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Thread: $69.00 Oil

  1. #31
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    Quote Originally Posted by Tinaa View Post
    My stepson used to keep me waiting every morning and make me late for work. I finally told him to be ready at 6:55 or I was leaving him at home. He wasn't and I did. He's never been late since. I hate to be late.
    Dear Tinaa,

    We have forwarded you a membership packet.

    Sincerly,
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    "We might not make much sense, but we sure love pizza"

    (I know she just posted in the wrong thread. But, I gotta take the oppertunity to pick on her when it arrives )

  2. #32
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    Quote Originally Posted by Daffy View Post
    Without getting political...gas prices dropped dramatically before the last presidential election and starting rising again the very next day. And now here we go again...
    Without also getting too political, if your theory were true, then in this particular election, given the candidates and the party in charge in Congress, crude prices would be rising.

    Seeing as they are not...

    Quote Originally Posted by Daffy View Post
    Gas prices are determined by crude prices...no, wait, they are determined by speculation...no wait...they are determined by weather shutting down refineries...no, they are determined by time of year! That's it! And Fall ends the day after the election!
    You are also confusing cause and effect, as well as causal chains.

    Prices are always determined by supply and demand. The other things you mention, do indeed effect prices. All those factors; but they do it via their effects on supply and demand. What you think of as demand, filling up the tank, is only the final link in the chain; and what you think of supply, oil pumped in the Middle East, is only the first link in the chain. Many other factors are involved in demand, and many other factors are involved in supply.

  3. #33
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    Quote Originally Posted by PraedSt View Post
    Without also getting too political, if your theory were true, then in this particular election, given the candidates and the party in charge in Congress, crude prices would be rising.

    Seeing as they are not...
    What theory? All I am doing is noting that gas prices are falling before a presidential election for the second time in a row. I find that very hard to justify by supply and demand arguments.

    I do have a question: people who suggest that supply and demand are at all that is at work here are, by implication, suggesting that gas prices are as low as the oil companies can get them based on outside factors.

    If that is true, why have their profits---profits, not gross---risen so sharply during this latest crisis?

    You may feel they have the absolute right to charge as much as they possibly can---you may even be right---but don't waste my time suggesting the prices are determined merely by supply and demand.

  4. #34
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    Quote Originally Posted by Daffy View Post
    What theory? All I am doing is noting that gas prices are falling before a presidential election for the second time in a row. I find that very hard to justify by supply and demand arguments.

    I do have a question: people who suggest that supply and demand are at all that is at work here are, by implication, suggesting that gas prices are as low as the oil companies can get them based on outside factors.

    If that is true, why have their profits---profits, not gross---risen so sharply during this latest crisis?

    You may feel they have the absolute right to charge as much as they possibly can---you may even be right---but don't waste my time suggesting the prices are determined merely by supply and demand.
    .
    Read the rest...sorry was in the middle of editing

  5. #35
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    Quote Originally Posted by PraedSt View Post
    .
    Read the rest...sorry was in the middle of editing
    Sorry, but when the commodity is something that we must have in order for our very civilization to exist---and when that commodity is sold by a handful of companies---talking about supply and demand is silly.

    No conspiracy is needed...they can charge whatever they bloody well please, up to the point where they actually ruin the whole economy. Oh, wait...

  6. #36
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    Quote Originally Posted by Daffy View Post
    I do have a question: people who suggest that supply and demand are at all that is at work here are, by implication, suggesting that gas prices are as low as the oil companies can get them based on outside factors.

    If that is true, why have their profits---profits, not gross---risen so sharply during this latest crisis?
    Two things. First allow me to change your first statement:

    I do have a question: people who suggest that supply and demand are at all that is at work here are, by implication, suggesting that gas prices are as high as the public will allow them based on outside factors.
    They simply are where they are based on all factors involved.

    Second, their net profits have risen so sharply because they target profit margin goals, not profit dollar goals. When revenues increase dramatically based on charging twice as much for your end product and you're still shooting for the same 10% net profit margin, your profits will double in terms of absolute dollars while your margins remain consistent.

  7. #37
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    Quote Originally Posted by Spock Jenkins View Post
    Second, their net profits have risen so sharply because they target profit margin goals, not profit dollar goals. When revenues increase dramatically based on charging twice as much for your end product and you're still shooting for the same 10% net profit margin, your profits will double in terms of absolute dollars while your margins remain consistent.
    In other words, they can charge whatever they like. Exactly my point.

