Posted on 09/01/2005 4:22:37 AM PDT by chronic_loser
Rod? By the way, I used to make a marked in wheat options on the KCBOT. Traded futures professionally (I was a local, not a wire house employee or broker) for about 3 years. I am always looking for someone to teach me some more about it, but I have a sneaking suspicion you ain't the one to do it. If so, please try and explain what a reverse crack spread is. Othewise, go back to your corner and I will call you when I need someone to slap again.
Funny that the gas lines disappeared until 1979 throughout that time in a "rigged" market.
The fact that the fed has intruded itself and disrupted markets is NOT an argument for them to do it more.
No, but but it does show that this free market so many on this thread are touting is really a myth, and has been for quite some time. It may exist in hammers, and DVD's, and bottled water, but not in oil. Many here including you seem to feel that the market will take care of everything, and it doesn't always, especially in times of crisis. I merely showed that the government has intruded many times to salvage the economy and our economic model, not to justify it.
That is like justifying shooting my kids because I already killed my wife!
Great analogy! It has left me speechless.
No one I know of is arguing that this is a temporary failure of a free market. Rather, it is the result of 15 years of artificially tamping down supply (no new refineries, refusing to permit drilling, no new nuke plants, boutique blends of gas for different sections of the country) and expecting the price to remain constant
Not arguing that. It merely points out that the energy market does not fit your economic model of supply and demand sometimes, especially in times of crisis. I was pointing out earlier that this particular market is highly regulated already, (eg: FERC), not to justify it, but to remind people of it's existence. Nor am I questioning the rising prices. We were discussing short term price gouging at the retail level, not the general price environment of the energy industry.
can only be considered even partially true if you start with the position that a portion of a business revenue stream "belongs" to the fed and they "subsidize" you by graciously allowing you to keep it.
Not at all. Subsidies exist in agriculture as well as energy. Oil companies drill both onshore and offshore (on government land) with numerous credits both to their royalty and tax obligations. That's a fact of life. You seem to approve of that, though I'm not sure how that fits into the market model.
Again, NO ONE here thinks oil is the "perfect free market." I have no idea where you came up with that.
The many posts comparing oil with highly elastic commodities. But in your recognition that it is not a normal commodity and not in a perfect free market, do you then recognize that some governmental oversight may be due?
What we are aguing for is LESS of what made the patient sich in the first place. Proponents of gov. regulation are saying "maybe a little MORE poison will work!"
Yes, government controls, especially in the long run, produce shortages. But the problems we saw in the last couple of days had nothing to do with the government. It is likely that these anomalies will sort themselves out quickly. But if they don't and we face shortages of oil and ultimately gasoline, you may see some allocation and possibly pricing controls for a period of time until stability is achieved.
Your arguments re: public utilities is silly. These never claimed to be market participants
Perhaps not, but they demonstrate that there are providers of energy that simply cannot participate in the free market system, which was my purpose. Once that is understood, then is is fair to ask what parts of the energy industry can participate effectively without some controls.
I don't have time for silly stuff like that.
My apologies for taking up your valuable time.
Nor do I have time for someone who doesn't see the difference between the 2000+ suppliers of crude I saw in Tulsa OK alone, feeding into the different refineries, purchased by the big oil guys or the independent stations, and a municipal water supplier.
I'm afraid I don't see the point. Surely you're not suggesting that the oil industry is anything but an oligopoly? The majors ate up the independents in the 80s like so much lo mein.
I will just have to let you figure that out on your own, or continue to attack a straw man. Your choice.
I don't recollect attacking anyone or anything. I merely pointed out three things: that much of what people on this thread think of the 1970's controls is wrong, that the oil industry does not fit the economic model many on this thread thinks it does, and that the government has responsibility to prevent chaos and anarchy, which at times may include interference in markets.
Whoops! My error. Sorry. Thought you were talking to me. Mea culpa and all that. You can slap ME if you like.
No, an oligopoly can manipulate supply, but it still cannot bypass the law of demand. Your comment regarding price elasticity of demand has some validity, but even highly price inelastic products like oil still must abide by the law of demand.
The bottled water comparison, which you considered ludicrous, is still a valid illustration of how price controls create shortages and still result in higher prices (just on the black market)
Finally, let me address your initial statement about "overlooked points" and your assertion that you "haven't heard any gnashing of teeth over" the examples of excess regulations, subsidies, price controls, etc. that you cited. You haven't seen those addressed on this THREAD because they are not germane to the thread. If you haven't heard discussions of those topics on this forum, on the other hand, you haven't been paying attention. The fact that our economy already features excessive regulation and market interference from government is hardly a reason to make it worse with more interference.
Price controls fail everytime they are implemented, but still their advocates insist that this time we'll get it right.
Thanks for the well reasoned post.
I think our differences (I can't speak for the residents of the thread) boil down to whether it is appropriate to "regulate" short term profiteers in a not-so-free market.
My contention is that free market forces are ALWAYS ALWAYS ALWAYS the preferable form of corrective action. (do you see me pretending to be Nikita Kruschev pounding my shoe on the "ALWAYS"?). It is because I believe in Acton's axiom. I distrust centralized power, and regulatory power by definition cedes freedom to gov't. That said, I realize you can't get everything you want. A purist who says "all or nothing" will get nothing every time.
Laissez Faire.
With a commodity like oil, when supply is manipulated, demand becomes far more intense that normally. Topping off is one way of increasing demand, which resulted from manipulated or naturally decreased supply.
The bottled water comparison, which you considered ludicrous, is still a valid illustration of how price controls create shortages and still result in higher prices (just on the black market)
It may be valid as a classroom exercise, but has absolutely nothing to do with a commodity that is the cornerstone of our economy and security.
