Originally Posted By EighthDwarf Economic theory says that when the price of a good goes up supply will increase. So if the equilibrium price has changed due to a permanent demand increase in demand, a permanent decrease in supply, etc. then the prices will stay high. Prices started going up and then speculators stepped in to take advantage of the bull market. Once supplies increase to meet the increased demand the bubble will burst. Panic feeds the bulls folks. Stay calm.
Originally Posted By Mrs ElderP ^^ What he said. The crazy thing is that this has applied to gas before. At the height of the oil crisis in the early 80s oil got to nearly (an inflation adjusted) $100 a barrel. And, as we all know it did eventually go back down. I clearly remember when I was a little girl and the two litle stations in our little town had a gas war and gas dipped temporarily below a $1 a gallon. I remember it because I remember my mom saying she thought she'd never see gas below a $1 again. We're "only" 5 years into the current price escalation. As I understand it, it takes only 3 years to get a new oil field online. When is the market going to bring down the price of oil? I bet that would help bring down the price of food. (I understand that the price of oil is partly due to speculation, but it's also due to increase in demand worldwide. The market should, however, correct to adjust for the increase in demand. Any time now, that would be fine with me!)
Originally Posted By Mr X I would say that panic feeds the bears, Eighth. Mania feeds the bulls. That and greed. (unless you mean panic in the sense of "I'm in a panic cause I'm not onboard", or something?)
Originally Posted By mrkthompsn Just put sugar back into Coke and Pepsi, and the corn supply will increase again.
Originally Posted By EighthDwarf <<I would say that panic feeds the bears, Eighth.>> That's true in the stock market but not so much in the commodity market. For example, you are suddennly afraid the price of corn is going up so you buy a contract now to purchase x number of bushels a year from now at a certain price. You do this because you are afraid the price is going to continue to soar but your actions ensure the price will continue to soar. And the futures day-traders (aka speculators) are there to sell you the contract, though they have no intention of fulfilling it. When they get caught with their pants down, watch for prices to come back down.
Originally Posted By Mr X That would be the commodities futures markets right? Don't they also have regular commodities markets? What if you are buying today, rather than locking in a contract for some future transaction? The stock market also has a futures trade, of course, and yes I can understand your point on that one (that panic causes the bulls to react). p.s. Funny story about a commodities speculator I read online. He accidentally forgot to unload one of his contracts, so he ended up stuck with pretty much a truckload of wheat.
Originally Posted By EighthDwarf Yeah, you have to be careful with commodities. And the commodities market is a forwards/futures market. When you see prices on a daily basis, those are SPOT prices - averages of the forward/futures contracts that are active. If you are buying today, you are generally not buying on an exchange. Production and delivery are based on the what is arranged beforehand via the forward/futures contracts. The contracts switch hands on an intra-day basis, but the commodities themselves do not. So, like in the stock market, you get trading momentum based on emotion. But the underlying fundamentals are sometimes put aside. Think about it. We are heading into a global slowdown meaning there will be less global consumption. And yet the commodities markets are betting on increased consumption. Food is more expensive right now because the futures trades are making it so - but there is no food shortage yet. It's all demand-driven, not supply-driven. And I am betting the demand will tail-off.
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Originally Posted By DAR I actually agree with the post above. It is a huge mistake that were using one our major food sources for fuel.
Originally Posted By RoadTrip ^^^ I disagree. The U.S. must do what it can to find new sources of energy. I would limit exports long before shutting down ethanol plants. Companies are presently developing ways to make ethanol from corn cobs, stalks and husks; leaving the kernel available for the food supply. In the meantime, ethanol production using the corn kernel helps fund research for future better methods. Geez... farmers FINALLY have a chance to make a decent living farming and everyone dumps on them. Besides... relatively little of the consumer’s cost of food goes to the farmer anyway. See details at the link below: <a href="http://www.extension.iastate.edu/AgDM/articles/hof/HofOct07.html" target="_blank">http://www.extension.iastate.e...t07.html</a>
Originally Posted By EighthDwarf Ethanol production is an abomination. It is hurting the environment much much more than it is helping it. The only people it is helping are the farmers growing it and the politicians that are promoting it. There are many other better ways to produce energy. However, like oil, ethanol production is governed by special interests - it'll be hard to get untangled from its web.
Originally Posted By RoadTrip << But it's driving the price of food up that's not a good thing.>> So? The percentage of income that the average American spends on food is still considerably lower than it was in 1960. High gas prices take a far bigger bite out of a person’s budget than increasing food costs does. <<Ethanol production is an abomination. It is hurting the environment much much more than it is helping it. The only people it is helping are the farmers growing it and the politicians that are promoting it.>> No it is not (show me ANYTHING that says it is). I will agree that it is pretty much a wash... that it doesn't help the environment but doesn't harm it any more than oil production does. But being green really has nothing to do with ethanol production. It has to do with freeing ourselves from dependence on foreign oil.
Originally Posted By RoadTrip <<Then why don't we look into hydrogen instead.>> Well, hydrogen isn't the be-all, end-all from the Green perspective. What it the by product of a hydrogen engine? Yup. Water vapor. What is currently the most prevalent greenhouse gas? Water vapor. There is a down side to EVERY energy source.
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Originally Posted By plpeters70 From Wikipedia: <<Water vapor is a naturally occurring greenhouse gas and accounts for the largest percentage of the greenhouse effect, between 36% and 66%.[21] Water vapor concentrations fluctuate regionally, but human activity does not directly affect water vapor concentrations except at local scales (for example, near irrigated fields). The Clausius-Clapeyron relation establishes that warmer air can hold more water vapor per unit volume. Current state-of-the-art climate models predict that increasing water vapor concentrations in warmer air will amplify the greenhouse effect created by anthropogenic greenhouse gases while maintaining nearly constant relative humidity. Thus water vapor acts as a positive feedback to the forcing provided by greenhouse gases such as CO2.>> So, in simple terms, the heating caused by the increase in CO2 will allow water vapor to build up in the atmosphere - causing further heating. The CO2 buildup is the root cause.
Originally Posted By plpeters70 "Just another program the left have brought us that in the end is a total disaster" The Left? Last time I checked, Bush was pushing hard for more home-grown ethanol.
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Originally Posted By SuperDry <<< Then why don't we look into hydrogen instead. >>> Hydrogen really isn't an energy source - it's a means of storing and delivering energy. It's not a whole lot different than a battery in an electric car in that regard: although the car itself doesn't pollute, there needs to be something elsewhere that generates (or harvests) the hydrogen, and that takes energy from another source.
