Posted on 04/26/2006 6:35:00 PM PDT by Blood of Tyrants
You are right about one thing: a lot of what is passed off as "Economics" is nothing but laff-wing propaganda.
BUT, there really are economic laws and they exist quite apart from opinion, either yours or mine.
When you say things like "That it has nothing to do with supply and demand, and everything to do with charging whatever the market will bear," it makes a lot of us wince, because it implies that "what the market will bear" has nothing to do with "supply and demand" and that it is somehow immoral.
Not only that, we know you don't really believe it yourself.
Allow me offer an example: Maybe own something. Hopefully you do. Maybe you have a CD collection of your favorite artists, and maybe you paid an average of $10 each for them. Just say. And now, these used CDs will bring a standard $3 each at a nearby used CD store any day of the week.
If I come along and offer to buy all your used CDs for $1 each and you tell me that you would rather sell them (if at all) for the $3 you can get at the used CD store, should I complain that "supply and demand" has nothing to do with it and accuse you of charging "what the market will bear"?
Of course not. Why not? Because you are not a dummy. You know that after I buy the CDs from you at $1 each, I'll head right over to the same used CD store you know about, sell them for $3 each and pocket the profit. Why let me earn that money when you could keep it for yourself?
Same with gasoline. Anyone that sells gas for below "what the market will bear" would be plain dumb. Just as dumb as you would be to sell me your Cds for a dollar each when there is a ready market at $3. All that would happen is that the seller would be passing on the profit opportunity to the next trader in line. That just doesn't happen ordinarily, and it has nothing to do with greed or any other form of evil.
It has all to do with the function of prices as a mechanism of communication and allocation of scarce resources with alternative uses so that they may be used in a manner that maximizes their utility to the economy as a whole.
It's just that simple.
You have nailed it with your analogy. And what follows is my rant about the situation. Put on your seat belt.
There is a huge culture out there that does not get it. It is a culture that either ignores or does not understand the free market and supply and demand economics. These are the ignorant ones who are being used and mislead by politicians who have in their back pocket another group which is called the "Me Generation".
You may have heard of the "Me Generation," which got its name in the 1970s. It must now be a powerful segment of the population because they seem to have the financial clout to attract politicians who will push the real agenda: limit the supply and add taxes so that high gas prices will push more people out of their cars and off the road. Only a self-centered culture would allow market conditions to be created by government action that raises the economic threshold without regard to its consequences. That is because their strategy is for one thing: limit those using the road (It is the same strategy they are using for cigarette smokers). For them, the less cars in their way, the better. It is the everybody-but-me culture that tailgates other drivers until they move out of their way; only to speed by while flipping the bird at 30 mph over the speed limit. It that group that says, "If those people wouldn't be having so many damned babies, there would be more sanity . . . I wish half the people would get themselves sterilized. . . Homosexuality is good because it takes more people out of the baby making market."
The blame game which attacks the oil companies fits into their selfish agenda. They are willing to use any lie and every deception to accomplish their narcissistic goal. It allows more regulation which increases the cost of production, limits the production of oil, and raises the price. They know market economics but they will not reveal what they are doing and the press is their willing accomplice. By hiding the realities of market economics; by creating a scapegoat, it allows the game to be played without any public outcry at what is actually is being done. By shifting the focus away from the nature of the game being played, the effort to push more people out of their cars-- and to a certain extent, population control--continues to their delight on schedule.
The commodities markets are weird, to put it mildly. Many past leaders and governments have tried to abolish them, but nothing they replaced them with worked as well. They do get out of control sometimes (remember the Hunts trying to manipulate silver at the end of Carter's reign?). But in the long run, things seem to average out since for every contract sold by someone, someone else has to buy one. And then cartels of producers (OPEC) also enter the picture. It is really one big crap shoot ultimately controlled by supply and demand.
What's your reference?
"+$70 per barrel oil is ridiculous."
Reference?
" There is no oil shortage."
Reference?
"We might run out of oil someday, but not today."
$70/bbl says you're right.
"There's actually an oil glut."
With respect to what reference?
"The record high prices are due to speculation and market manipulation.
The speculation regards the fuzzy particulars effecting future availability in the midst of rising demand. Market manipulation is psycho babble, otherwise present your findings to the DOJ.
"At this point, I'd be looking to short oil, because there's plenty of supply to meet demand.
Your reference is missing and if you really had the oil to short(BS walks, money talks), there'd be plenty of buyers.
"I'll complain about the too high gas prices as much as I feel like it."
Feelings aren't valid currency in the market and generally aren't appropriate to economic theory, or rational discussion of economic reality.
Well if that's what it is, then that's what it is.
Still, charging whatever the market will bear regardless of any actual shortage or surplus, is something that a monopoly in collusion with other monopolies is better able to get away with doing.