  8. #38
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    Quote Originally Posted by Daffy View Post
    What theory? All I am doing is noting that gas prices are falling before a presidential election for the second time in a row. I find that very hard to justify by supply and demand arguments.

    I do have a question: people who suggest that supply and demand are at all that is at work here are, by implication, suggesting that gas prices are as low as the oil companies can get them based on outside factors.

    If that is true, why have their profits---profits, not gross---risen so sharply during this latest crisis?

    You may feel they have the absolute right to charge as much as they possibly can---you may even be right---but don't waste my time suggesting the prices are determined merely by supply and demand.
    Anyway, this is all wrong.

    1. Second time in a row is not a trend. We've had a century of oil, and ~20 presidential elections. Work that out.

    2. You don't know what supply and demand mean. If your conspiracy theory is true, that would only be because the President increased supply prior to the elections...somehow.

    3. No-one suggests gas is low now because of...what you said. They're low now because global economic activity is declining. Demand for crude is falling, or demand for crude is expected to fall further.

    4. 'Gross profits' is still profit. Apart from that, I don't know what point you're trying to make here. Your knowledge of oil company profits probably comes from quarterly results. In that case a) the last ones were in Jun- almost 5 months ago; profits were high because cost of production was much lower than average crude prices over the quarter. b) Prices are much lower today than in Apr-Jun period. c) You also have to take into account refining margins, which I don't actually recommend, as they're stupidly complicated.

    5. Right to charge what they can? Of course. For the last bit, please read the first chapter in any economics texbook before you make up CTs.

  9. #39
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    Quote Originally Posted by Daffy View Post
    Sorry, but when the commodity is something that we must have in order for our very civilization to exist---and when that commodity is sold by a handful of companies---talking about supply and demand is silly.

    No conspiracy is needed...they can charge whatever they bloody well please, up to the point where they actually ruin the whole economy. Oh, wait...
    You're changing your argument here. Now you are advocating manipulating the market

    This is also incorrect. Your civilisation needs energy, not oil. There's been huge progress in solar and wind and nuclear during the last 3 years, spurred on by the rising cost of oil.

    You actually have to read an oil company's balance sheet at one point. Compare the margins you find there, to those of say, Google. And then ask your self who's charging an 'unfair' rate.

    Also, oil companies actually don't have much control over the price of crude oil. If they did, it wouldn't have languished in the $30s for over 10 years. If you want to find manipulation, look at OPEC. But, again, that is still manipulating the supply of oil. They can't mandate oil prices directly.

  10. #40
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    Quote Originally Posted by Daffy View Post
    In other words, they can charge whatever they like. Exactly my point.
    If your point is correct, why aren't they charging $10.00 a gallon? Or $20.00? Why not $100.00 a gallon if they can charge whatever they want? Why did the price drop by 25% or better at the pump if they can charge whatever they want?

  11. #41
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    Quote Originally Posted by Spock Jenkins View Post
    If your point is correct, why aren't they charging $10.00 a gallon? Or $20.00? Why not $100.00 a gallon if they can charge whatever they want? Why did the price drop by 25% or better at the pump if they can charge whatever they want?
    There is a limit...when the economy starts to tank.

    Look, in my business, if my expenses go up (and they are) I cannot raise prices to the same amount. Why? Supply and demand...I have competitors, and I provide a service that is helpful but not vital. So my profits go down.

    With oil, we have a commodity for which the demand is effectively infinite. When costs go up, so do profits (you said so yourself). This is Supply and Demand?

    The only real control on prices is the overall economy...and the whims of a handful of CEOs. I suppose you could make the argument that this is a watered down version of S&D, but it sure ain't the S&D I was taught in school.

  12. #42
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    Quote Originally Posted by PraedSt View Post
    Without also getting too political, if your theory were true, then in this particular election, given the candidates and the party in charge in Congress, crude prices would be rising.

    Seeing as they are not...
    Yes. Aside from the practical problem of dramatically affecting world oil supply without anyone noticing (I don't see how that would be possible), it isn't clear to me who this would help.

    "The problem with quotes on the Internet is that it is hard to verify their authenticity." Abraham Lincoln

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  13. #43
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    Quote Originally Posted by Daffy View Post
    With oil, we have a commodity for which the demand is effectively infinite.
    That's rather obviously not true. Increase prices too much, and people reduce use, find other sources, and substitute.

    "The problem with quotes on the Internet is that it is hard to verify their authenticity." Abraham Lincoln

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  14. #44
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    Quote Originally Posted by Van Rijn View Post
    That's rather obviously not true. Increase prices too much, and people reduce use, find other sources, and substitute.
    Or the economy tanks...I think I said that.

