But, what I have read leads me to think that there are investments in alternatives that are profitable if you know that oil is going to be at least $50-$60 a barrel which might not be profitable if you don't know that.
And the fact that folks are now adjusting to $100 a barrel suggests that they could tolerate $50 a barrel. Especially if that floor were set now when the price is much higher.
Also, couldn't it be argued that what hurts people is not just the level, but also the volatility. The price is $25, and people make decisions based on that, like what job to take and where to live and what kind of car to buy, and then they get hit with the price spike, and it's hard to adjust. Wouldn't they be better off if there were an explicit policy to tamp down the price swings? There are "dirty floats" for currency prices, why not for oil? And couldn't it be argued that raising the floor might lower the peak? Because if you make substitutes more profitable and therefore more available, that should act as a brake on price rises.
Also, putting a floor under the price could make some oil exploration and refining investments less risky. That's not a green argument, but it is potentially a lower the price peak argument.
> ---------- Forwarded message ----------
> From: Doug Henwood <dhenwood at panix.com>
> To: lbo-talk at lbo-talk.org
> Date: Thu, 12 Jun 2008 10:47:56 -0400
> Subject: Re: [lbo-talk] how about a floor under gas prices?
>
> On Jun 12, 2008, at 10:05 AM, Robert Naiman wrote:
>
>> suppose the government were to announce today: from now until forever, a
>> gallon of gas will never sell in the united states for less than two
>> dollars, and a barrel of oil will never sell for less than fifty dollars, in
>> 2008 dollars. if the market price falls below that, we will push it up
>> through taxation and stockpiling.
>
>
> Two points. I doubt $2 gas would change American behavior much. $4, yes. Not $2.
>
> And what dictator is going to mandate this? I can't imagine anyone ever facing re-election would vote for such a policy.
>
> Doug