High gas prices leading the way to independence from OPEC and crude oil?

As I watch tonight’s Presidential Debate, I can’t help but think back to a story I posted on The Digital Bullpen back in April. Think you know everything about natural gas, coal and alternative energy options? Be informed…

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On March 9, after 39 days of increases, the national average price of gasoline was $3.758 per gallon. Sixteen days later, it was $3.894 and climbing. Today, it teeters near $4.

Is it possible rising gas prices could actually be a good thing?

“What’s good about high gasoline prices is it sets in motion the market forces that will cause gasoline prices to fall,” said Christopher Thomas, an associate professor in the College of Business Administration who holds a doctorate in economics. “When it goes up, two valuable things happen: consumers will buy less gasoline and some of them; will make permanent changes in their consumption behavior. They will get rid of their gas-guzzling cars and switch to more gasoline efficient cars.”

Thomas said this will not just help today, but in the future in reducing the demand for gasoline, which creates a downward pressure on future prices.

And that’s just on the demand side of things.

“Producers, when they see higher gasoline prices, they want to add to their capacity to produce gasoline,” he said. “So rising prices cause both an increase in supply and a decrease in demand. That’s a good thing.”

Another good thing, Thomas said, is that rising prices of gasoline will force us from fossil fuels to alternative fuels, such as natural gas.

In fact, in March 2012, GM and Chrysler announced they will soon sell trucks that run on both natural gas and gasoline. Thomas said this wouldn’t be happening without the rising prices of gasoline and the falling prices of natural gas.

Thomas said the benefits to natural gas are that it is cleaner than the dirty coal that is used now, and is very abundant and cheap.

“We have a 100 to 200 year domestic supply,” he said. “All the natural gas we’ll ever burn, we don’t have to buy one bit of it from foreigners. Domestically produced, it is very cheap.”

Thomas said the gasoline equivalent is 75 cents to $1 a gallon. The reason we have not been accessing it already is the technology is just now being discovered and implemented.

“It’s going to change the nature of our energy markets substantially within the next few years,” he said. “We’ll be much less dependent on OPEC (Organization of the Petroleum Exporting Countries) and much less dependent, I might add, on dirty coal.”

Thomas said when oil companies drill for crude oil they also find natural gas.

“As we say in economics, the marginal cost is zero,” he said. “The cost of taking the natural gas out is a big fat zero, so even if the price is low, it’s still above the cost.”

Thomas said it is also necessary to consider the potential of natural gas because of the ongoing tensions in the Middle East and the price of crude oil going up.

“You still need crude oil for some things,” he said. “But natural gas can replace crude oil for many things, and in time, and this is where the complexity comes in, the ability to substitute natural gas for crude oil grows increasingly easy to do. Two years from now this will be commonplace.”

Check out a recent story I did on a USF student who will soon embark on his first mission trip!

JOU 2100 Reporting

It’s a hot and sticky afternoon at USF’s Bull Market. David Guetta’s “Turn Me On” plays on loudly, while table representatives eagerly tout their goods and services. Farther down the line, two young men wearing white, button-down shirts, ties and dark slacks stand on the sidewalk, smiling at passers-by. Their nametags reveal they are elders of The Church of Jesus Christ of Latter-day Saints who are serving their mission in Florida.

The display table is for the USF Latter Day Saints Student Association and is covered with religious literature. Copies of The Book of Mormon, For the Strength of Youth – Fulfilling Our Duty to God and The Restoration of the Gospel of Jesus Christ are ready for distribution.

Behind the table sits a young man wearing a black T-shirt and khaki shorts, and although he may not be dressed the part, he, too, will soon begin a mission…

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Status update: Understanding Facebook’s IPO

Image courtesy of: http://www.opinno.com/

Last week Facebook announced an IPO valued at $5 billion, a record for Internet companies.

But what does it all mean?

Firstly, an IPO stands for Initial Public Offering. It essentially means Facebook is changing its profile from private to public and allowing the public to buy stock in the company and own a piece of the pie.

“When going public you need to produce profits,” said Mikael Bergbrant, Ph.D. candidate in the department of finance in the College of Business. “When you’re a private company, many times you can leave out the possibility of future profits. But once the stockholders start having an input, then they usually want to see the bottom line really start increasing.”

Bergbrant said the impact this will have on the individual user relies on the stockholders.

One benefit of these new developments is the release of Facebook’s once private financial information.

Facebook is said to hold a value between $75 and $100 billion and it generated $3.71 billion in revenue in 2011.

It may surprise you that Zynga (the company responsible for your growing addiction to Words with Friends and all of the games that end in ‘Ville’) made up 12 percent of that 2011 revenue.

So how does all of this affect the 845 million monthly active users?

“If you have new money, you can introduce new applications, new programs,” said Erdem Ucar, who is also a Ph.D. candidate in the College of Business. “There are good things and bad things, but basically they go public because they need to raise funds.”

In the short term, the site will most likely not see many changes. Facebook might implement new site tactics when there is pressure to keep the shareholders happy. They could develop new ways of advertising, like making money off of private user data.

It will certainly be interesting to see how this affects Mark Zuckerberg, who will now make one dollar every year, and whether he will give up his position as CEO.

(Also posted on The Digital Bullpen – the news site of the USF School of Mass Communications)