Gas Prices/Gas Shortages

[Coronach]

That may be a whole 'nother discussion, but it is no less than a knee-jerk reaction ignoring the realities of the corporate/government incestfest that rules economics.

Not so. I'm hardly opposed to limited regulation in some industries. When you start using phrases like "price control" however, you're basically espousing a form of socialism. If this sounds offensive to you, perhaps you should more closely examine the implications of your position.

Uh huh. That's the way it's supposed to work. I haven't seen a 'gas war' in what??? 30-40 years??

I see gas wars every day. I see neighboring stores charging different rates all the time. Usually they're close to one another because- surprise! that's what the market will bear.

Gasoline (& diesel) is the primary substance that fuels this (and the world's) economy. Not only is its availability vital, but it must be priced at a level that allows industry and commerce to thrive. When the small group that controls supply (re-supply) frivolously manipulates price and availability the result is an increase in the cost of everything and a lower standard of living for everyone.

Note that we've shifted emphasis from the gas retailers to the gas distributers and oil comanies, now. Lets talk apples to apples.

Corporate tyranny is ok by you

Now, hold on. Once again, if you have evidence of collusion or price fixing, or of a monopoly, you have a situation where the free market model falls apart. We can, of course, go on a tangent in reference to this, but you've now stepped several degrees of separation away from gas retailers and their post-Katrina price hike. Let's keep talking about gas retailers, as opposed to oil companies. If you want to claim the retailers or their distributers are tampering with the price, cite your case. If you want to blame Conoco-Phillips, you'll be hard pressed in this instance- any price increases they have instituted have not had time to be felt downstream.

but government regulation is by definition socialism.

Well, at least you have that more or less correct.

At some point common sense needs to override blind ideology.

Actually, I agree with that. Your argument, however, is not a shining example of common sense. It seems to be an ad hoc mishmash of partly-right and mostly-off-point ideas used to justify a position opposed to gas retailers hiking up prices when supply is fixed and demand has spiked.

Mike

 

[Coronach]

Uhhhhh....there were a whole lot of people trying to get away from a hurricane. That might cause an increase in the demand for gasoline, and hardly qualifies them as sheeple.

Nice try. No one in Atlanta was trying to drive away from the hurricane, and yet Atlanta is getting slammed with gas shortages. Hmm.

The demand to which I am referring is the simultaneous gas-run made by everyone in the USA one day after Katrina stormed ashore. Everyone in Atl went to the pumps. The supplies got tight. Then, due to the storm, the resupply did not happen, and supplies got tighter.

How can the retailers be solely responsible, when their costs are steadily increased by the producers? You can't have it both ways. There is a small group who control the refineries and distribution; they are the monopoly. They have been increasing prices and their profits are at record high levels. That is hardly the definition of a 'free market'.

You keep repeating this. Make your case for collusion or price fixing, or let it go. Note that when you have a significant portion of our drilling, importing, refining and transport capability decimated by a natural disaster, you're going to be hard pressed to find proof in a $0.50 hike in the cost of gas, when taken alongside widespread shortages in key urban areas.

The fact that gas prices went up is not proof of anything, especially when there are readily identifiable (free!) market forces impacting the price.

Mike

 

[jefnvk]

mobile oil has payed off all there outstanding bills bought back all there stock and put 9 billion dollars in the bank . since jan 05 wow some body is making money .
As for overseas 22 per cent uneployeement some countries have 3 months vacations .
mom and pops dont set the price people selling them the gas sets the price they raise the price to pay for it .
oil companies are true Americans makes me sick .

OK, once again there is nothing against making money. You want gas companies to make no money? My guess is that not too many will stay around selling at cost.

I don't see how other countries unemployment or vacations affect us.

The mom and pops part is right.

People thinking that there should be rules against making too much money, or preventing selling their product at what they see fit make me sick.

 

[Waitone]

Classic example of the market place at work. Profits go up when products are in short supply. That's just the way markets operate.

They work just the opposite when products are plentiful. No one bellyaches when oil companies have substandard performance yet let them show increased profitability during a shortage and everyone is outraged.

Humans are driven by greed. Those who are alturistic will paint a thin coat of excuse over it but the facts are no profitability no interest in providing service. The wonder of the market system is it rigorously enforces penalties when greed rules and market principals are violated. No one can run up prices willey nilley without market consequences being imposed. An unfettered market is its own check on human greed.

