Should the price of fuel in Australia at this point be so high?
First price isn't artificially maintained at a level. When a refining company signs a contract to buy crude from a supplier, it promises to buy at a certain price with options for increase and decrease due to the fluctuating prices in the market. And it buys crude to build up a certain buffer to supply itself for a certain duration, in case of supply problems. As it had bought oil at a higher price, it would be reluctant to lower the prices even if the current crude it buys is at a lower cost. If it buys oil from the open market, it has no other option than to pass on the hike on to the consumers, so a more intense fluctuation in the prices of oil at the point, where you buy it. Some airlines used hedging to take care of the spurts in the price of oil, to mantian their operating margins.  And moreover refining and distribution is a very low margin business, so the company has an incentive to sell at a higher cost if required. Fuel prices are regulated in most countires. The way its regulated differs. Essentially the idea is once the retail prices are up, they are normally kept that level so that a buffer profit is built, now if the fuel prices increase beyond the retail price can still be kept same using the buffer built up. (disclaimer: I don't answer specifically about Australia) As long as people don't question car usage and urban sprawl, and thus are willing to pay a premium for being stuck in traffic jams every working day, I don't see any reason why fuel producers wouldn't increase their prices. Given increasing demand from China and other rapidly growing countries, given state of remaining world resources, I think that fuel is a bargain nowadays.
I agree with the article, but one thing I wonder about: how much is driving suppressed because of the relative high price of gasoline and the relative lack of fuel efficiency in cars? In other words, are we going to put more cars on the road and drive on average more km per yr per if we have a sort of quantum leap in fuel efficiency? Not necessarily a bad thing, but perhaps something that makes achieving foreign oil independence a bit harder than we might think. "This highly editorialized headline makes no sense and suggests that the OP did not read and/or understand the article at all.  &gt;*""The decision is probably driven by Qatar’s worries over losing market share to emerging competitors like the United States, whose shale gas industry has been growing fast, and Australia. An increase in the emirate’s exports could discourage investment by would-be rivals.""*  How does anything in this piece suggest a quid pro quo deal when on the surface, the strategy is meant only to harm global LNG prices and therefore US producers?" "If any intelligent person can answer the title of your article with one word (in this case, ""no""), then you are writing a puff opinion piece. In this case, one obviously sponsored by one of Tesla's many, many detractors in the fossil fuel industry trying to find reasons why we shouldn't save the world by banning over-priced fossil fuels." I'm not sure, but if it does fall below $70, I don't think the chances of the US emerging as an energy superpower will fall. Nat gas has had low prices (and as a corollary, low prices), for the past couple of years. If Brent really does fall below $70/bbl, then I would assume that natural gas production and efforts would serve as a substitute, and with that, use of the energy source would become more common.  But then again, I don't know shit. "I'd like to see a credible source for ""the highest"", but it's certainly fairly high. Household debt could be broadly categorized as debt for housing and debt for consumption. Housing prices seem very high compared to equivalent rental income.  This is generating a great deal of debt.  Keynes(?) said that ""if something cannot go on forever, it will stop.""  Just when it will stop, and whether it will stop suddenly or gradually is a matter of great interest.  Obviously there are huge vested interests, including the large fraction of the population who already own property and do not wish to see it fall.  Nobody really knows; my guess would be on a very-long-term plateau in nominal prices and decline in real prices. The Australian stock market is unlike the US: since it's a small country, a lot of the big companies are export-driven, either by directly exporting physical goods (miners, agriculture) or by FDI (property trusts, banks).  So a local recession will hurt the stock market, but not across the board.  A decline in the value of the Australian dollar would be very good news for some of these companies. Debt for consumption I think is the smaller fraction.  Arguably it's driven by a wealth effect of Australia having had a reasonably good crisis with low unemployment and increasing international purchasing power.  If this tops out, you'd expect to see reduced earnings for consumer discretionary companies." Summarized article: Recent mishaps causing supply disruptions at 14 California refineries caused wholesale gas prices to reach an all-time high of $4.39 per gallon.   Local gas stations increased prices to 30 cents or more per gallon overnight, with some stations charging as much as $5.79 per gallon.   