Here go the oil Speculator's again!

[Shannow]

Yep, this week I watched the tomatoes on the supermarket shelf get more spotty and squishy, as people refused to pay $8/kilo...watched the $5/kilo broccolli get snapped up while the $5 each cauliflower turned brown.

And while oil is largely irreplacable now, not long ago in England, owners of diesel vehicles bought their fuel in the cooking aisle of the shopping centre (Vegetable Oil) because the price of diesel exceeded it...I remember people in Oz running their cars on paint thinners and toluene at times.

 

[TTK]

The only people who should be able to buy oil futures are those who can actually deliver it.

 

[ZZman]

T R: the only reason all these people pay is because there is no alternative. there is no alternative for oil. in your earlier sample about chicken and beef, if 1 got to costly we could switch to the other. but there is no other for oil right now. So people are stuck paying whatever the price is, reasonable or not. It is a captive market.

 

[Tornado Red]

Originally Posted By: ZZman
T R: the only reason all these people pay is because there is no alternative. there is no alternative for oil. in your earlier sample about chicken and beef, if 1 got to costly we could switch to the other. but there is no other for oil right now. So people are stuck paying whatever the price is, reasonable or not. It is a captive market.


Yes, that is why the demand is so inelastic, and why a very slight change in the supply-demand equation can cause such a big change in the price.

So far you have not told me anything I did not know.

 

[ZZman]

That is why it should be "tightly" regulated because everyone uses it and needs it and people are stuck and held captive. When this happens consumers can be taken advantage of.

Much like electricity. It needs to be regulated so people can't just jack the prices sky high and stick it to people.

 

[Tornado Red]

Originally Posted By: ZZman
That is why it should be "tightly" regulated because everyone uses it and needs it and people are stuck and held captive. When this happens consumers can be taken advantage of.

Much like electricity. It needs to be regulated so people can't just jack the prices sky high and stick it to people.


When an essential commodity is in short supply, the last thing that ought to be done is to hold down the price artificially. This only encourages hoarding and is the reason why fuel stations run out when there's a hurricane or a refinery or pipeline outage. The price needs to rise sufficiently high to discourage people from filling their tanks unnecessarily, so as to allow those who absolutely must have fuel to still get a few gallons or so.

Some call this gouging, but gouging is a legal term that has no real economic meaning. "Gouging" is exactly what should happen, what must happen, in order to ration limited quantities.

 

[TTK]

Yes, but it is not in short supply....just a bunch of people betting on the political climate.

 

[Tornado Red]

Originally Posted By: TTK
Yes, but it is not in short supply....just a bunch of people betting on the political climate.


Not on the political climate, except as it relates to supplies of the physical product. When despotic regimes undergo rapid and/or violent political changes, as happened in Iran in 1979, oftentimes this leads to a disruption in oil production. What has happened before, can happen again, and no one wants to get caught napping.

 

[ZZman]

Originally Posted By: Tornado Red
When an essential commodity is in short supply, the last thing that ought to be done is to hold down the price artificially. This only encourages hoarding and is the reason why fuel stations run out when there's a hurricane or a refinery or pipeline outage. The price needs to rise sufficiently high to discourage people from filling their tanks unnecessarily, so as to allow those who absolutely must have fuel to still get a few gallons or so.

Some call this gouging, but gouging is a legal term that has no real economic meaning. "Gouging" is exactly what should happen, what must happen, in order to ration limited quantities.

Hmmm...Or they could limit each persons amount. Say 15 gallons max. But then the greed would not be satisfied....... Plus they are not gouging to be good humanitarians are they?

** But then again you might be talking about a real shortage. Not what is happening now.

 

[Tornado Red]

Originally Posted By: ZZman
Hmmm...Or they could limit each persons amount. Say 15 gallons max. But then the greed would not be satisfied.......


I admit that I've never thought too much about rationing as anything but a desperate action of a free society, or the routine action of a despotic one. I doubt that I have much in common with anyone who would voluntarily choose an economic system based on rationing.

Of course, I'm one of those people motivated by greed -- if I want something, and I have enough money, then I don't want to mess around acquiring enough ration coupons. Because yes, I would become an economic criminal in this gray new world you'd have us living in, if you had your way.

In fact, however, the economic system you'd create would turn everyone in to a criminal. Get rid of the free market, and it returns as a black market. Need 50 gallons of gasoline? Need 100 tons of steel? Need cigarettes, chocolate, meat? It'll cost you, what have you go to trade?

 

[ZZman]

And yours would let the rich snap up all they could and let the others suffer?

You said this was a shortage situation. Why not put a limit on how much people could buy so everyone can get a shot at some. If you want 15 more gallons go back and get in line again.

