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Old 02-27-2012, 11:30 AM   #1
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Default Supply/Demand




Today, America is still the world's largest importer of crude oil.
Today, America's #1 export is crude oil.
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Old 02-27-2012, 01:39 PM   #2
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I paid over $4 for 93, for the first time ever today. I am sad.
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Old 02-27-2012, 02:05 PM   #3
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Thanks to speculators, my disposable income is shrinking by the hour.
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Old 02-27-2012, 02:07 PM   #4
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now you sound like bill o rielly.
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Old 02-27-2012, 02:08 PM   #5
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Too bad the GOP has promised to block any reform of commodity markets to try to fix that, huh Tekel?
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Old 02-27-2012, 02:13 PM   #6
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Originally Posted by Braineack View Post
now you sound like bill o rielly.
I'm not mad that it happens. I'm mad that I don't have the income to become involved in it.

From 2009
http://www.telegraph.co.uk/motoring/...s-to-rise.html
Speculators and others buying up oil at the height of the recession and waiting for prices to go back up and then selling.
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Old 02-27-2012, 02:26 PM   #7
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Originally Posted by blaen99 View Post
http://www.youtube.com/watch?v=wcXJR7eZ_jQ

Too bad the GOP has promised to block any reform of commodity markets to try to fix that, huh Tekel?

Quote:
Today, America is still the world's largest importer of crude oil.
Today, America's #1 export is crude oil.
Both are truths. You cannot dispute them. Well actually, no, one is wrong.

America is the #1 importer of crude oil.
America's #1 export is gasoline, diesel, and jet fuel.

okay, now that we cleared that up. Think about that for a second.
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Old 02-27-2012, 02:27 PM   #8
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Originally Posted by Braineack View Post
Both are truths. You cannot dispute them. Well actually, no, one is wrong.

America is the #1 importer of crude oil.
America's #1 export is gasoline, diesel, and jet fuel.

okay, now that we cleared that up. Think about that for a second.

We import more than we need, are urged to reduce our dependancy for fossil fuels (EPA MPG standards, recession cutbacks, our "fair share", ethanol subsideies, etc.) as well as from forgien sources and then have boatloads of oil leftover, refine it, then to sell for a bigger profit to S. America, Europe and Asia, thus causing the costs here to skyrocket.


If we stopped exporting the prices would go down. It's simple
I'm not seeing any contradiction between any of the three posts, Brainy. If anything, I'm seeing agreement.
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Old 02-27-2012, 02:35 PM   #9
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Im just talking.
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Old 02-27-2012, 02:37 PM   #10
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Ah, you had me scratching my head wondering what the topic in debate was.
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Old 02-27-2012, 03:01 PM   #11
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I fail to see how the demand for refined gasoline is at all elastic, which is a necessary assumption for a supply / demand model.

The demand for Italian silk underwear and French champagne is elastic. When the supply of these commodities decreases, and the price goes up, then consumers adjust their behavior by hanging onto their old underpants a bit longer and purchasing more domestically-produced sparkling wine.

By contrast, I have not generally observed most consumers to stop going to work or driving the kids to soccer practice in response to increased fuel prices. In the long-term, some consumers will respond to this by trading in older vehicles for newer, more environmentally harmful Hybrid cars, however I don't believe that the rate at which consumers alter their behavior in this way accounts for large week-to-week swings in retail gasoline pricing. Cars are purchased on a different time-scale from gasoline.

And while we (along with RV and boat owners) may, as a group, differ somewhat in this regard, most consumers do not expend gasoline recreationally. The purchase of gasoline is not considered to be discretionary spending by most consumers.


So I don't really accept the classical model of market equilibrium in this regard.


Although it is nice to see someone else paying a higher price for gasoline than we do in SoCal. How's that "leave California and move to the crappy Atlantic coast" argument coming?
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Old 02-27-2012, 03:11 PM   #12
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Obama keeps telling us we are producing more gas than ever in history, which I believe is true.

but we are failed to be told it's not being sold here, which is cause the prices to increase as our demand for it continues to fall.
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Old 02-27-2012, 03:19 PM   #13
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Originally Posted by Joe Perez View Post
I fail to see how the demand for refined gasoline is at all elastic, which is a necessary assumption for a supply / demand model.
What other mechanism do you suggest is responsible for gas prices?
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Old 02-27-2012, 03:22 PM   #14
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Quote:
Originally Posted by mgeoffriau View Post
What other mechanism do you suggest is responsible for gas prices?
I wasn't suggesting anything. Just making an observation.
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Old 02-27-2012, 03:23 PM   #15
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Quote:
Originally Posted by Braineack View Post
Obama keeps telling us we are producing more gas than ever in history, which I believe is true.

but we are failed to be told it's not being sold here, which is cause the prices to increase as our demand for it continues to fall.
Wait, isn't this the forum where everybody always says "unrestricted free-market capitalism is good. Government regulation of international commerce is bad"?

