ALT-1 Are high fuel prices necessary? – No
Every nation is dependant on fuel and as a result the price paid for the fuel is relatively price inelastic. This means that the fuel price is irrelevant and nations and companies will have to supply the fuel regardless of the price whether it be at $120 a barrel or $200.
The fuel prices are not necessary for a number of other reasons.
Firstly I beleive that governments are using high fuel prices as a tax revenue fund raising example. In Great Britain, the company British Gas has its own pipelines running from Russia to the North Sea in England. The example I am trying to make is based upon British Gas having its own fuel and what they have done is sell the fuel on a wholesale basis to Russia who in turn re sell the fuel back to the National Grid and indeed you guessed it British Gas themselves at highly inflated prices. So in price and product control Russia is certainly having a laugh at Britain and other European countries expense. So take for example a supply of fuel that is able to power up homes and provide gas and energy the controlling nations of fuel do seem to take advantage of this and as a result of the Russian nation control over this resource the price ends up at a domestic homeowners front doorstep much higher consistently.
On the trading that takes place in America and on commodity markets throughout the investors or more importantly the market makers seem to take a bullish reactionary view to any source of news information regarding the supply of fuel including oil and in any deals signed amongst nations. Wars also seem to be over played in determining the price of fuel. The Iraq and Afghanistan conflict is more example of the forever increasing price of fuel.
In inflationary terms since the records set in 1974 in real terms the increase in fuel is not that great a deal to suggest that higher fuel prices are important. Certainly the higher price will put more and more people and businesses under financial pressures in increasing the cost of living and cost of doing business. Though in counteracting the increases in fuel prices there will come a point where the fuel is reduced in demand. Governments have been good at controlling the supply of fuel and have given utility companies free reign in setting the prices for fuel. Their might come a day where people are able to grown and use their own fuel using kerosene and white spirit in making bio diesel.
I also feel that whilst high fuel prices also increase air ticket prices, then any increase in price can be seen by the individual and choices can be made. People can take a year or two or longer without having to travel abroad on vacation. Or during the winter alternative methods of saving fuel can counteract the high price set as to give the utility companies something to think about.
The only beneficiary of high fuel prices are the utility companies and the governments who collect the tax raised from not just the spike increase in price but from a great proportion of the whole retail transaction price paid by consumers.