Some stations chose not to buy high-priced wholesale gas for fear they wouldn't be able to sell it. While others shut off their pumps after they ran out of the gas they bought at lower wholesale prices.  Some of the refinery mishaps include an oil pipeline problem, a power outage at Exxon Mobil Corp's Torrance refinery and a shutdown of the crude distillation unit at Chevron Corp's Richmond refinery.   It is unknown when wholesale prices will come down but one solution may be to allow refineries to switch over from the summer blend to the cheaper winter blend earlier than planned.    The California Energy Commission is considering the idea but notes an early switch over could impact air quality. The summer blend reduces evaporation of pollutants during warm weather which would be less damaging to air quality in California's current heat wave.  * For more summarized news, subscribe to the [/r/SkimThat](http://www.reddit.com/r/SkimThat) subreddit It seems to me that oil will never again reach or exceed $100 a barrel.  The rate at which we are abandoning fossil fuels means we will never ever run out of the stuff. Demand will continue to decrease, and electric cars will be the first cars that are owned by the people in emerging markets in the next decade.  And in a decade from now, 90% of all new cars will be purely electric.  Beyond that, Fusion research on multiple fronts (but not ITER -  that will never ever produce a plan for a viable power station) points to total destruction of coal and gas as a fuel for power stations. And when they come online, you don't even need to build new power stations! All you do is build banks of reactors in the car park, hook up the steam pipes to the new reactors, and then bulldoze the old furnaces. Job done. "So I'm in Australia and we have our very own housing price/credit bubble right now (which is finally deflating) and I'll try explain it as I understand. I welcome anyone to chime in and correct me.  The problem we faced (still face to a large degree) is the idea of rising asset prices and how this fuels a feedback loop into increasing personal debt, all based on the false assumption that house prices always go up. Now before I continue, house prices *do* always go up in the long run, but so does the cost of everything and we call that inflation, adjusting for this effect usually reveals that house prices are cyclical in the long term and never really 'grow'. So that aside we in Australia recently saw a long period of increasing house prices (as did the USA and Europe, and more recently China), the thing about house price is it is your 'equity', I'll try and explain: (all figures are made up to provide a simple example) if you borrow $200,000 to buy a house that costs $250,000 you owe the bank 80% of the equity (what your home is 'worth', and notionally this is value that you own) in your home and the bank will be happy, remembering that they make money on your interest payments, not your principal repayments. If your house then increases in value to $300,000 but you still owe $200,000 then you now owe only 66% of your equity. The bank sees you as a lower risk and encourages you to borrow more to get back up to that sweet spot they had before of 80% - this is a nice tradeoff between risk and reward for the bank. You, the consumer, have just been mailed a new credit card with a 50k limit (hypothetical) and theres a new iMac being released next week, and you really did want to trade in your 5yr old car (see where this is going yet?). Not only is this type of spending given a mighty boost but consumers feel like this house thing has done them very well and suddenly they have the ability to borrow lots more money, why not get a second house and do it all over again? The added demand for investment housing drives prices, throw in some generous government incentives (here and in the USA) and demand is pushed hard, prices grow more and the whole thing feeds back into itself. People feel richer, spend more from their credit cards, buy another house, etc.  But what happens if your house 'value' then drops to $240k? The bank now sees you as a high risk, so do the bank's investors, you have negative equity, the bank demands the difference paid back to it or it might take your home. Somehow, nobody believed this would happen.  Hopefully you start to see the picture? In Australia we are now facing a slow melt in housing prices which has not yet hurt en masse but it has dried up the credit cards, retails spending has collapsed and everyone is worried about the future.  Now to realise where the USA got to you have to also understand that banks were not merely asking for a maximum of 80% owed on the asset, many of them let this figure go to 100%, since hey prices always go up, right? They then in some cases went further and neglected to look into your income and confirm you could even *repay* your loan. Sounds dodgey? This is just the setup.  