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By (user no longer on site) OP
over a year ago
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It is often difficult to comprehend why oil companies are quick to push the price of fuel up when the cost of producing it rises, but are less keen to reduce the price at the pump when the cost of crude falls. We've all been exasperated when this happens, and feel powerless as we see the cost of filling up our cars rises exponentially year after year.
Here's a possible reason why this practice is so prevalent in our markets:
Oil companies, who are registered in one country, operate as multi-nationals, and as such they are more insulated against the rules of the country in which they are registered. They can use the laws of the many countries in which they have a presence to skirt around what we consider to be the morally correct thing to do.
But why do they feel it's neccessary to operate in this manner?
The answer lies in that they know with an absolute clarity that the world's reserves of oil has a finite lifespan - oil that's easy to extract that is - and that to exist as a company in the future, a future without massive oil extraction, they have to reap as much as they can now from what they have left in the ground. This usually involves hiking up the price when the markets dictate that the price should rise and then keeping the prices up when the price of oil falls. This allows for maximisation of profits, which in turn permits the oil companies - state owned companies in places like the Middle East - to use that money to invest in the world markets in commodities other than oil. Many governments have huge investment funds that specifically invest in overseas private companies, and these funds are so colossal that they give their relative state-owned benefactors a huge say in the economics of the country in which those shares are held.
And this is the reason why our government is powerless to force fuel prices down, as they know that an election can be lost if a Middle Eastern, or Eastern European funded investment portfolio worth trillions of pounds decides to hold a political party to ransom if it feels that it's interests would be better served by a change of power.
Now you know. |
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By (user no longer on site) OP
over a year ago
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"Wonder what would happen if just for one day we didn't use the car"
It would be bliss out there but nothing to petrol companies couldn't absorb. If we didn't use our cars for a week, now that would be a different matter, they'd shit themselves. So would the govt. |
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By (user no longer on site)
over a year ago
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"It is often difficult to comprehend why oil companies are quick to push the price of fuel up when the cost of producing it rises, but are less keen to reduce the price at the pump when the cost of crude falls. We've all been exasperated when this happens, and feel powerless as we see the cost of filling up our cars rises exponentially year after year.
Here's a possible reason why this practice is so prevalent in our markets:
Oil companies, who are registered in one country, operate as multi-nationals, and as such they are more insulated against the rules of the country in which they are registered. They can use the laws of the many countries in which they have a presence to skirt around what we consider to be the morally correct thing to do.
But why do they feel it's neccessary to operate in this manner?
The answer lies in that they know with an absolute clarity that the world's reserves of oil has a finite lifespan - oil that's easy to extract that is - and that to exist as a company in the future, a future without massive oil extraction, they have to reap as much as they can now from what they have left in the ground. This usually involves hiking up the price when the markets dictate that the price should rise and then keeping the prices up when the price of oil falls. This allows for maximisation of profits, which in turn permits the oil companies - state owned companies in places like the Middle East - to use that money to invest in the world markets in commodities other than oil. Many governments have huge investment funds that specifically invest in overseas private companies, and these funds are so colossal that they give their relative state-owned benefactors a huge say in the economics of the country in which those shares are held.
And this is the reason why our government is powerless to force fuel prices down, as they know that an election can be lost if a Middle Eastern, or Eastern European funded investment portfolio worth trillions of pounds decides to hold a political party to ransom if it feels that it's interests would be better served by a change of power.
Now you know."
all very interesting wishy but the government can do something about the price of fuel by cutting the tax they take from it which as we all know is the main cost we all pay for a litre of fuel |
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By (user no longer on site) OP
over a year ago
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"all very interesting wishy but the government can do something about the price of fuel by cutting the tax they take from it which as we all know is the main cost we all pay for a litre of fuel"
Can it though?
The government know just as much as the oil companies regarding how much oil is left - and that allows them to calculate how much tax revenue they'll raise from it. Whilst the govt still have that money coming in they can continue to offer incentives like the Feed-in Tarrif so that we won't be left without a sustainable and proven method of obtaining energy when oil does eventually run out (it won't run dry completely, it'll just get more expensive to extract from the deeper or more isolated wells that will need to be sunk, and whatever oil they do get will be reserved for industry/commerce).
With the development of wind farms and solar panels to heat our homes and water and to provide electricity, it is not difficult to see that we have reached a milestone in the way we consume energy and how it is provided.
You'll start to see much more efficient electric cars appearing on the forecourts over the next few years - accompanied by good financial incentives to buy them.
The govt can only pay for that by keeping tax revenues on oil higher now, while there is still enough of it left to make a difference. |
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By (user no longer on site) OP
over a year ago
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"Wishy does all this deep thinking hurt?