 

[Firethorn]

I'll chime in that as gasoline shoots ever higher, that eventually people are going to start making changes. I think ethanol becomes competitive at ~$4 a gallon. Lower in the midwest around the production facilities, higher in other areas. Hybrids/AltFuels are likely going to outnumber standard vehicles in the next ten years.

I'm already shopping for an E85 compatible vehicle(most of the ones I find are trucks and I don't want a truck), or an affordable conversion kit. I was looking at Subaru before the last price increases, but their vehicles only take standard gas.

I'd look at hybrid/electric, but I have concerns about Minot, ND being able to handle them, they also don't have the feature set I'm looking for.

Heck, are there any E85 hybrids?

 

[gm]

current prices as of saturday.

filled up last nite after work..paid 10 cents per gallon less than the day before.the fuel truck was also there filling the stations tanks.On my way back, I passed through a small town about 10 miles south,it was going up. MY home town,20 miles away from where I filled up, had it for 299,the duke across the street still had it at 309,folks were still buying gas there in spite of the extra cost probably cause of the extra goodies and junk food,neither place was packed with cars..I did notice diseal had gone back up though.


lots of people I know are considering hybrid cars now,they are a tad more expensive but after being in this mess are considering it to pay off in the long haul should it keep happening.I drive a 4 year old honda,it gets great mpg but Im going to consider the hybrids too now.the technology is what 60 years old..gas and electric motors?I think the uncertainty of gas prices and the waiting and pricing games have gotten alot of people fed up and are starting searching for more reliable/stable transportation costs.eventually,it would be nice if manufacturers streamlined the hybrid market and made them cheaper for everyone.We are also updating our heating to the most efficient design minus gas usage.the gas companies can eat it someday,Im tired of the games.


not to stray too far off here but there are alot of great ideas to power automobiles and trucks that dont use gas,why dont we hear more about them?

 

[R.H. Lee]

I'd wager that in the months to come, we'll see some successful prosecutions of individual price gougers. I predict the 'free marketers' will be either strangely silent, or join the chorus of condemnation then.

 

[Titus]

I'd wager that in the months to come, we'll see some successful prosecutions of individual price gougers.

Why not? All you need is a jury full of people that have no more understanding of Econ 101 than most of the people who've been boo-hooing the past few days. And there are plenty of them around.

I predict the 'free marketers' will be either strangely silent, or join the chorus of condemnation then.

Well, I guess some people could be intimidated into denying basic economic reality. Or they might just be politicians.

D@mn free market! What we need right now is some good old fashioned communism!

 

[Firethorn]

I disagree. As long as no fraud was commited, both parties agreed(however grudgingly) without force, etc, I'll be upset if a party is sued for 'price gouging'.

 

[R.H. Lee]

D@mn free market! What we need right now is some good old fashioned communism!

A 'free market' is an environment where fair market values are set between a willing seller and a willing buyer with [/b]all the facts known and neither party being under duress[/b]. Since a small group of gasoline producers control the supply, you have a monopoly, not a free market.

When all else fails, shout 'communist'. No, communism would be more along the lines of nationalizing the oil industry (at least the fuel producers) in the interests of public policy. That's not entirely out of the realm of possibility, given the recent SCOTUS ruling and the fact that Democrats will probably control the government come 2008; the Republicans having done nothing during their term.

 

[jefnvk]

I'd wager that in the months to come, we'll see some successful prosecutions of individual price gougers. I predict the 'free marketers' will be either strangely silent, or join the chorus of condemnation then.

STILL NO ONE HAS SHOWN ME HARD NUMBERS OF HOW PEOPLE ARE GOUGING, OR EVEN GIVEN A DEFINITION BEYOND 'OIL COMPANIES MAKING MORE MONEY THAN THEY SHOULD'

A 'free market' is an environment where fair market values are set between a willing seller and a willing buyer with [/b]all the facts known and neither party being under duress[/b]. Since a small group of gasoline producers control the supply, you have a monopoly, not a free market.

The oil supply is NOT a monopoly. MONOoploy means ONE. As in if Shell was the only supplier. REPEAT AFTER ME: Mono means ONE. ONE. This is just proving Titus's point that all you need is a few people without any economics background.

What you have is an Oligopoly.

In all honesty, unless you are forced to buy something by the government, I fail to see how anything should be prosecuted for gouging. Kinda reminds me a while back, when Microsoft was found guilty of overcharging consumers. There were other products out there, no one was forcing them to buy Microsoft, why should they be punished (I am leaving out the other stuff they did, that was borderline illegal).

