Posted on 05/12/2008 9:06:22 PM PDT by jazusamo
Some people think that the reason the public misunderstands so many issues is that these issues are too "complex" for most voters. But is that really so?
With all the commotion in the media and in politics about the high price of gasoline, is there really some terribly complex explanation?
Is there anything complex about the fact that with two countries-- India and China-- having rapid economic growth, and with combined populations 8 times that of the United States, they are creating an increased demand for the world's oil supply?
The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains.
It is clear that many people prefer to blame President Bush. Others prefer to blame the oil companies, who have long been the favorite villains of the left.
Politicians understand that. Numerous times they have summoned the heads of oil companies before Congressional committees to be denounced on nationwide television for "greed," with the politicians calling for a federal investigation to "get to the bottom of this!"
Now that is emotionally satisfying, which is the whole point. By the time yet another federal investigation is completed-- and turns up nothing to substantiate the villainy that is supposed to be the reason for high gasoline prices-- most people's attention will have turned to something else.
Newspapers that carried the original inflammatory charges with banner headlines on page 1 will carry the story of the completed investigation that turned up nothing as a small item deep inside the paper.
This has happened at least a dozen times over the past few decades and it will probably happen again.
What about those "obscene" oil company profits we hear so much about?
An economist might ask, "Obscene compared to what?" Compared to the investments made? Compared to the new investments required to find, extract and process additional oil supplies?
Asking questions like these are among the many reasons why economists have never been very popular. They frustrate people's desires for emotionally satisfying explanations.
If corporate "greed" is the explanation for high gasoline prices, why are the government's taxes not an even bigger sign of "greed" on the part of politicians-- since taxes add more to the price of gasoline than oil company profits do?
Whatever the merits or demerits of Senator John McCain's proposal to temporarily suspend the federal taxes on gasoline, it would certainly lower the price more than confiscating all the oil companies' profits.
But it would not be as emotionally satisfying.
Senator Barack Obama clearly understands people's emotional needs and how to meet them. He wants to raise taxes on oil companies.
How that will get us more oil or lower the price of gasoline is a problem that can be left for economists to puzzle over. A politician's problem is how to get more votes-- and one of the most effective ways of doing that is to be a hero who will save us from the villains.
You have heard of the cavalry to the rescue. But have you ever heard of economists to the rescue?
While economists are talking supply and demand, politicians are talking compassion, "change" and being on the side of the angels-- and against drilling for our own oil.
Has any economist ever attracted the kinds of cheering crowds that Barack Obama has-- or even the crowds attracted by Hillary Clinton or John McCain?
If you want cheering crowds, don't bother to study economics. It will only hold you back. Tell people what they want to hear-- and they don't want to hear about supply and demand.
No, supply and demand is not too "complex." It is just not very emotionally satisfying.
NYMEX crude up $2 suddenly. RBOB gasoline 3.21 suddenly. Heating oil 3.68 suddenly. What is going on?
I remember reading an article years ago about a gas station that displayed a large poster with a breakdown of what made up the gas price, with taxes featured prominently. The state regulators pressured the station into taking it down
Every time I read Sowell, I learn something. He has pulled back the curtain for me on the appeal of Obama.
Most here know you well enough to realize the sarcasm of “Just let the Gov’t set the price”, but it is interesting to see the reactions of those who remember the last time the Gov’t set gas prices....that disaster needs to be remembered as much as possible, thanks Jimmuh Carter.
Diverting to internal use. Not increasing production. Is world prodution so tight this would matter?
Sorry, meant that as a joke. Yemen is a rather small player. Just the first new article that came up on an oil search.
NYMEX crude is headed for 127. Something must be happening. Fuel oil is 47 cents above RBOB gasoline, an evil portent.
For reference, they are increasing the size of their total diesel reserve to about equal to what we add in a normal week to our SPR.
Further, I am an energy trader and have been for more than 25 years. I'll match my experience and, frankly, expertise in the energy mkts with you ANY time.
I've nothing at all against specs; I **am** one. That said, the nature of energy specs has changed, and radically so, since 2002.
