Friday, May 23, 2008


High Oil Prices: Analysis, Thoughts and Ideas
  • Any price > $100 a barrel is a high price
  • Price was $131.28 at press time. An updated price can be found here.
  • High prices encourage people to conserve
  • Drive less
  • Less leisure driving
  • Combine trips. Wal-Mart and Target may be winners from this consumer behavior
  • Consumers may walk or bike more. It has been overheard that bicycle sales are up so far this year.
  • More exercise leads to better fitness
  • Resource productivity increases
  • People have an incentive to maximize output when input costs are increasing
  • This may create cost differentiation among producers. Those who effectively increase resource productivity make more profits per dollar of sales.
  • Alternative strategies become relevant. When gas was $1.509 people kept buying trucks and SUV's because the cost per mile was so low as to not matter. Now that Gas is >$4.009 in some location people want alternatives.
  • Toyota utilizes hybrid technology that provides excellent fuel economy
  • Honda is well know for efficient and reliable engines.
  • GM has a vehicle called the Chevy Volt. This vehicle will be capable of 40 mile round trips WITHOUT using a drop of fuel. When not in use this vehicle is plugged into the wall. This is the future. This vehicle is the most exciting vehicle from the General in decades [pick your favorite car introduction].
  • As this technology proves itself, reliance on fuel will be lessened. Consumers driving patterns will change to take advantage of the strengths of plug in cars etc.
  • Power firms and suppliers may be the big winners from high oil prices.
  • Plus the firms that patent effective battery technologies

What are your thoughts and idea on oil prices as well as the costs and benefits?

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