    I'm sorry, but in a situation where costs go up, causing profits to go up, that is simply not supply and demand.

  15. #45
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    Quote Originally Posted by Daffy View Post
    Or the economy tanks...I think I said that.

    I'm sorry, but in a situation where costs go up, causing profits to go up, that is simply not supply and demand.
    In can be if your in an industry where substitutions aren't as easy and barriers to entry are high.

    It sounds like you might be in an industry with lower barriers to entry, meaning more competition, and possibly substitutes or an ability to go without your product or service.

    It's all still supply and demand, it just impacts different industries in different ways. The corner gas station actually runs a very slim margin on fuel sales and they have been adversely impacted by the increase in cost. They make their margins on c-store products. It's farther up the supply chain where there are fewer competitors and higher barriers to entry.

  16. #46
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    Quote Originally Posted by Daffy View Post
    Or the economy tanks...I think I said that.

    I'm sorry, but in a situation where costs go up, causing profits to go up, that is simply not supply and demand.
    Actually, it is perfectly supply and demand, and in that situation, it simply means that the demand is inelastic.

  17. #47
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    For the record, I LOVE posting in the wrong thread. I get all the attention that way. I was really just seeing if any one was paying attention.

    Truthfully, this is an example of what happens to ones brain when one is in a house with five teenagers. My brain is mush. After I spend all day with middle schoolers, I rush home to to battle - I mean - spend quality family time cooking supper, getting homework done, washing a load or two of laundry, etc. Yeah, yeah they should help.

    On topic, I paid 2.49 a gallon for gas today.

  18. #48
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    Quote Originally Posted by Tinaa View Post

    Truthfully, this is an example of what happens to ones brain when one is in a house with five teenagers.

    I hope some of those are friends of your kids.

  19. #49
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    Quote Originally Posted by Daffy View Post
    Or the economy tanks...I think I said that.
    The oil price bubble would have popped whether or not we had the mortgage mess.

    I'm sorry, but in a situation where costs go up, causing profits to go up, that is simply not supply and demand.
    Why not? That's a market signal: It's an incentive to produce more, including previously uneconomic sources. Of course, that assumes the price stays up. Which it isn't.

    "The problem with quotes on the Internet is that it is hard to verify their authenticity." Abraham Lincoln

    I say there is an invisible elf in my backyard. How do you prove that I am wrong?

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  20. #50
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    Quote Originally Posted by Van Rijn View Post
    The oil price bubble would have popped whether or not we had the mortgage mess.



    Why not? That's a market signal: It's an incentive to produce more, including previously uneconomic sources. Of course, that assumes the price stays up. Which it isn't.
    It may be fine, it may be just the way things should be, but supply and demand it ain't. And the economy tanking is not solely the result of the mortgage mess...it is the direct result of a MASSIVE transfer of wealth occurring all across the board, in many, many areas. That rate of transfer simply cannot be sustained indefinitely, and that is what we are seeing.

    However, I will concede your point if, after the election, prices do not immediately start to rise again the way they did last time. If they do, will you do the same?

    PraedSt, I don't discuss things with people who put words in my mouth. Especially words that I have specifically said do not apply.

  21. #51
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    Quote Originally Posted by Daffy View Post
    PraedSt, I don't discuss things with people who put words in my mouth
    Lol

  22. #52
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    Quote Originally Posted by Daffy View Post
    What theory? All I am doing is noting that gas prices are falling before a presidential election for the second time in a row. I find that very hard to justify by supply and demand arguments.

    I think you go against the grain of decades (centuries?) of economic theory here. Theory that can't predict at a very fine level what the stock market will do tomorrow, but in terms of generalities, works well in practice.

    Also "twice in a row" isn't exactly a very large sample size.

    Finally, strong are the politicians in the (economic) force, but not that strong.

  23. #53
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    Quote Originally Posted by tdvance View Post
    I think you go against the grain of decades (centuries?) of economic theory here. Theory that can't predict at a very fine level what the stock market will do tomorrow, but in terms of generalities, works well in practice.

    Also "twice in a row" isn't exactly a very large sample size.