The free market concept requires that if people in other countries want to buy our gasoline, then we must sell it to them.
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Old 02-27-2012, 04:19 PM   #16
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There seems to be some confusion of terms and concepts on this topic, which is almost as confusing as the US tax code. Some helpful tips to reduce confusion:

If possible, please try to avoid using the term "gas" and distinguish whether you are referring to natural gas or refined gasoline (or diesel fuel or jet fuel) or NGL (natural gas liquids).

When referring to "supply and demand," remember that crude oil is a global commodity whose pricing is strongly influenced by an oligopolistic cartel.

When referring to crude oil pricing, please label it as "WTI (West Texas Intermediate)" or "Brent." The former was the traditional pricing model for US crude prices but Brent is more regularly used today as it is more reflective of global pricing. WTI is both "lighter" and "sweeter" than Brent, but trades at a discount.

[Edit] And don't forget to include pension funds and university endowments in the "speculators" grouping when referring to the financialization of commodities. Without pulling the actual figures, I would think they have way more money in commodities plays originally designed to reduce equity correlation than any other "non pure-hedge" group.
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Old 02-27-2012, 04:24 PM   #17
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Maybe people will quit driving so many tanks.

I hate driving the Jeep unless its needed, and even then I feel like an a-hole for it.
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Old 02-27-2012, 04:41 PM   #18
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I paid $4.01 at the track yesterday for 93-octane. Three sessions cost me $80 in fuel.
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Old 02-27-2012, 05:00 PM   #19
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Quote:
Originally Posted by mgeoffriau View Post
What other mechanism do you suggest is responsible for gas prices?
Actually, I take back my previous non-answer.

I suggest that the mechanism of action in regulating the end-user cost of gasoline is emotion.

Emotion at every level in the process, from Scrappy's supposed "oligopolistic cartel" down to the individual retail supplier.


Say that "Event X" occurs.

Everyone involved in the process of delivering refined petroleum products, from well to tank, simultaneously exclaims "Oh my God! (or Oh my Allah!) Event X has occurred, which will have the effect of increasing my supply costs! I must raise the price at which I deliver my product to the next step in the chain!"


Except that nothing ever actually happens to supply. It's just an example of circular logic, where everyone raises their own retail prices because they expect the person just before them in the supply chain to raise theirs.


I still posit that consumer demand for gasoline within the US is essentially inelastic, or at most, displays an elasticity of only a few percent across the range of gasoline prices which have been observed over the past few decades. People don't sell their house and move closer to work in response to a 40% increase in gasoline prices. Nor do they pull the kids out of soccer club. At most, if the cost is still high when it comes time to buy their next car in a few years, they might opt for the hybrid SUV that gets 17 MPG in the city instead of the old one which only got 16 (and, ironically, delivers only 19MPG highway, while the non-Hybrid version gets 23 MPG. I'm not making this up- check the stats on the new BMW X6. The Hybrid version consumes MORE fuel than the non-Hybrid model.)


This is where the idea that short-term supply elasticity plays a significant role in the retail price of gasoline is kind of bunk. With elastic supply and inelastic demand, a shortage of the commodity in question is inevitable. But when was the last time this actually occurred? 1974? And that was an artificial shortfall, caused by the aforementioned oligopolistic cartel actually agreeing to impose an embargo which lasted for six months. There was no problem with supply, just a bunch of guys who didn't agree with the US' military policy in Syria and decided to use oil as a lever.

Last edited by Joe Perez; 02-27-2012 at 05:17 PM.
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Old 02-27-2012, 05:31 PM   #20
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Quote:
Originally Posted by Joe Perez View Post
This is where the idea that short-term supply elasticity plays a significant role in the retail price of gasoline is kind of bunk. With elastic supply and inelastic demand, a shortage of the commodity in question is inevitable. But when was the last time this actually occurred? 1974? And that was an artificial shortfall, caused by the aforementioned oligopolistic cartel actually agreeing to impose an embargo which lasted for six months. There was no problem with supply, just a bunch of guys who didn't agree with the US' military policy in Syria and decided to use oil as a lever.
Why do you assume that the shortage was due to inelastic demand rather than price controls and rationing? Newly discovered oil wasn't subject to the price controls, the price went up, and people adjusted their demands by waiting in lines for the price-controlled old gas.

Now, if government had not controlled distribution with price controls and rationing, prices went up as a result, and STILL people didn't curtail their consumption, then perhaps I could agree with you. But leaving price controls and rationing from your analysis is only telling half the story.
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