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To: malakhi

I understand what your saying and agree with most of it; even though you haven't answered the question directly.

But if that's true, then why not a gradual shift in price?


25 posted on 11/30/2004 8:18:23 AM PST by odoso (Millions for charity, but not one penny for tribute!)
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To: odoso
I understand what your saying and agree with most of it; even though you haven't answered the question directly.

You asked if, prior to the high prices, American consumers had been "ripping off" the oil companies. My answer was no, in a relatively free market, there is no such thing as "ripping off" the other party in the transaction. Buyer and seller agree on price.

But if that's true, then why not a gradual shift in price?

A few reasons. First, like the stock market, some of the price movement is due to the action of speculators. Second, an unexpected, temporary drop in supply (due, say, to a hurricane hitting an oil refinery) will cause a sudden spike in price. Also, in the gasoline market, there is a very tight balance between supply and demand. It is not as if people can stop buying gasoline entirely if the price increases. So it takes a proportionally higher increase in price in order to bring demand into line with the available supply.

29 posted on 11/30/2004 8:38:28 AM PST by malakhi
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