Posted on 06/01/2007 8:05:41 AM PDT by george76
Few politicians can resist the urge to exploit consumer angst over gasoline prices, and thereby deflect where the blame certainly lies — with them.
Here are 10 things the politicians won’t tell you:
1. At over $3.00 a gallon, the U.S. inflation-adjusted price for gasoline in May 2007 is now less than it was in 1981, a remarkable decrease in price over a 25 year period during which real prices in other sectors, such as health and education have tripled and quadrupled.
2. This decline in the price of gasoline since 1981 is enjoyed almost exclusively in the U.S. In most other developed counties in the world, the price of gas is at least double what Americans pay. Consumers in the Netherlands now pay an average of $7.77 gallon, while those in Great Britain pay over $7 and consider it a bargain.
3. The gross profit margins of the major oil companies is far less than that for many other sectors, such as beverages, electrical equipment, chemicals, and computers.
4. At present gas prices, the major oil companies make a profit of between 10 cents and 12 cents a gallon...
5. At present prices, combined federal and state government profit (i.e. taxes) on each gallon of gas is 28-68 cents a gallon, depending on which state you live in. Pelosi’s San Francisco enjoys tacking on an extra 26 cents bite.
9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by the international market of supply and demand, which fluctuates hourly, and not by private companies; while the major oil producing countries can form cartels (such as OPEC) which can set prices at higher than a free market, these countries are not subject to U.S. antitrust laws.
(Excerpt) Read more at blogs.rockymountainnews.com ...
“Traders (or if you prefer, speculators) provide a valuable service to any economy.”
Ok since Toddsterpatriot will not do it how about you use the Brian Hunter/Amaranth example to show me how their non-delivery speculating provided a valuable a service to the economy.
I kinda skeptical that what they and many others like them are doing is what Adam Smith had in mind.
Then why do you whine about their impact on ignorant consumers such as yourself?
How does non-delivery speculation drive the crude price up? Work thru it, step by step.
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.”
I know what the butcher, brewer, and baker produce, but what does a non-delivery speculator produce?
Liquidity?
I can’t connect to that like a can to a cold brew and you won’t help me by explain non-delivery speculation = efficiency though liquidity using the Brian Hunter/Amaranth example.
“Then why do you whine about their impact on ignorant consumers such as yourself?”
Becasue these leeches inflict collateral damage far beyond themselves. The Brian Hunter/Amaranth fiasco proves that beyond any doubt.
Liquidity?
YES!!!!
efficiency though liquidity using the Brian Hunter/Amaranth example.
Brian was a speculator. His participation in the market made it easier for producers and consumers in those markets to execute their trades at better prices.
You just can't explain how.
To the speculators, I say "thank you very much!" They aid in price discovery and supply liquidity, both of which functions ultimately lower costs for end users
Memo to Bill O'Reilly:
Speculators serve a vital function in a capitalist economy.One could shoot the messengers, but that would be ridiculous.
“Brian was a speculator. His participation in the market made it easier for producers and consumers in those markets to execute their trades at better prices.”
6 billion for that, what a deal, only an unethical leech would warp that into something good. Man for lame.
BTW I understood a there were retirement funds invested with Brian Hunter/Amaranth, many times an individual has no control over how their retirement plan is managed. People got screwed by Brian Hunter/Amaranth who were NOT the “speculators” in the same sense like Brian was.
“You just can’t explain how.”
I just did, again, you need to unscrew your blinders a bit.
Finally, someone who understands.
You give your money to a speculator to trade, that makes you a speculator. Sorry you don’t understand how markets work. I hope you never trade anything.
Your “friend who ran a small convenience store” had it wrong, or perhaps you completely misunderstood. I don’t know why, but I suspect if your friend was in error, that “ran” is past tense for a good reason.
For the first six months of 2005, Pre-Katrina, commodities speculators were paying in the constantly rising range $1.20-$1.60/gal ... and that meant buying in 42,000gal lots and then having to transport it to the users’ destination and then having to add taxes on top of that.
It had been pretty steadily rising. For much of the world-wide (and certainly US) economic slowdown of 2002, the price was indeed about $0.80/gal... again EXCLUDING transportation and taxes.
It was down at $0.40/gal in 1993 after the Gulf War speculation had drained out, and has essentially been steadily rising since then.
Again, this is all EXCLUDING transportation costs and taxes.
Because I think gas will increase in price beyond $1/gal over the course of a year, whereas the owner wishes to trade in that potential future profit for $500 today.
When non-delivery speculation drives the crude price up who is making more money?
To get back to my example given earlier, if gas prices go up $1.25/gal, my portion of the futures contract with the gas station owner becomes a profitable proposition to the tune of $250. If I advertise that I'm willing to sell my futures contract, and someone who think prices are going to go up even further pays me $750, I've locked my profit, and the purchaser will make money if the gas prices increase and lose money if gas prices decrease.
The gas consumer at the pump, meanwhile, is unaffected by the contract regardless of what price it's traded at or how many times it changes hands.
A hedger might be a coporate user of large amounts of corn, oil, or, for that matter, Treasury bonds. He can lower his risk and thereby lower his prices by locking in today's price, knowing it will be acceptable for acheiving his desired profit when he sells his corn flakes, or plastic parts, or mutual funds next December. He's transfered his risk to another party, just as one would when paying an insurance premium.
The buyer of risk is the speculator. I think most economists familiar with capital markets would agree that speculators provide fairer, freer, and cheaper markets that benefit all. Futures markets are one of the great prides of American capitalism, not gambling casinos.
Of course, professional speculators are motivated by the desire for profit, but what businessman is not? Is this motivation evil? As Ivan Boesky crudely put Adam Smith's principle, "Greed is good. Greed works."
Speculators and their oil futures market provide the illusion of capitalism in action, for what would otherwise be perceived correctly for what it is, namely, a racket.
You said: How much were you making an hour in the 80s? ;-)
***
I don’t think that is a fair analysis of the price issue, but it made me think back. I am making a little more than 10 times what I made back in 1981. I would hate to pay ten times those prices today
“He can lower his risk and thereby lower his prices by locking in today’s price, knowing it will be acceptable for acheiving his desired profit when he sells his corn flakes, or plastic parts, or mutual funds next December. He’s transfered his risk to another party, just as one would when paying an insurance premium.”
Insurance costs money and who will ultimately pay for it?
The consumer of course.
Southwest Airlines hedged their fuel costs when oil was much cheaper. Who paid the price for their insurance?
American futures markets are something we should be proud of. The image of commodity traders as immoral crooks is just like the image of stock holders as robber barons lighting cigars with hundred dollar bills. Pure class warfare, invented by communists and propagated by Democrats.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.