Gas Prices

[STSF Precip 0]

I'm not saying I like to see high gas prices (I'm as angry about the situation as everybody else), but if you have thousands of sellers willing to sell at a certain price and millions of people - showing by their actions - that they are willing to buy at that price then where is the price gouging?

 

What is the difference between "gouging" and market prices set by supply and demand?

Problem is here is the unwillingness of many to chose another means of transportation. I suppose I could carpool, take a bus..take a Metrolink Train. Yet, all are fossil fuel driven as well!

 

I will embrace the day the fossil fuel internal combustion engines are phased out. Yet I know I will be a fossil the day that happens here in the U.S. The industries have to much clout here in the US.

 

As for Gouging I believe it has taken place. To increase profits and revenue in percentage despite having to replace equipment..and while consumers are not using more of the product in question doesn't add up. I'll be very curious to see the final fiscal quarter's profit margins for the oil industry, and consumer usage reports of oil. When those reports are issued...conclusions could replace beliefs.

 

-Precip

[Dumbass 0]

But you will have to answer the question of what is "fair" profit vs. "unfair" profit - and before you even get that far, you should ask who has the right to make that decision.

[Sam_SemaJ 0]

they are somewhat going down...somewhat, what is rediculous is that a station two blocks from another will have a 50 cent difference. Its the same stuff!

[WesleyMustDie 0]

Last week, we had gas at $3.19. Now it's back down to $2.80.

[DigitalLava 0]

they are somewhat going down...somewhat, what is rediculous is that a station two blocks from another will have a 50 cent difference. Its the same stuff!

you sure its the same stuff.... ;)

[Sam_SemaJ 0]

maybe not exactly the same, but generally speaking, its all refined petroleum, there's really no possibility that Gus' Gas is selling a product that is 50 cents worth different than the stuff Fred's Fuel is selling, know what i'm saying?

 

(of course fred is a god and can do whatever he wants...)

[DigitalLava 0]

Sure Sam, atleast your medication doesn't cost 50 cents more so you should go buy some more. Now.

[STSF Precip 0]

But you will have to answer the question of what is "fair" profit vs. "unfair" profit - and before you even get that far, you should ask who has the right to make that decision.

I basically would think something would be described unfair profitwise, if profits continue to rise if demand is remains flat or worse reduced. That would seem rather seem to violate the axiom of "supply and demand" pricing.

 

As to who has the right to make that decision? I think you know the answer. Perhaps you meant who "should" have the right to make that decision?

 

-Precip

[CaptainSDavies 0]

I basically would think something would be described unfair profitwise, if profits continue to rise if demand is remains flat or worse reduced. That would seem rather seem to violate the axiom of "supply and demand" pricing.

 

As to who has the right to make that decision? I think you know the answer. Perhaps you meant who "should" have the right to make that decision?

 

-Precip

Prices never affect demand. Prices only affect quantity demanded. :)

[STSF Precip 0]

Lol...did not mean to convey that..Demand affects Prices. Here here.

 

Precip

[Cptn Corizon 0]

Cetris Parabis of course Simon. :)

 

 

And actually. There is a difference in Gasoline types. Different companies and different regions require different addatives, as well some companies will only sell more refined gasoline that is "cleaner" than others (not nessicarily higher octane :P ) The more refined the gasoline is, and the more addatives it has, the more expensive it is (EG: Exxon gasoline has Techron in it, and thus costs slightly more...on average.)

[Dumbass 0]

I thought Chevron has Techron in it. But again, for the most part, gas is gas.

 

As with any sales, however, LOCATION, LOCATION, LOCATION! That explains why gas is usually more expensive the closer the station is to a major street or highway, how difficult it is to get there (i.e. can you pull right in or do you have to make a series of turns?), etc.

 

Unfortunately, high school and college freshman/sophmore economics textbooks routinely use "demand" with "quantity demanded" as if they are the same thing. They are not. Same goes with "supply" and "quantity supplied". The distinction is not necessary for the understanding that supply and demand curves have to intersect at some point, and it is this intersection that determines the market price, but unless you understand the difference between a new point on an existing curve and the establishment of a new curve that analysis will only take you so far.

 

Underlying the supply side of the equasion is the magic formula of marginal revenue = marginal cost. It is at this point that the firm will produce as this is the point where total revenues exceed total costs at the widest point and profit is maximized. Logicly, then, if you limit how much a gas station can charge (marginal revenue) you are also creating an incentive for the station to provide less gas. We tried such price controls in the 70s and it only made the existing gas shortages worse on the general public.

Edited September 12, 2005 by Dumbass

[knlwtchr 0]

OK, all I have to say is I KNOW its price gouging. They try to blame it on Katrina, but, like Dumbass has said, this was going on way before the storm hit. What was the excuse then? The war? HA! I call bogus! Scam! Fraud! Fake! And...all those other theft-described words. =0]

 

Im paying 2.98 or there abouts, here in Ohios capital. Im running out of 20's to fill my tank. Im surprised the buses havent jacked up their prices.

