Posted on 06/05/2006 8:43:21 AM PDT by thackney
Here's what one reader wrote: "Williams, I can understand how the destruction of Hurricane Katrina and Middle East political uncertainty can jack up gasoline prices. But it's price-gouging for the oil companies to raise the price of all the gasoline already bought and stored before the crisis." Several other readers made similar allegations. Such allegations reflect a misunderstanding of how prices are determined.
Let's start off with an example. Say you owned a small 10-pound inventory of coffee that you purchased for $3 a pound. Each week you'd sell me a pound for $3.25. Suppose a freeze in Brazil destroyed half of its coffee crop, causing the world price of coffee to immediately rise to $5 a pound. You still have coffee that you purchased before the jump in prices. When I stop by to buy another pound of coffee from you, how much will you charge me? I'm betting that you're going to charge me at least $5 a pound. Why? Because that's today's cost to replace your inventory.
Historical costs do not determine prices; what economists call opportunity costs do. Of course, you'd have every right not to be a "price-gouger" and continue to charge me $3.25 a pound. I'd buy your entire inventory and sell it at today's price of $5 a pound and make a killing.
If you were really enthusiastic about not being a "price-gouger," I'd have another proposition. You might own a house that you purchased for $55,000 in 1960 that you put on the market for a half-million dollars. I'd simply accuse you of price-gouging and demand that you sell me the house for what you paid for it, maybe adding on a bit for inflation since 1960.
(Excerpt) Read more at jewishworldreview.com ...
"But avoiding fuel purchase is impossible. Even if I ride the bus, I've bought fuel. If I buy anything that has been transported, I have purchased fuel. If I heat my house or turn on a light bulb, I have purchased fuel. So while there are viable alternatives to the strawmen examples the free marketeers push, there are no viable alternatives to our oil addiction."
How additionally wrong you are.
1. Buy more things made and produced locally - road side produce stand instead of the super market, local store instead of the catalogue or the Internet, "local" entertainment instead of a four hour car trip or a weekend plane trip - and you will reduce your fuel consumption and/or fuel costs. You have choices.
2. Reduce the number of trips you take. Do more "drive buy" shopping by picking up things as you go to and from work instead of making everything a separate shopping trip. Eliminate those very wasteful last-minute, gotta-have-it one-item-purchase trips. Nothing is that important.Walk to the neighborhood mini-mart around the corner for your 11:Pm Hagen Das fix.
3. But "riding a bus" is more fuel efficient than taking a car, when you measure the fuel in passenger-miles achieved by the same gallon of fuel.
4. Turn lights off when not at home. Buy "pilot-less" gas water-heaters and kitchen ranges - they don't waste gas when they are not being used. Spend a little more and install water-heaters that produce all the hot water you want, on demand, without running 24/7 to keep a tank of water hot. Cost more to buy, saves tons of cost and fuel in the long run.
So, every way noted above CAN reduce the EXTENT of YOUR oil addiction.
However, don't lose sight of this fact. As you reduce your "fuel consumption" because the price is high, you will in time bring down that price, and therefore you will continue to use that "fuel" when your conservation efforts help keep the price of that fuel reasonable.
And, conversely, if you allow your useage to remain as it is and the current "fuel" prices do not decline, you will help to insure that someone will bring out more alternatives to the "fuel" you are consuming, because the high prices will make the profitability of those alternatives more likely.
Either way, we have and we do make the choices that result in what is available to us.
Yes, like food and shelter, there are some things that must be purchased to survive in today's modern world. Are you really wanting to live in a world that does not have energy use?
He "maybe" better add on a lot more than a bit. Like maybe a factor of 6.3 according to the inflation calculator I consulted. Like maybe more because I suspeect the inflation calculator did not take into account the real estate bubble we now have. Williams is great but he's behind on the inflation issue. And that is a shame because despite his claim to be a radical for liberty, inflation is very damaging to liberty as it represents the confiscation of property. I think his advocacy of liberty is rather selective.
Many people could, if they wanted to badly enough, ride a bike to work.
I did it myself for six months and lost 40 pounds.
Until I had a high-speed encounter with a dumpster.
Unless gasoline prices are based on market forces, people will not have incentives to adapt to the reality that gasoline is a dearer commodity.
I can understand the average American's difficulties with rising fuel costs but no one has a right to cheap gas or a high quality of life. In the end, market forces will encourage innovation and promote as high a quality of life in the US as circumstances permit. Non market forces always fail after a while.
You can reduce the extent of fuel purchase, but you cannot avoid buying fuel. I can avoid buying coffee. Therefore, the coffee argument is a strawman. How wrong I'm not.
it's price gouging for me to jack up the price of my house which cost me much less when I bought it, just because there is an increased demand for housing by immigrants.
It's price gouging for me to jack up the cost of my labor to a rate much higher than when I started working, just because there is a shortage of people in my IT skill set.
No, I'm wanting to live in a world where there is a viable alternative or two. Right now, we don't really have a choice. I would like to see some competition and some domestic fuels that we don't have to buy from terrorists.
Actually you can.
You can walk, lite candles, get a wood stove, get an "ice-box", grow a "victory-over-fuel" garden in your back yard, and a zillion other things.
You CAN.
Whether or not you WANT to, is your choice and not a "strawman", to essential economics.
You can reduce your consumption of coffee and bottled water in response to price increases for coffee and bottled water, but you can also reduce your consumption of these things in response to price increases for gasoline.
And there are choice available that affect how much you spend for fuel. There is plenty of competition. Our Legislature needs to make some choices that bring more America's resources available for us to use.
This place is filled with helpless wimps. The only thing you can't avoid is death.
I got dozens of neighbors who don't buy fuel. It's amazing how we don't hear a back woods dirt farmer whining about how helpless he is even though it's a lot easier for a fuel-buyer to lower his lifestyle and stop, than it is for the farmer to improve his lot.
If people spent a few bucks to buy some stock in an oil company, they wouldn't moan about the company's "record profits" when they're a shareholder.
Way back in my freshman macroeconimics class my instructor mentioned the availability/scarcity of alternatives in commodity pricing. You're right, the fact that there really is no alternative to gasoline for transportation fuel means that the only thing the consumer can due is change behavior (& b*tch).
You would still have to buy gasoline if you did those things. You would just buy less of it. Every American is forced to buy gasoline.
Do your neighbors who don't buy fuel buy any goods which were transported? If so, they buy fuel.
Holy smokes, what an amazingly helpless attitude!
They don't buy goods that are transported, they grow their own food, make their own clothes out of what they can scrounge and when they travel they ride horses. They cook on wood that they've gathered.
Bear in mind that this is not some kind of goofy 'back-to-nature' shtick, this is how hey live. Those that can will grow some cane, mill it, and sell it to get cash so they can buy fuel. Fuel is bought by anyone that is able to, but those that can't don't just roll over and whine like whimpering helpless ninnies. It's them that has money that's got the choice, and it's those that don't have a choice that doesn't buy fuel.
Americans don't have to buy fuel if they don't want to. They do because they can.
using your logic we're forced to buy all kinds of stuff. The trucking industry is fueled more by coffee than it is by gas (shipping trucks mostly burn deisel, but truckers pound coffee like normal people breath), and everybody knows that to make a better cup of coffee you need better water, which means bottled water, so with your "trickle down purchase" concept we're "forced" to buy coffee and bottled water.
OOPS, FreeRepublic is loaded with people who don't get it.
Some are on this thread.
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