    Finally, strong are the politicians in the (economic) force, but not that strong.
    I am not claiming a conspiracy. I am claiming that oil prices are not really controlled by supply and demand. How can they be?

    a) With only a handful of producers of a commodity the entire world needs, there is little or no real competition. The original anti-trust laws in the U.S. (no longer enforced) were specifically enacted to control Standard Oil.

    b) If Supply and Demand theory includes profits rising as costs rise, I was never taught it in school.

    c) Corporate lobbyists work both sides of the aisle. Donations, as parties switch in power, are starting to flow the other way. There is no conspiracy; this is all a matter of public record, and is perfectly legal.

    d) The reasons we are given for gas prices rising (or falling) keep changing. Am I the only one who notices that? Am I the only one who notices that prices are falling even though production is down?

    As I say, you may think this is all good (what's good for Standard Oil is good for the country)---and you may even be right---but calling it supply and demand is ridiculous.

  24. #54
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    Quote Originally Posted by Daffy View Post
    supply and demand
    You keep using those words. I do not think they mean what you think they mean.

  25. #55
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    The prices are *always* influenced (and usually outright controlled) by supply and demand. Even in a "command economy" (old USSR), where the government sets the prices, funny things happen as a result of supply and demand setting a different "natural" price: black markets, shortages, gray markets where people find nearly-legal loopholes, and so on, that only are corrected when the government sets the price to the supply-demand-mandated price.

    Crude oil prices started coming down soon after gas hit the psychological $4.00 mark which was just the trigger to get large numbers of people thinking about ways to use less gas. That resulted in less demand (intensified by demand always going down after labor day). The drop in the stock market reduced demand even farther, lowering the price. The subsequent rise in the value of the dollar lowered it even more. What the politicians did--a few laws/executive orders regarding exploration, and releasing some of our reserves, increased the promise of supply, lowering it a small amount--so even supply/demand is king in this situation. Oil is now taking a slight upturn because OPEC, seeing their profits go out the window, are reducing supply to make up for lowered demand. People are also reversing some of the habit changes in the face of lower prices, increasing demand somewhat. I have little doubt gas prices will follow in a few weeks--and it might start on or around the election.

  26. #56
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    Quote Originally Posted by tdvance View Post
    The prices are *always* influenced (and usually outright controlled) by supply and demand. Even in a "command economy" (old USSR), where the government sets the prices, funny things happen as a result of supply and demand setting a different "natural" price: black markets, shortages, gray markets where people find nearly-legal loopholes, and so on, that only are corrected when the government sets the price to the supply-demand-mandated price.

    Crude oil prices started coming down soon after gas hit the psychological $4.00 mark which was just the trigger to get large numbers of people thinking about ways to use less gas. That resulted in less demand (intensified by demand always going down after labor day). The drop in the stock market reduced demand even farther, lowering the price. The subsequent rise in the value of the dollar lowered it even more. What the politicians did--a few laws/executive orders regarding exploration, and releasing some of our reserves, increased the promise of supply, lowering it a small amount--so even supply/demand is king in this situation. Oil is now taking a slight upturn because OPEC, seeing their profits go out the window, are reducing supply to make up for lowered demand. People are also reversing some of the habit changes in the face of lower prices, increasing demand somewhat. I have little doubt gas prices will follow in a few weeks--and it might start on or around the election.
    Influenced by supply and demand I can agree with. Controlled by? The evidence strongly suggests otherwise. All the things you mentioned are no doubt factors. But how you can ignore the biggest factor of all...no real competition (which is crucial to supply and demand working) is beyond me.

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    "The evidence strongly suggests otherwise." what evidence? two observations?

  28. #58
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    Quote Originally Posted by PraedSt View Post
    You keep using those words. I do not think they mean what you think they mean.
    I had the same thought.

    "The problem with quotes on the Internet is that it is hard to verify their authenticity." Abraham Lincoln

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  29. #59
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    Quote Originally Posted by Daffy View Post
    With oil, we have a commodity for which the demand is effectively infinite. When costs go up, so do profits (you said so yourself). This is Supply and Demand?
    Except it's not infinite. It's awfully inelastic because for many people, you must have a certain amount of oil-baser products, like gasoline. But it's not perfectly inelastic.

    But recent reports have been that US demand and worldwide demand is falling. And then prices fall behind it, especially on concerns that demand will continue to fall.

    Why is this? It can't be because demand is infinite. Certainly we will get to the day when oil production can't meet worldwide demand. I'm sure it will probably cause some major wars. How else would you decide who gets the limited goods but fight over it?

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    Certainly we will get to the day when oil production can't meet worldwide demand. I'm sure it will probably cause some major wars. How else would you decide who gets the limited goods but fight over it?
    Well, currently we let the price of oil rise and whoever wants it can pay for it.

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