Remember I mentioned the bank's investors? Well banks/smart people basically figured out a clever way of 'dealing with' the risk of a few outliers with bad financial situations by collecting large numbers of home loans into a single entity and selling it on. Loans were graded according to risk and I believe they were even cut up into smaller pieces (10% of your high risk loan assigned to 10 different 'debt objects' with different risk profiles). These 'collateralised debt obligations' were traded from one bank/investment firm to another with everyone happily accepting the risk profiles until eventually nobody knew what risk was where. Think about it like ""I'll throw 10 high risk loans, 50 medium risk loans and 40 low risk loans into a pot, stir it up and sell the soup as 'pretty safe' "". This all seemed like a very good idea until it gradually became clear just how much of these loans were in the 'extremely stupid high risk' category. This is probably extremely confusing by now, but thats the point, investors could no longer judge how risky an investment in a bank or financial institute was, the market did not correct for any of this until it was all too late.  The moral of the story is when people tell you an investment is guaranteed to make you money, you stay away from that investment. And to specifically answer your question you can't solely blame government incentives as you might be able to see, but they play a part in a giant orchestra, there are many factors that drive this sort of stupidity, stupidity being the primary one." Australia has a massive housing bubble (one of the last in the world to pop), no productivity growth (lots of investment in mining which hasn't yet payed off, though we'll do well if commodities pick up), and relies on China and India buying lots of coal and steel at historically high prices. "This is the best tl;dr I could make, [original](http://www.news.com.au/finance/economy/australian-economy/issuing-new-loans-against-unrealised-capital-gains-has-created-an-australian-house-of-cards/news-story/853e540ce0a8ed95d5881a730b6ed2c9) reduced by 87%. (I'm a bot) ***** &gt; THE Australian mortgage market has &amp;quot;Ballooned&amp;quot; due to banks issuing new loans against unrealised capital gains of existing investment properties, creating a $1.7 trillion &amp;quot;House of cards&amp;quot;, a new report warns.  &gt; The report describes the system as a &amp;quot;Classic mortgage Ponzi finance model&amp;quot;, with newly purchased properties often generating net rental income losses, adversely impacting upon cash flows.  &gt; Melbourne&amp;#039;s median house price has risen by 12.7 per cent over the past year to $695,500, with Brisbane up 3 per cent to $488,757, Adelaide 5.2 per cent to $430,109, Hobart 13.6 per cent to $383,438 and Canberra 12.9 per cent to $575,173.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6z9ea1/issuing_new_loans_against_unrealised_capital/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~207582 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **property**^#1 **per**^#2 **cent**^#3 **report**^#4 **market**^#5" &gt;Your exports are greater than your imports (at least relative to the US). This is going to have a significantly inflationary impact on your economy.  I did consider this, but I frankly don't understand. Exactly how and why does a strong economy mean higher prices?   Also, I presumed the reverse of your second point: that our minimum wage is 2x higher than America's because it would be totally and utterly impossible to live in this country on the American minimum wage High-paying salary countries have higher cost of living and Japan tops the list (unless you want to live like a monk inside the creepy confines of Japan's suicide forest called Aokigahara).  This infograph will make you think hard.  Do you wanna stay-put and eat 350 pesos/kilo of large pink shrimps or do you wanna go and see the world, maybe live in Australia and have the same shrimps for lunch enjoying the breathtaking views of Sydney Harbour for twice the price? You can’t say low buildings are popular if constructing tall ones is illegal, it doesn’t make sense.  Unless you’re a civil engineer, you’re not qualified to speak on whether or not it would be a good idea to build taller buildings in NZ.  If supply is artificially restricted, prices will rise. That’s econ 101. It’s the same reason prices are out of control in San Francisco. I kept hearing during the BP crisis and other times when gas was over $4 a gallon that a large part of it was due to the US's constraints on refineries, which, for for various reasons including NIMBYism and environmental concerns, have resulted in the last new refinery in the US being built over 30 years ago. "Answering a more general question:  are financial services firms worth the money?  It really depends on the person.  Some can contribute regularly to index funds, and do the asset allocation on their own.  They are comfortable buying and selling various funds and there is really not that much management to do a Bogle like ""3 fund portfolio"".  All that is needed is an occasional re-balance.  This person probably does not need a firm like UBS or many of the others out there. Some do some active picking of funds and stocks, and also some indexing.  Again they are comfortable in doing the right thing and probably don't need a manager. There are others, however, that need a manager.  A friend of mine pulled all of his money out of the market when Trump was elected.  He missed out on some nice growth.  The extra percentage point that he paid to have an adviser would have been well worth it. For people who get spooked easily by the market and need things explained over and over, an advisory service is great.  My mom falls in that category.  I thank God every day for her service as she would otherwise call me with the same investment questions every other quarter."