I se no point in continuing on in this until:
1) Someone shows me some hard figures on how much costs and profits are at each step of the process
2) Someone shows me what normal figures would be
3) Defines 'gouging' past 'big oil making money'
4) Using laws of economics, shows how the change in price was not due to the potential lack of supply in the future, and simply due to 'gouging' by whatever definition they came up with

 

[Titus]

No, communism would be more along the lines of nationalizing the oil industry (at least the fuel producers) in the interests of public policy.

And would be more in line with your way of thinking...

A 'free market' is an environment where fair market values are set between a willing seller and a willing buyer with [/b]all the facts known and neither party being under duress[/b].

Okay, how 'bout this then? We don't let anyone sell gas until after all the damage has been cleaned up? We wouldn't want anyone feeling they're buying under duress.

Since a small group of gasoline producers control the supply, you have a monopoly, not a free market.

What's the minimum number of producers of a product you require for "not a monopoly"?

 

[R.H. Lee]

And would be more in line with your way of thinking...

No, I'm just not drinking the same corporate/government KoolAid™ you are.

What you have is an Oligopoly.

That's a distinction without a difference. The result is the same.

In all honesty, unless you are forced to buy something by the government, I fail to see how anything should be prosecuted for gouging.

IF (notice I said if) supplies are manipulated, rationed, crimped by producers to support high prices, it's not a 'free market', and those high prices would qualify as 'gouging'. Gasoline is not for the most part a 'luxury' item that you can choose to forego. For nearly all of us it's a basic economic necessity. Its consumption is guaranteed into the future as far as the eye can see. There is no reason for oil companies to enjoy windfall profits at the expense of the overall economy.

 

[jefnvk]

It may be similiar, but it still shows the lack of knowledge of many in economics when I keep hearing people cry that the oil industry is a monopoly, over and over, its a monopoly, its a monopoly.

 

[Flyboy]

IF (notice I said if) supplies are manipulated, rationed, crimped by producers to support high prices

I agree; when producers manipulate the market, it's not a free market.

Unless, however, you're alleging that the gasoline producers orchestrated the hurricane, that statement's a non sequitur.

BTW, an oligopoly does have some significant differences from a monopoly. It's not as free as a market with a large number of suppliers, but it does provide some protection against the producers abusing the market, unless there's collusion. Are you alleging collusion (a criminal action) among the producers?

There is no reason for oil companies to enjoy windfall profits at the expense of the overall economy.

Sure there is. They have a product that's in high demand right now. That's how capitalism and free markets work: if a lot of people want your product, you can make money at it.

By the way, they'll not be keeping a lot of that money. Turns out that building or rebuilding refineries is expensive. Guess where those "windfall profits" are going to go.

Titus commented that you seem to be trending toward communism. I'll not use the dreaded c-word, but you clearly seem to be favoring centralized (governmental) control of the market. Rather than trying to infer your beliefs from your posts, why don't you tell us all what you would do, were you king? How would you solve this temporary interruption in the supply chain?

 

[R.H. Lee]

Beginning in the late 1990s, the industry saw increased consolidation as already large oil companies merged with each other, including Exxon (the largest U.S. oil company) with Mobil (the second largest; forming ExxonMobil), Chevron with Texaco as ChevronTexaco, British Petroleum with Amoco and ARCO as BP, and Conoco with Phillips Petroleum as ConocoPhillips.

http://www.answers.com/topic/history-of-the-petroleum-industry

Crude oil production in Opec only costs between $7 and $8 per barrel.

Meanwhile, based on their 2003 financial reports, Chevron Texaco spends $3 per barrel for exploration, and Royal Dutch Shell, almost $4 per barrel. This means that the upstream (exploration and production) costs plus the royalties range from $15 to $17 per barrel, or a difference of $18 to $20 per barrel from the latest price of Dubai crude. The difference between the posted price and the estimated total cost of producing crude oil represents windfall profits for the oil companies.

Giant oil companies' strategic control of crude oil production is further strengthened by their domination in the downstream level of the global oil industry. The six biggest oil TNCs in the world (Exxon Mobil, Royal Dutch Shell, BP, Total, Chevron Texaco, and Conoco Phillips) own 186 of the 744 refineries in the world. As of 2003, they also accounted for 19 percent of global refining capacity of 112.4 million barrels per day and 16 percent of global sales of petroleum products of 79 million barrels per day.

http://www.inq7.net/opi/2004/jun/15/letter_2-1.htm

and this:

http://www.citizen.org/documents/oilmergers.pdf

There's plenty more hard verifiable numbers available. But why let facts get in the way of ideology?

