Posted on 06/01/2007 8:05:41 AM PDT by george76
Few politicians can resist the urge to exploit consumer angst over gasoline prices, and thereby deflect where the blame certainly lies — with them.
Here are 10 things the politicians won’t tell you:
1. At over $3.00 a gallon, the U.S. inflation-adjusted price for gasoline in May 2007 is now less than it was in 1981, a remarkable decrease in price over a 25 year period during which real prices in other sectors, such as health and education have tripled and quadrupled.
2. This decline in the price of gasoline since 1981 is enjoyed almost exclusively in the U.S. In most other developed counties in the world, the price of gas is at least double what Americans pay. Consumers in the Netherlands now pay an average of $7.77 gallon, while those in Great Britain pay over $7 and consider it a bargain.
3. The gross profit margins of the major oil companies is far less than that for many other sectors, such as beverages, electrical equipment, chemicals, and computers.
4. At present gas prices, the major oil companies make a profit of between 10 cents and 12 cents a gallon...
5. At present prices, combined federal and state government profit (i.e. taxes) on each gallon of gas is 28-68 cents a gallon, depending on which state you live in. Pelosi’s San Francisco enjoys tacking on an extra 26 cents bite.
9. Crude oil prices, which make up 90% of the total cost of running gas refineries, are set by the international market of supply and demand, which fluctuates hourly, and not by private companies; while the major oil producing countries can form cartels (such as OPEC) which can set prices at higher than a free market, these countries are not subject to U.S. antitrust laws.
(Excerpt) Read more at blogs.rockymountainnews.com ...
It doesn't matter. You've got to actually think this thing through. So a speculator buys a bunch of oil. What then? He tries to sell it at a higher price, to whomever will buy at that price. But ultimately it has to be bought by someone who will take delivery, and that person isn't competing against speculators to buy it; he's only competing against other end users of the oil. If there aren't enough end users to actually take delivery, the price tanks; if there are too many who want it, the price rises.
Speculators *can* cause temporary spikes in prices if there are enough of them. But over a relatively short time they lose their influence, because the real demand for oil is the end user who actually takes delivery of the product. It really is simply supply and demand; the speculators are just middlemen.
There is one other point to be made here, which is that the current problem is not simply a function of the price of oil. The price of oil has not increased like the price of gasoline; the current rise in gas prices is driven more by refinery problems, many of which are associated with the changeovers to summer fuel requirements. Refinery construction, expansion, and improvements are slow because the government's push to move to ethanol has made them an extremely risky investment (they're *not* cheap), and all the environmental requirements for fuel blends cause a great deal of expense at the refinery stage.
So basically, the current high gasoline prices are caused by a combination of supply and demand affecting the price of oil, and government regulation causing a rise in the expense of refining oil into gasoline. Speculators play no real part in it; they're just along for the ride like everyone else.
I appreciate your thoughtful reply, however, I think you have failed to consider the impact that a “middleman” has on prices. They are not in for nothing. There may be risks involved, but if so, then the potential for profit must also exist.
“the speculators are just middlemen....
Speculators play no real part in it; they’re just along for the ride like everyone else.”
What, you want to be the only dancer in this club?
LOL
Did you really think Soros invented oil futures? Or were you joking?
Do you really think speculators only make oil more expensive? Or were you joking?
Not to mention that prices are high because we aren’t building refineries thanks to the environmentalists
And that impact is always to raise prices? That's funny. I guess you've never been involved in the financial markets.
I suppose you have?
Only since 1984.
Of course there's potential for profit, but it's no different than stock traders on the floor at NYSE, or other commodity traders in Chicago. They try to buy low and sell high; they're not just buying, buying, buying, because then they'd have to take delivery. They have to sell it too, to someone who can actually use it. There's serious risk to the speculator; if they guess wrong then prices will tank at the wrong time and they'll lose their shirts.
Speculators cannot affect prices in the long term, because they have no real effect on either side of the supply/demand equation. They sell the same amount of oil that they buy over time, so their net effect over time is essentially zero.
By definition, speculators are speculating (betting) on the future price of oil. If they bet right they'll do well, if they bet wrong they'll do poorly, but they have no real effect on the outcome of the bet over time.
These guys have a different opinion than yours:
“Oil has become a speculator’s paradise. Surging energy prices have attracted a horde of investors — and their feverish betting on rising prices has itself contributed to the climb.”
http://online.wsj.com/article/SB109321816171898083.html?mod=home_whats_news_us
Helps to explain your bias, doesn’t it?
Where do they store the oil they buy?
Not necessarily. I'm not a subscriber so I can't read the whole article, but I didn't deny that speculators can affect the price in the very short term. But it's fundamentally impossible for them to sustain that effect because of the realities of the market; the oil they buy has to go somewhere. If it's not bought and used - *really* used - then the supply will exceed the demand and the price will crash back to earth. That's just a logical fact of life; to deny it is to avoid thinking about it critically in favor of swallowing demagoguery.
The same place your opinions belong, a crock.
Nor will it.....ever. These people are truly delusional in the literal sense of the word.
So much for thoughtful responses, I guess. With all due respect, you have so far failed to substantively address the issue and have only been reciting the typical thoughtless remarks that I expect to hear from liberals, not conservatives. Have you actually taken the time to think any of this through?
You think that the speculators are “only” middlemen, and that their activities have no long term effect on the price of oil.
If that were true, then in the long term, speculators, as a group, would gain nothing, and lose nothing. Obviously the speculation has been going on for years, and has attracted many well-heeled players. Do you really believe they are in it purely for the sport?
As for my remark to Todd, he asked me where they store the oil. Please...let’s not presume our opponents are that stupid.
Some percent of the commodity market, both crude and RBOB gasoline, is speculators no doubt. Most contract owners are in the business and buy and sell according to what they need. The commodity market is totally regulated, which is the only way to keep the market free.
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