07 May, 2008

Obama: Candidate of the City

Obama cut his political teeth in Chicago. He attended Columbia University in New York City and Harvard Law School in Boston. Like many in cities, he is a second-generation immigrant. His support base consists largely of blacks and youth, who live disproportionately in cities. For the first time, we may have a president who is of the city and who has a deep connection with problems and issues of cities.

Perhaps we can then do something about this:


Cassady said...

One of the comments in the article proper is pretty interesting. That the US is an exporter and (was?) the world's largest producer obviously has a large effect on the tax situation.

Just as important, I feel, are the speculative practices and control factors that have made the oil market operate completely outside of the rules of supply and demand.

spencer said...

I can't seem to get to the article proper. But I have to quarrel with two of your statements.

First, the US may export some oil, but we are a net importer of oil. In fact we are the world's largest net importer of oil. We do produce a lot, but not nearly enough to make up for what we consume. Certainly, a higher gas tax would not be good for US oil producers, but they could always just export more as the gas tax would only affect US demand.

Second, I think it's wrong to say that the oil market is somehow outside of the "rules" of supply and demand. Yes, a good chunk of supply is controlled by OPEC, which may or may not make production decisions based on political concerns. But, they do not have control of the price of oil, only the amount that they produce. And of course demand appears to be functioning normally; when gas prices rise, people drive less. In the long run they'll drive a LOT less.

Cassady said...

I was just noting what was said on the page of the article itself. I knew somewhere in my mind that we're a net importer, or else why the emphasis on dependence on foreign oil?

I disagree with your other point: that the market for oil is operating normally under S/D. If this were true, oil would be about $55/barrel. What is driving the prices up largely, is trading in oil futures, and the speculation of higher oil prices that occurs there. Also the control of OPEC, but not to all that large of an extent, we're way too protectionist for that to really hurt us.

A senator from Washington just gave a report on this. The demand we have now for oil doesn't outstrip our reserves, and we have proportionally as much oil available to meet our demands as we had when it did cost $55/barrel. If S/D were really dictating the market, gas prices would be about 1/2 of what they are now.

spencer said...

I don't think that speculation in oil futures represents a market failure, per se, that would prevent oil from being priced "correctly", or according to supply and demand.

I don't even think that changes in the price of futures affect the actual price of oil. A future is just a contract to buy oil at a later date. The price of the future itself does not cause the price of oil to do anything. If you think that futures are overpricing oil, then sell a future and buy oil when it comes due and you'll have made a profit.

Moreover, if the price of oil is too high and there's a bunch of oil just sitting around because no one wants to buy it, why doesn't someone start selling it for a lower price?

I don't know where you are getting this $55 per barrel figure from, but I don't usually trust Senators from Washington with my economic information.

Cassady said...

I do trust the CEO's of BP and Marathon when they say that oil is operating ridiculously.

The price gouging that you keep hearing about centers a lot around that speculation. The reserves I'm talking about are the "Security Oil Reserves," or whatever the government calls them. They're a safety net against whatever might befall our oil imports from external forces. What we have would cover our needs completely for 5 days, they're not meant to support the whole nation at once.

I guess what I'm saying is just that the market is not great, not necessarily that it's failing as such. I think there a lot of external factors weighing in that aren't present in other markets.

Elliot said...

Isn't the point about speculation that because some people expect the price to continue rising more or less indefinitely (due to real factors like increasing world demand) they hold off selling it now in expectation of higher profits in the future? And then, that, in itself, drives the prices up further by limiting supply below what it "should" be? At least, that's how I understood it - although, I'm not sure it's at all clear that that is a driving factor of prices rather than an influence at the margins.