[George_Pickett 0]

It's finally dropped down to $2.94 a gallon in N.W. Ohio. 20miles away I've seen it as low as $2.88 how can we aford to pay this even with limiting our travel to just work related, especially if like me you have a 20mile drive to work. My wfe drives 40miles to work but we can't move either. Got us by the........well you know. I know what you mean Andrea. :)

[Dumbass 0]

What is really peculiar is that fuel prices - as well as food prices - are not used by many economists in determining inflation. These measures are subtracted from the CPI (but not the PPI for fuel prices) for their analysis so as to not include the volatility of these commodities when comparing inflation to, say, unemployment or growth.

 

If you ask me excluding these things because of their volatility is poppycock, not to mention bad economics. So they are volatile. They are also a necessary cost of living, and inflation figures are supposed to measure the cost of living.

 

But back to my original point, why do consumers treat gasoline differently than any other comodity? Why do we complain about the rising cost of gas and cry for government intervention - and complaining about being gouged at the pump is exactly that - and make little mention of the rising cost of milk, clothes, toner cartridges, or even cars? Why do we consider gasoline (as well as education) as something that shouldn't be subject to the market but think nothing of other commodities?

Edited September 12, 2005 by Dumbass

[STSF Precip 0]

Van Roy you are quite an accountant.

 

Your last question is a valid one. Breakfast Cereal for example has gone up in price over the years consitently without signs of letting up. Since I am a creature of habit I have noticed this. (I confess I dont fix myself hot breakfast! Too Lazy).

Cereal Box sizes are actually shrinking in size on the shelves! Higher transportation (gas) costs no doubt will be passed on to the consumer to exacerbate the situation. But Breakfast Cereal is a commodity that seems to fit the point you are making.

 

Gas (Oil) is such a touchy topic, in my opinion because everyone goes to pump. As a Californian...the Car seems to be a part of life out here. To take a bus (believe it or not this would add to my commute time greatly) i should not have to do. It would seem we have the "Right to Commute our way.. cheaply". Better put perhaps...Americans feel they have the "right to cheap gas/heating oil". This is pure folly.

 

Yet high Oil costs have a larger impact than other commodities with higher prices. Higher Oil prices dont just mean higher prices at the pump. Higher Oil prices can impact the price of your next Flight, next bus ride. Your winter heating bill...the price of bananas. (heh! They do have to get driven to your market..and that requires most likely an internal combustion engine). Yes even my Fruit Loops can go up in price just a wee bit from higher oil/gasoline prices.

 

-Precip

[Dumbass 0]

Yes, I am an accountant, but my arguments are economic.

 

So energy - in all forms, whether it be oil or gasoline or electricity or coal - then is a raw material and, being such, a rise in energy costs will lead to a rise in prices in most commodities that people buy, right?

 

Maybe so, but not directly. It will increase production costs, which will reduce output, lead to scarcity, and lead to a higher price that the consumer pays as the point on the demand curve shifts. However, it is still supply and demand that determines the market-clearing price. You can only push the price of a commodity up so high before people stop buying, and gas is no exception. If the costs are pushed up higher than that people stop buying and producers leave the industry. But the fact that people are still buying gas (even though they complain about it) means we have not reached that point yet.

 

Now I have a queston for you. If your argument is that the price of gas should be kept artificially low (relative to what the market will bear) then what about other raw materials, like labor? Since labor is is also a key cost that can drive up consumer prices then should the government adopt a policy to keep employers from paying employees too much?

[HyperDrive 0]

Prices here in central Kentucky have dropped to $2.85, thankfully. It is still costing $40.00 to fill up my Accord. :)

[OHNO 0]

What is to much. The cost of living is still to high and low income people are the ones who are getting the shaft. min wage is to low to keep up with the cost of living. We need to bring down the cost of living, not bring it up. :)

[FredM 0]

What is to much. The cost of living is still to high and low income people are the ones who are getting the shaft. min wage is to low to keep up with the cost of living. We need to bring down the cost of living, not bring it up. :)

Hey there,

 

I'm glad you did not attempt to say that the minimum wage should be increased, as almost every solid economics individual will tell you that while it will provide a very "brief" short-term relief to certain individuals, in the long term the effects are adjusted for by the economy.

 

In the same light, the cost of living...should it decline...will also cause economic adjustments. Being able to say the "poor" are no longer in that state is not something that can be accomplished, in my view, thru economics. Education is the only means of defeating this beast, as an economy will simply adjust itself and leave those who are less off in the same situation.

[Cptn Corizon 0]

Hey there,

 

I'm glad you did not attempt to say that the minimum wage should be increased, as almost every solid economics individual will tell you that while it will provide a very "brief" short-term relief to certain individuals, in the long term the effects are adjusted for by the economy.

 

In the same light, the cost of living...should it decline...will also cause economic adjustments. Being able to say the "poor" are no longer in that state is not something that can be accomplished, in my view, thru economics. Education is the only means of defeating this beast, as an economy will simply adjust itself and leave those who are less off in the same situation.