Anyway, I'm on my way to the range right now. Gonna drive my truck, which only gets 16 or so mpg

 

[Titus]

No, I'm just not drinking the same corporate/government KoolAid™ you are.

Yeah, it's either the KoolAid or the bachelor's in Industrial Management and Finance MBA that drives my view of basic economics.

Gasoline is not for the most part a 'luxury' item that you can choose to forego. For nearly all of us it's a basic economic necessity.

Why? What happens as prices go up? Shortages persist? What happened in the late 70s/early 80s?

There is no reason for oil companies to enjoy windfall profits at the expense of the overall economy.

What is the correct level of profit for a company? How will you enforce that? This makes sense if I'm going to run on the Dean/Titus '08 ticket, but not if I know how the free market actually works. Why is that?

 

[Titus]

Crude oil production in Opec only costs between $7 and $8 per barrel.

Q: Is price a function of cost?

 

[Titus]

Titus commented that you seem to be trending toward communism. I'll not use the dreaded c-word, but you clearly seem to be favoring centralized (governmental) control of the market.

Well, if MONOpoly=oligopoly, then I get to use the c word!

By the way, they'll not be keeping a lot of that money. Turns out that building or rebuilding refineries is expensive. Guess where those "windfall profits" are going to go.

Exactly! I think I may be stealing from the PJ O'Rourke book I recommended, but as it turns out, at the Exxon offices, Scrooge McDuck isn't in his vault swimming in his pile of cash...

 

[TaxPhd]

jefnvk, Mike, Titus, and others,

This is an interesting discussion. It appears that those of us who have actually studied economics seem to be on the same page.

This whole thing reminds me of one of Billy Bob Thornton's lines from Tombstone:

"I feel like I'm arguing with my sister's kid's."

For those on the price gouger/market manipulator side - show some evidence of price fixing, because without it, you don't really have an argument.




Scott

 

[Titus]

http://www.answers.com/topic/histor...roleum-industry

Hey, what does the rest of the paragraph you quoted say?

http://www.inq7.net/opi/2004/jun/15/letter_2-1.htm

This is under "Letters to the Editor" and contains gems like this:

Consider this: If Shell oil were pumped from Shell oil fields into Shell storage tankers, and through Shell pipelines, on to Shell retail stations, what can prevent Shell from manipulating the amounts in their transactions? Of course, there are "commodities markets" in the global oil industry but if giant companies are both the buyer and the seller, such markets lose their significance.

 

[mussi]

Coronach is still wrong

Coronach left out a few ideas how the fuel price problem could be alleviated.

Let's have a look at a country that is much-maligned by every other European country and has become the target of many jokes: Belgium.

After the fuel prices have become very high, they did something very sensible. Every family gets a 75 Euro rebate in their next tax return, which equals 75 more Euros to spend, car or not.

The effect? The price at the pump stays high, but at least these who really have to commute by car get a little rebate. And those who don't have a car can at least partially offset the additional cost of heating oil, more expensive deliveries and so on. Maybe some countries could take a hint?

 

[Owen]

sounds like another wealth redistribution scheme to me.

In other words, Belgium is making a killing of the taxes on the gas, just from the people that buy gas.

At the end of the year, they redistribute the money to everybody.

If that was my good idea, I would hope to be much maligned also.

Why don't they rebate the money to the people that spent it, or better yet, just lower the taxes on gas to get the price back to "reasonable," whatever that is.

3 companies owning 1/4 of the refineries, and 18% of the capacity does not make a monopoly, or even an oligopoly. It indicates to me that are probably 50 or 60 players in the game. The big guys are always much bigger than the little guys in every industry. Look at the gun industry...5 or 6 huge companies, and dozens, hundreds of small manufacturers. Is the gun business a monopoly?

Oh and the surest way to make sure that those big companies don't become monopolistic...huge profits. High profits will attract new companies to the business like poop attracts flies. Then those competitors will undercut the big guys, and prices will drop. I think Adam Smith called it the invisible hand.

Of course, I'm sure you think that companies that produce products you "need" should be charities.

 

[JohnBT]

I was just browsing a shotgun board and noted some posts that prices in parts of the country have fallen 50 cents/gal. Looks like the supply is coming back.

John

 

[Moondoggie]

If anybody's interested in perusing current gas/diesel prices all over the country you can go to the Flying J website.

This is the first time in 6 yrs of trucking that I've seen them annotate "Low Supply/Out" status on their website.

You also have to factor in state fuel tax differences which run from about 0.13/gal in OK to 0.33 in NY and the more populus states (except NJ which has surprisingly low rates).