You haven't seen those addressed on this THREAD because they are not germane to the thread
I was attempting to show that the free market environment that people were so energetically trying to protect on this thread simply doesn't exist.
The fact that our economy already features excessive regulation and market interference from government is hardly a reason to make it worse with more interference.
Nor am I suggesting that such interference take place now. I am suggesting that if there are prolonged shortages either regionally or nationally, that the government will likely consider both allocation and pricing controls for a period of time. What is clear to most I would think is that in this market, consumers and producers are not equally situated. Shortages and excessive prices can and will produce lawlessness, and that, the government has a responsibility to stop.
Price controls fail everytime they are implemented, but still their advocates insist that this time we'll get it right.
They have had some short term successes, but in general, they do fail. Nonetheless, in industries such a energy, where price controls over the transmission of electricity and the movement of oil still exist, little harm has been done.
Ditto for socialism, but then price controls are a subset of it.
The 64 thousand dollar question. For short term profiteers, probably not. I think it's only where there is a legitimate long term supply shortage that it becomes problematic. In that case, the government will likely have to initiate allocation regulations, but without some contol on price, would have little effect. For example, the government can decree that Charlotte airport get x gallons of jet fuel, but if the price rises to $5 a gallon, while the price is 1.50 a gallon in Atlanta the airport will just shut down. So if one is implemented, the other would likely follow. But for perceived short term shortages, no. The government has responsibility for the integrity of our transportation system, and to curtail civil unrest.
My contention is that free market forces are ALWAYS ALWAYS ALWAYS the preferable form of corrective action.
Agreed, the preferable, but in some instances, not the only.
That said, I realize you can't get everything you want. A purist who says "all or nothing" will get nothing every time.
Agreed. It might be characterized as pragmatism. Take care.
Boy, that is really stretching it to say there is a stewardly duty to "boost the price" and "skimp on the measure" when the market bears it.
Then God shouldn't have sent the hurricane into the Gulf Coast.
Prices are simply a measure of relative worth when comparing goods, and work to adjust supply/demand when allowed to work.
Commies don't want them to work. Your God sounds like a commie.
It is dangerous indeed to ignore the God who made the money and the goods. If He rubbed right along with materialism, how would you tell the difference between the behavior of one who believed in a heavenly future and one who only believed in an earthly now?
I must have missed The Book of Economics in my bible.
I sure hope you keep your nose in your books and stay out of the way of level-headed people who have to rebuild a society.
A caution.
A model where the station owner invests in a tank of gas, sells it at a fixed profit, invests in another, sells it the same way, etc. will work OK (if not maximally profit) for the station owner while the price stays steady or keeps rising. If the price falls, however, he loses his shirt since he won't be able to sell his gas at all -- his competitors on a different model will undercut him. So he has to allow for that possibility in rising or steady markets so he can cover the possible loss in falling markets. A game with no clear answer.
As for the folks who say well, the whip of high prices is what the consumer always needs, I find that a little TOO cozy with materialism. It's like the patriot who, having gotten a traffic ticket, throws a party because the system works.
If all you build is a society but ignore a set of souls, you are to be pitied indeed.
Characterizing my argument as including "skimp on the measure" is also stretching it. Perhaps I missed it hidden in the penumbras of what I actually said, but I'm pretty sure there wasn't anything in my post to suggest "skimping on the measure". But if you are positing selling off one's entire inventory at substantially below market prices to be "good stewardship" I suppose that could come down to one's reasons for doing so. I doubt that the servant who doubled his master's five talents did so by using such strategies. In fact, he probably would have ended up with less than the servant who hid his one talent in the ground. (I'm sure you remember how that worked out for him).
You are mixing metaphors.
You are mixing a piece of a metaphor with a piece of a literal action. No can do.
I don't follow you. You said my suggestion of a "stewardly duty" to "boost prices" and "skimp on the measure" was a stretch. I responded by pointing out that I said nothing about "skimping on the measure" (as I am well aware that the Scriptures are very clear about using honest measures).
I inferred from your post that you were suggesting that someone "boosting prices" simply because "the market bears it" is NOT acting in good stewardship. I responded to this implication by suggesting that one who left prices substantially below market prices would not achieve the kind of return on investment that was achieved by the commended steward in the parable of the ten talents. If you want to call that mixed metaphors, I suppose that is fine. However, that does not negate the fact that you attributed to my post a fallacious point that was not included in it. Nor does it address the validity of the point I raised regarding stewardship over one's investments.
We were talking about hotel rooms. There are a limited number of hotel rooms in the affected areas. That number doesn't change. It won't increase over time.
Allowing companies to negotiate with their cities, counties, and districts to set their emergency rates in case of an emergency gives emergency planners and people planning to evacuate a better idea of what they'll be able to afford. It is possible the lower set rates might even encourage people to evacuate out of affected areas. Nothing dictates that the emergency rates have to be lower than non-emergency rates. Just that once a state of emergency is declared their rates convert to emergency rates for the duration of the emergency. I don't think anybody is going to be building hotels to take advantage of the emergency market in the short time that the emergency is in effect, so allowing market prices to prevail at that time would not end up in a rush of people to the area to build hotels.
The point during an emergency is to save lives and prevent lives that can be saved from being lost. And as for other goods deemed necessary, I didn't comment on them. Having lived through a major hurricane that destroyed our house around us. I may have only been a kid, but I still remember what it was like having to flee the house. I remember living in a tent FEMA provided, and sleeping on a cot. Food was cooked on a portable gas stove. All around us were surrounded by the debris of the house. Access to the bank was limited. I'm not even sure if they were open.
I'm not sure if you've ever had to live through a major disaster, but if you haven't, I suggest you do. Market principles in the middle of a disaster area do not necessarily help in the delivery of goods.
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