**You know as well as I do TR that when gas stations gouged people they did it out of greed not some noble effort to limit people from buying too much and save some for more people.

 

[ZZman]

Maybe during this shortage I can't run down to the gas station with huge gas cans and a SUV with huge tanks and fill them all up.

Maybe I don't have the money to spend to pay the gouge price.

Should I be penalized?

Why would some limited rationing to get thru this crisis be unreasonable?

 

[Tornado Red]

Originally Posted By: ZZman
And yours would let the rich snap up all they could and let the others suffer?

You said this was a shortage situation. Why not put a limit on how much people could buy so everyone can get a shot at some. If you want 15 more gallons go back and get in line again.


What about the desperate guy who needs to get his kid to the hospital? He doesn't have time to spend 12 or 24 hours waiting in line to get fuel. But he would probably pay $10 a gallon for two or three gallons, which is all he needs.

Your "solution" would inconvenience everyone -- except maybe the rich, who can afford to hire someone to take their cares down to the fuel stations and wait in line. Millions of man-hours, maybe hundreds of millions, would be wasted because of your demented notion of fairness.

 

[OilNerd]

TR, Goldman Sachs called, and they want you to stop posting and return to their PR office, immediately.

(Please don't take offense, that's just a little light-hearted humor. I've enjoyed the debate immensely, and look forward to your posts.)

 

[Tornado Red]

Originally Posted By: OilNerd
TR, Goldman Sachs called, and they want you to stop posting and return to their PR office, immediately.

(Please don't take offense, that's just a little light-hearted humor. I've enjoyed the debate immensely, and look forward to your posts.)


I'm not offended, but I am not fan of GS. Nor am I a fan of any company that relies so greatly on its political connections in Washington. To name a few others, how about ADM, GE, GM? Goldman is one of the worst, however, because when Washington was bailing out troubled trading houses, GS made sure that Lehmann Bros and other competitors were turned down for help.

 

[Tempest]

Quote:
And yours would let the rich snap up all they could and let the others suffer?

You are quite rich by global standards, so you should be giving up a large part of your standard of living to others around the globe so they don't suffer.

How much higher is your income than the global average?

 

[Tempest]

Originally Posted By: ZZman
And who said prices need to rise just because demand does?

Pretty much sums up his argument.

 

[fsskier]

Rationing always sounds like a good solution..... until you actually do it.

Many live in cities, use mass transit and seldom move their car. I commuted to college for several years, now live 3 miles from work, and can bike easily.

Needs change constantly, who decides how much we each get? Emergency family issues occured one month, thousands of miles of driving resulted. Then for months I ride my bike to work. Daughter commuted to college, now works from her home on computer....
the list is endless.

One thing I am sure of, higher prices encourage conservation. A gas tax that was matched with income tax reductions could decrease imports, greatly improve balance of trade.... stimulating the economy, and of course help our wildly unbalanced budget deficits.

I suspect many that feel harmed by $3.75 gas were already suffering when paying $2.50 for gas, due largely to poor vehicle choice.

 

[OilNerd]

Originally Posted By: Tornado Red
Originally Posted By: OilNerd
TR, Goldman Sachs called, and they want you to stop posting and return to their PR office, immediately.

(Please don't take offense, that's just a little light-hearted humor. I've enjoyed the debate immensely, and look forward to your posts.)


I'm not offended, but I am not fan of GS. Nor am I a fan of any company that relies so greatly on its political connections in Washington. To name a few others, how about ADM, GE, GM? Goldman is one of the worst, however, because when Washington was bailing out troubled trading houses, GS made sure that Lehmann Bros and other competitors were turned down for help.


GS was just the first big futures player to pop into my mind for the quip.

 

[ZZman]

Originally Posted By: fsskier
Rationing always sounds like a good solution..... until you actually do it.

Many live in cities, use mass transit and seldom move their car. I commuted to college for several years, now live 3 miles from work, and can bike easily.

Needs change constantly, who decides how much we each get? Emergency family issues occured one month, thousands of miles of driving resulted. Then for months I ride my bike to work. Daughter commuted to college, now works from her home on computer....
the list is endless.

One thing I am sure of, higher prices encourage conservation. A gas tax that was matched with income tax reductions could decrease imports, greatly improve balance of trade.... stimulating the economy, and of course help our wildly unbalanced budget deficits.

I suspect many that feel harmed by $3.75 gas were already suffering when paying $2.50 for gas, due largely to poor vehicle choice.


The rationing idea was a answer to a short term supply issue that TR mentioned (Hurricane or Refinery issue.) It was meant to stop people from hoarding all the oil/fuel and leaving some for others. His example of the Hospital thing was funny.

As I mentioned earlier the gas station operators/companies don't raise the prices with a noble attempt to stop hoarding. They do it to gouge the consumer in a panic situation.