::coughs:: Captalist ::coughs::

 

The classical economic theory argument for that (raising the min. wage) is so flawed...I don't know where to begin.

 

The argument (and I have sat through economics classes...apparently they think PR majors need to learn about the economy... :) ) about raising min. wage is that it will cause unemployement, and thus hurt the economy. What the theory doesn't take into account is that (and I have never heard a good rebutal to this charge, but feel free to try) when raise the min. wage, your putting more money in the hands of lower income people, who studies show are more likely to spend their new found cash, and thus will stimulate the economy. Those buisnesses which raise the Min. Wage will now find increased profits that will off set their losses, thus there is no reason to raise prices.

 

The old "invisable" hand theory is equally untrue. Modern Economic theorists acknowledge that only in the "ideal" world does the Free Market regulate it self, and that in the "real" world, the Free Market must be regulated by the Government.

 

Now back to topic. :P

 

In the "ideal" world, people would stop buying fuel (energy) when it reached a certain price. But because we're so dependant upon it, they won't. However, what they will do (as a result of scarcity) is they will buy fewer good that they don't need (such as gifts, eating out, going on vacation.) Which could/would/will have a negative impact on the overall economy.

 

I don't think anyone would argue that a Price Cieling on labor would be effective, due to the negative impacts it would have on the economy (not to mention the slippery-slope you'd be creating.)

 

However, setting price ceilings for the finished product wouldn't have the same negative impact on the actual Oil Companies (Not the people who sell the refined product, the crude oil suppliers). Because it would only cut into their profit margins. Of course, they'd use it as an excuse to lay-off the employees to make up the difference, which of course is a cop out.

 

In the old days, you would never see a corp. try and do something like that, because in the hay-day of the Nation-State, multi-national corps. had the same interests as the country..."What was Good for GM, was Good for the US." But that's not the case anymore.

 

So what is the solution? There probabbly isn't one simple resolution that will solve the problem. More likely, a combination of ideas taken in moderation.

 

[/Rant]

[Grom 0]

Studies also show that Commander Corizon does not live in the real world. You wanna talk about what's flawed? Well let's start with social science. :)

[LoAmi 0]

What I find interesting is that so far the argument has been two-sided:

There are some who think the market should be allowed to do whatever it can bear, and there are some who think the government should artificially lower gas prices. Nobody has argued yet that the government should artificially raise gas prices. Here's one submitted in an attempt to complicate this thread even more.

 

Right now, petroleum is absolutely necessary for our way of life. It's not just transportation (and absolutely every individual and corporation that relies on transportation). Plastics are made of petroleum products, and, even agricultural fertilizer is frequently petroleum based.

 

As it stands now, we're wasting large amounts of petroleum resources, and we've built the waste into the system. Does every second American really need an off-road vehicle? If gas were always more expensive, would Americans continue to buy much larger cars than they need? Would they demand more fuel efficient technologies? Would urban sprawl have taken the same course? As a counterexample, the average European's car is much smaller than the average American's. Gas prices all over Europe are kept artificially high through taxes.

 

The argument for encouraging limited use of petroleum products isn't just about the potential environmental benefits. Eventually, the world will reach peak-oil, the point where the oil supply can no longer increase. Meanwhile, worldwide demand is increasing, especially with large developing countries like China beginning to convert to an oil-based economy. Forcing the conversion away from an oil-based economy goes to the long-term survivability of the country, on the theory that it will soften the blow once peak-oil is reached. What do the economists (or armchair economists) have to say about that?

[NDak 0]

Studies also show that Commander Corizon does not live in the real world.  You wanna talk about what's flawed?  Well let's start with social science. :P

Yes...and Economics claims to be a Social Science. (Economics: The Study of how people make decsions based on Scarcity. :) )

 

 

 

Lo'Ami makes good points. Many of which I agree with...however...there are somethings to keep in mind.

 

European cars a smaller for more reasons than fuel economy. They also have less space for which to navigate. The average parking spot in Europe is about 1/4 the size of one in the US. Also their roads are, for the most part, much smaller.

 

Also they don't use roads for traveling long distance (Remember going from Germany to England is like a trip from Ohio to New York City....maybe not as far..I'd have to look.) Instead most people travel by Eurorail. However, in the US we've more or less abandonded Mass Transist.

 

Personally I don't think that setting gas prices artifically low would help the situation, it might help the economy as an intrim solution until gas prices returned to that level, but that would be a short term fix, but would not address the root of the problem.

 

As I said earlier I don't think there is a magic swtich that someone can flip and make it all better, I think instead that there will be several solutions that, if taken in moderation will help the problem.

[LoAmi 0]

Break for a science joke:

 

When faced with 5% error, a physicist gets worried by the discrepancy.

When faced with 10% error, a biologist is content with his result.

When faced with 100% error, an economist is elated by the accuracy.

:-)