Prior to then, we did not have these huge pools of NOLLSO and LOSO capital, and these are distorting energy mkts seriously. As I said previously, these pools are only able to create their distortions because goobermint allows them to do so.
The US has two energy exchanges, one heavily regulated (NYMEX) and one essentially unregulated (ICE). You don't think there are potential abuses in that structure? Potential, hell, there are numerous quite real abuses occurring every day, and they began in Jan 2006 when ICE listed a look-alike WTI contract.
I'm 100% in favour of free markets and free trading. Goobermint's only role in trading is (or should be, at least) the prevention of fraud and abuse. They're falling down badly as regards the latter, and energy mkts, like it or not, have an amplified effect on the entire economy. ICE simply has to be brought under the same or nearly the same regulatory rubric as NYMEX, and diplomatic niceties be damned (ICE is a UK corporation, and Bush passed on the opportunity to regulate it properly).
When you know what you're talking about, boyo, get back to me. I won't be holding m'breath, of course; learning what really goes on in the energy mkts takes some number of years.
The ChiComs have decreed that, very shortly in future, their entire passenger car fleet be run on diesel. The Wonderlanders (aka Euroweenies) are on the path to making the same decree.
So, what's been happening for several months is that #2 oil has been gaining hugely on motor gasoline. Unfortunately, out of a 'barrel' of crude, one can only make X gallons of #2 oil and Y gallons of motor gasoline...and Y is greater than X (in the general case). The mkt can simply not absorb this type of demand shift.
BTW, basis June, #2 is up 13.50 and RBOB up only 5.39 as of a few minutes ago. Get used to it, m'friend -- our goobermint won't lift a finger to rein in these price rises, which are -- at THIS point -- entirely due to paper demand, not the mkt fundamentals.
Then of course you would be happy to receive your salary in information.In fact money and prices are information,
Oh, absolutely! All I ask is one little bit in the right place in my bank's computer! Just one, and I'll be on easy street.Do you actually think that when you are at the checkout at the grocery store that you are giving the cashier things in exchange for the bread and milk they allow you to take out of their inventory? They're just as happy to accept the information from your credit card as they are to have a $10 bill, and they're happier to have a $20 bill than they are a $10 bill, even tho there is nothing any more special about a 20 than a ten except that the digits printed on it represent bigger numbers. And they are far happier to have a $20 bill - a mere piece of paper - than they are to have a quarter, which is metal.
No, money is not substantive at all, it is pure information. Specifically, in your wallet it is credit which you have from your employer for your work - and when you give it to the store it is credit for their having the thing you wanted in inventory, and letting you take it. And so on. Money isn't fuel, it is blood - it doesn't get used up in performing its function, it just carries the fuel to the muscles &c.
My comment was sarcasm, too :-).Mile-long gasoline lines were a real laugh riot back in the Seventies!
But some of us lost our sense of humor about it after a while . . .</sarcasm> tags are cheap.
Well, in that case, you can have some free </sarcasm> tags, too!</sarcasm>You're welcome! </sarcasm></sarcasm>
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I was in high school during that fiasco in the early 70s. But even before Carter, Nixon had set W&P controls.
“NYMEX crude up $2 suddenly. RBOB gasoline 3.21 suddenly. Heating oil 3.68 suddenly. What is going on?”
More people think it is going to go up than down.
IF you were really a trader you do not care what moves a market only that you are out ahead of it. There are no distortions only opportunities. All markets have abuses. Look at equity markets. Why and when do you think the big market makers upgrades or downgrades a stock? The analyst knows something about the company? HA. Don’t make me laugh. But if you know this (and have some insight into the whys and wherefores of upgrades and downgrades) you can trade correctly.
Check out this little thing called Reg FD. How often do you think company CEOs sit down with a few hedgefund PM buddies and heads up the Q??? You think there is abuse in energy. Check out equity markets. Do I care? Well sure. Is there anything I can do about it to correct it? No. Does it pay me well? Ha.
Want a refinery? 220,000 barrels of oil a day, no natural gas. 60% goes to jet fuel. Only 30 years old. Put yourself on the right side of the equation.
It was... but heck, the way FR has gotten so Nanny-State, Rah-Rah Big Government, I guess we have to be careful.
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