 gallon gasoline, which is low enough to discourage competeting technologies.

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Factoid of the day:
Europe depends on trucks to move freight far more then the U.S.

In 1996, Trucks in the U.S. carried 72% of the ton-miles that railroads did. The U.K. shipped 1000% (10x) more by truck then rail; Germany & France shipped 300% more by rail. Their rail networks are designed as a government jobs program first, and a people mover second...with freight way down the list. We even use a greater percentage of water shipping -- the most energy efficient -- then Europe.

Our rail network since then has become even busier to the point it's bursting at the seams. Now if we could just pull the money that's is playing on oil futures out of that market and actually invest it, we can make a good thing even better.

I'm wishing that you are right Matt, but I don't have much faith in Disney's Law.

I agree with you about the railroads though.

quote:

Originally posted by ctdahle:
I agree with you about the railroads though.

In my state our governor actually bought some of the smaller rail spurs to keep them from being sold for scrap when the metal prices were so high. She knew that if the rails closed down then all the trucks that would be hauling wheat would wear out the highways and burn more fuel than the trains do.

one problem with the current railroads is that 60% of all the traffic is routed through Chicago. This means that it can take as long as 2 days for a train to arrive in Chicago, get shifted onto the correct outbound track, and make it's way through the city. I know of a lot of abandoned lines that could be brought back into service without to much effort.

Major,

About my lack of a sense of humor: there are three things I don't joke about. One is the price of oil. Another is my steel-trap memory. I can't remember what the third is.

And another thing I did completely forget about, another huge reason behind the soaring cost of oil that OPEC nations can't be blamed for: the fact that our leadership has let the value of our dollar sink into the toilet.

Wayne

quote:

Originally posted by adirondackgardener:
And another thing I did completely forget about, another huge reason behind the soaring cost of oil that OPEC nations can't be blamed for: the fact that our leadership has let the value of our dollar sink into the toilet.

Now that is something we can agree on.

quote:

Originally posted by Major:
In my state our governor actually bought some of the smaller rail spurs to keep them from being sold for scrap when the metal prices were so high. She knew that if the rails closed down then all the trucks that would be hauling wheat would wear out the highways and burn more fuel than the trains do.

I support preservation and expansion of the use of railroads also.

It sounds as if your Governor has keen insight to the future needs of your state. She's a keeper.

Wayne

Unfortunately that is the only thing she has done that makes any sense. She won the job after 3 recounts and finally got about 40 more votes then the guy that won the first count.

Then it was discovered that several of her votes were from dead people and felons in prison. By the time the courts got involved they (the courts) decided that it was too late to vote again so we are suck with her.

As far as I know she doesn't even care about the use of rails to save fuel. She just doesn't want to have to fix the roads on our side of the state. The only other thing I have seen her do is raise taxes but we don't have anything to show for it. At least not yet and not anything that will help out our side of the state.

quote:

one problem with the current railroads is that 60% of all the traffic is routed through Chicago.

That's the type of thing that can be fixed with investment though. The primary problem is it will be like building a new road -- it'll take 10 years to get through the courts in lawsuits over environmental impact studies and NIMBYism. It's an area government leadership in a private market can make a huge impact -- from the ability to use eminent domain, to legal reforms to bring appeals to a quick conclusion.

There are many parts of our rail network that can be re-opened, or re-expanded (I've walked single tracks near Worcester that clearly were originally built to hold three parallel tracks!)

CSX is looking to build a new terminal west of Boston -- partly to expand capacity, partly because Harvard is willing to pay an enormous premium for the railyards to expand it's campus.

There is, however, a catch that may occur with increases in rail traffic -- many communities aren't used to them being that busy. Expansion of the Worcester -- Boston commuter rail has been a world class SNAFU for the last 15 years. One of several valid problems is the mid-sized town of Framingham...the trains cross through downtown Framingham at grade. I've seen the traffic the current train schedule causes, increasing it to meet the pent up demand for more commuter rail west of Framingham will cause gridlock in downtown Framingham. They need to depress the railroad through downtown...you do the math on that engineering challenge

Challenges like that where outside factors complicate the construction of railroads and require extraordinary expenses I'm not disinclined to say there's a good reason for investing tax money to make it happen.

One of the neatest engineering things I used to drive under daily was a two level railroad bridge in Worcester, MA -- the CSX tracks headed E-W crossed over the P&W tracks headed N-S, which crossed over Southbridge Street. Hundres of acres East & South of downtown Worcester in the early 1900s was "depressed" -- they literally excavated and lowered the ground level, leaving the railroads in place. All the streets then crossed under the railroads, eliminating the congesting and danger of numerous at grade crossings.

Well Matt as it happens I am a civil engineer and my field is transportation. If the rail road comapanys were to decentralize their network it would help. Make use of "flyover country" open switch yards in sparsely populated areas and avoid the major city traffic. Corinth Mississippi was a major confederate railroad junction during the Civil War before Grant decided to do a little renovation. They currently have only a few thousand people who could use the new jobs. This would service all the new automobile manufacturing belt in Tennesee, Mississippi, and Alabama as well as being near to water transport using the Tennessee Tombigbee Waterway(I worked on it in 1979). Pick another small town in Arkansas or north Texas, then Utah. Add another one in the Dakotas to complete a north/south and east/west network that avoids major towns and is away from Chicago. I'm afraid that ends the free sample but my rates are reasonable.