That's something different than saying prices are high simply because supplies are tight.
Prices are high because they can get away with it, because for many buying gas is not a choice.
You either buy it, or give up on earning a living.
It's past my bedtime.
Maybe I'll feel more like debating what is and isn't supply & demand tomorrow, or maybe not.
I should have said that the commodities FUTURES markets are weird (no one, to my knowledge, has tried to do away with the commodities markets themselves).
I have a brokerage account with equity, so I can short oil or oil related stocks anytime I feel like it.
Your other points I'll have to get back to.
Must sleep now.
Why aren't you screaming about the salaries of every CEO and farm conglomerate?
Most of the price you pay for gas, is comprised of local, state, and federal TAXES.
The retiring CEO of EXXON is getting 8 or 9 million dollars cash; the rest is in stock and most of the $400,000,000 is in STOCK OPTIONS, which can't be sold for years!
It is none of your business what a company pays its employees! Not a single cent is YOUR money; once your money goes into a company's hands ( which you received something for ), it is NO LONGER YOUR MONEY! Neither are YOU anyone to decide who is worth what or when. Nor are YOU in any position to say the NOBODY is worth almost 1/4 of a billion dollars. And FYI...many Americans are worth many BILLIONS of dollars.
Robbery is when someone takes that which is not his or hers.
If you BOUGHT ( that's the operative word here, BTW ) gas from Exxon, you got gas; they got the going rate; it was an exchange. Or did some Exxon employee hold a gum to your head, take everything you had with you ( all of your money, your car, your close, etc. ), and run away, leaving you bereft of your possessions?
People bid and sell futures and/or options on commodities; not to mention oil company stocks. This does NOT set the price at the pump. OPEC, refineries, and taxes have far more to do with the price.
Gasoline isn't the only thing oil companies "make." Our US cheap oil prices for the past 30 years are supported by our widespread use of petrochemicals in every aspect of our daily lives. A barrel of oil doesn't just make gasoline.
I contend that it also makes pizza cheese, among a million other things.
Remember a few years ago when cars cost $12,000? And average salaries were $30,000 or so?
Who do you think works for oil companies and invests in oil companies? The people who make $75,000 and buy $30,000 cars. How are they supposed to be paid today? Remember, there are over 600,000 of them just connected to the top company.
And you replied:
"I remember. That was when oil companies were going bankrupt or seeking mergers to survive.That was when the companies in Alaska were producing oil at a net loss, but to shut the wells in would have killed them.
That was when there weren't any profits and only losses, but armchair economists like you never noticed.
You were still bitching that gasoline was 27 cents a gallon like it was when you were a kid."
And I say:
Better yet, let's just shut down all the gas stations and then everyone can drive their cars to the refineries, or for the cheapest gas, they can drive up to an oil well and hand pump a few barrels of crude to have for their own.
Then they can drive that car with the bucketloads of crude oil there to their friendly neighborly refinery and ask them nicely if they'd be a pal and crack that sucker for you, for a $1.
They say, we'll go you one better - you probably don't want to wait, what with your busy schedule, so here, here's a bucket of gasoline we've already made for you, do you want a tire, too? How about some carpeting or linoleum? Some pizza cheese? It's your crude oil - tell us what you want.
You want a whole barrel of gasoline from your barrel of crude oil? Sorry, we can't do that, unless you want to pay a lot extra. But you still have to take the plastic stuff, because it's *your* barrel of crude oil.
Or, if you like, we can give you 15 gallons of gasoline and then the leftover feedstock, to do what you want with it. Got a 747 in your hangar? A space rocket? A camp stove? We can refer you to some specialists to get the just what you want.
Oh, sorry, I forgot. This is California. Here's your 12 gallons of gasoline and we'll ship the rest of your stuff to TX, where it's legal to possess it. Thanks for stopping by our refinery! You can pick up your custom order in 2 weeks, with a deposit. Keep coming back!
Thank you!
Yesterday, I got a FReepmail that had been mailed to me "tomorrow." *shrug*
LIFO means Last In First Out. FIFO means First In First Out. Beyond that, would take a few MBA courses to explain the why's and wherefore's and nuances within those accounting methods. Oh, and GIGO means Garbage In Garbage Out.
Except that the geologic ages, epochs and eras when the sediments were laid down and the right organic compounds were abundant in the right places are long gone, by about 2 mllion years at the most recent.
Cars aren't the only things that run on hydrocarbon fuels, i.e., the derivatives from that barrel of oil we're all discussing.
Oh, really! Have you actually ever read the financial statements of a publicly traded corporation? Net or Gross? A 40% gross is good and normal. A 40% net is fairly rare. I've been a business man for 40 years - running a $5 million dollar a year business with 50 employees. I also have my MBA.
And hurricane season is less than 5 weeks away.
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