Cos you do it all the time, and quite frankly it scares me!
*whistles innocently*"
No, it hurts more to be unaware of why things happen they way they do. I's hate to think I'm merely riding the crest of a wave without any knowledge of what's happening underneath me, or when it's about to crash into the shore.
I like to know when to get off safely.  |
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By (user no longer on site)
over a year ago
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"Wishy does all this deep thinking hurt?
Cos you do it all the time, and quite frankly it scares me!
*whistles innocently*
No, it hurts more to be unaware of why things happen they way they do. I's hate to think I'm merely riding the crest of a wave without any knowledge of what's happening underneath me, or when it's about to crash into the shore.
I like to know when to get off safely. "
Get off safely- dream on! We are all far too far round the merry-go-round for that! |
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By (user no longer on site) OP
over a year ago
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"Get off safely- dream on! We are all far too far round the merry-go-round for that!"
What I meant by that was having a smackering of an idea when the int rates are going to go up etc. If you ask Siren she'll tell you I've pretty much nailed the int rate rise and falls over the past four years. She'll also tell you that she didn't listen to me when we first met when I told her to go for a tracker (we'd be paying a lot less than we're paying now if she had listened to me, but it was her house and her mortgage so she opted for a fixed rate).
Here's a clue to mortage rates:
The govt always raise interest rates in the first two years after winning an election, and then in the run up to the next election they start buying back our votes with nice little interest rate cuts - but, this time around, Mr Cameron cannot afford to do it that way, he has to make budget cuts but he can't afford interest rates to go up as that would kill off any chance of a recovery in the economy. He's running out of time to raise interest rates before he has to go to the polls again in 2015, he has possibly another year to 18mos if he's going to raise int rates and then he has to think about 2015.
On that basis, I predict a small int rate rise next year if we have three consecutive quarters of growth in the economy between now and next Summer, as that will mean we are firmly in recovery and the Treasury would have to raise the base rate so that the economy doesn't grow too fast, as that would affect inflation.
If you can get a fixed or capped deal for 10 years at under 5%, I'd seriously consider it, particularly if you only have 10-12 years left on your mortgage. We won't ever see the old bad days of double figure interest rates as we're much more closely allied to the Euro now, and tbh, we'll be spending the Euro over here within ten years anyway. |
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By (user no longer on site)
over a year ago
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"Get off safely- dream on! We are all far too far round the merry-go-round for that!
What I meant by that was having a smackering of an idea when the int rates are going to go up etc. If you ask Siren she'll tell you I've pretty much nailed the int rate rise and falls over the past four years. She'll also tell you that she didn't listen to me when we first met when I told her to go for a tracker (we'd be paying a lot less than we're paying now if she had listened to me, but it was her house and her mortgage so she opted for a fixed rate).
Here's a clue to mortage rates:
The govt always raise interest rates in the first two years after winning an election, and then in the run up to the next election they start buying back our votes with nice little interest rate cuts - but, this time around, Mr Cameron cannot afford to do it that way, he has to make budget cuts but he can't afford interest rates to go up as that would kill off any chance of a recovery in the economy. He's running out of time to raise interest rates before he has to go to the polls again in 2015, he has possibly another year to 18mos if he's going to raise int rates and then he has to think about 2015.
On that basis, I predict a small int rate rise next year if we have three consecutive quarters of growth in the economy between now and next Summer, as that will mean we are firmly in recovery and the Treasury would have to raise the base rate so that the economy doesn't grow too fast, as that would affect inflation.
If you can get a fixed or capped deal for 10 years at under 5%, I'd seriously consider it, particularly if you only have 10-12 years left on your mortgage. We won't ever see the old bad days of double figure interest rates as we're much more closely allied to the Euro now, and tbh, we'll be spending the Euro over here within ten years anyway. "
I am not being patronising, I have No doubts over your intellect. And if I had a mortgage I would be listening.
Intently xx |
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By (user no longer on site) OP
over a year ago
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"
I am not being patronising, I have No doubts over your intellect. And if I had a mortgage I would be listening.
Intently xx"
You're in the best position of all then because the savings rates go up with the base rate too!  |
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By (user no longer on site)
over a year ago
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Interesting read Wishy but I disagree with most of what you've said here mate.
Firstly interest rates, yes in the past they have at times been used as a political tool, but that's a long time ago.
The decision on interest rates was taken away from the government and given to the monetary commission at the Bank of England for this specific reason, to eradicate monetary policy decisions being made solely for short term political gain.
Decisions are now made based on the underlying strength of the economy, inflation targets etc, NOT timings of general elections.
Probably one of the best things the Labour govt did. |
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