New oil pricing scheme proposed

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posted on Jun, 14 2012 @ 09:40 PM
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VANCOUVER, CANADA -- Francis Jones remembers a time when oil was 30 cents a litre. "It was only ten years ago that for under 25 dollars I could completely fill up my minivan at the local Superstore." Nowadays the price of oil hovers around 140 cents a litre, almost five times the price ten years ago. Nonetheless, life must go on as usual for the daily commuters of Greater Vancouver despite this blow to their wallets. A combination of factors contributed to this price explosion, including the BC carbon tax, instability in the Middle East, worldwide inflation, and dwindling supply. The general sentiment among civilians is that prices will continue to rise, and at a faster rate.

To quell the fears of the public, University of British Columbia Economics professor Roger Bateman proposes a new pricing scheme for oil. "Instead of using absolute numbers, we are using a logarithmic scale, in the vein of the decibel scale for loudness and the Richter scale for earthquakes. Using this new scale, the marked price indicates an exponent: instead of paying for the marked price, you pay e to the power of the marked price.

"We believe this will reduce panic among the public because changes in marked price will not be as drastic. For example, if the actual oil price doubles, then the marked price only increases by 0.69, the natural logarithm of 2. Since calculating the actual price requires complicated arithmetic, obscuring the actual price also serves to hide the very information people do not want to see." Applying this to the price of oil in Vancouver, 30 is e to the power of 3.40, and 140 is e to the power of 4.94. Had Francis Jones seen instead a gradual change from 3.40 to 4.94 over a period of 10 years, he may have reacted differently.

Shout-out to Gateman.
edit on 14-6-2012 by Tadeusz because: (no reason given)






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