It would take a typical dumb, uninformed, uneducated liberal mindset not to understand this simple business concept.
The big eeevil oil companies are causing a sky-falling crisis.
Posted on 06/05/2006 8:43:21 AM PDT by thackney
Here's what one reader wrote: "Williams, I can understand how the destruction of Hurricane Katrina and Middle East political uncertainty can jack up gasoline prices. But it's price-gouging for the oil companies to raise the price of all the gasoline already bought and stored before the crisis." Several other readers made similar allegations. Such allegations reflect a misunderstanding of how prices are determined.
Let's start off with an example. Say you owned a small 10-pound inventory of coffee that you purchased for $3 a pound. Each week you'd sell me a pound for $3.25. Suppose a freeze in Brazil destroyed half of its coffee crop, causing the world price of coffee to immediately rise to $5 a pound. You still have coffee that you purchased before the jump in prices. When I stop by to buy another pound of coffee from you, how much will you charge me? I'm betting that you're going to charge me at least $5 a pound. Why? Because that's today's cost to replace your inventory.
Historical costs do not determine prices; what economists call opportunity costs do. Of course, you'd have every right not to be a "price-gouger" and continue to charge me $3.25 a pound. I'd buy your entire inventory and sell it at today's price of $5 a pound and make a killing.
If you were really enthusiastic about not being a "price-gouger," I'd have another proposition. You might own a house that you purchased for $55,000 in 1960 that you put on the market for a half-million dollars. I'd simply accuse you of price-gouging and demand that you sell me the house for what you paid for it, maybe adding on a bit for inflation since 1960.
(Excerpt) Read more at jewishworldreview.com ...
Doesn't Walter Williams sit in for Rush sometimes?
It's really sad that most people don't understand even the most basic economics.
Not a bad example. Could also say that those people who in the last few years were "flipping" houses were price gouging.
It would take a typical dumb, uninformed, uneducated liberal mindset not to understand this simple business concept.
The big eeevil oil companies are causing a sky-falling crisis.
How is anybody supposed to understand anything when there is so much ideology posing as knowledge?
2) You pay for tap water from the city. Unless you live in the country then you pay for the pump, a well, and some sort of septic system. Either way, you pay.
3) You can buy a cheap fuel the same way you buy a cheap house, or rent.
Your example explains it quite well. You can also purchase a higher mpg vehicle. You can live closer to work. You can travel less distance for vacations. You can combine trips or cut out nonessential. You don't eliminate the need for shelter, but there are choice to make that determines how much of your income you want to spend on this commodity. Are you telling me you have made zero changes in fuel consumption since prices were $1.50? Some people have put themselves in situations that make it difficult to significantly reduce consumption, such as living 50 miles from their work, but that is a choice as well.
Do Republicans in swing districts have brains?
I'm getting tired of,
Bush's changes to fuel laws.
May 2006, RFG gasoline laws change, surprise,
prices skyrocket.
October 2006, diesel fuel laws change.
What do you think will hvppen?
Introductory courses in Economics and Accounting. The learning experience is no more complex than balancing a checkbook.
BTW, I loved Economics, but hated Advanced Accounting. Dual majors in Econ and Marketing - class of 1972.
My point was there is an alternative to bottled water. I can buy tap water which is cheaper. But as long as I am purchasing anything, I am purchasing fuel. Fuel costs are passed on to all of us in the price of goods, even for those people who don't drive. That's why the "bottled water is expensive/ coffee is expensive" arguments are strawmen.
However, if coffee then drops to $1.25 a pound, you will still pay the $5.00 a pound until it becomes obvious to customers that there is no way that any of the higher priced inventory is still in stock. Nobody wants to drop prices to take into account that the new inventory is going to cost less. Then it isn't called gouging, it's called smart business sense.
In my experience, one supplier will first see the opportunity to increase his volume by selling at $4.50. And it continues to work the price down through competition. Supply and demand works.
I get so fed up with the hypocracy of congress-people who whine about so-called price gouging at the pump and record-profits. The true fact of the matter is that for each gallon of gas purchased, the profit made by oil companies pales in comparison to the amount of taxation on that gallon. So the REAL price gouger is state and federal governments. I say if congress people want to make a big deal about oil company profits, let them first limit taxation to NO MORE than what the oil companies profit. Otherwise they can just shut up!
Last week, the 'replacement cost' of a barrel of crude dropped by a few dollars, for a few days.
The price of a gallon of gasoline didn't drop by 5 cents or so for a couple of days, then go back up when the price went back up a few dollars.
The price at the pump shoots up any time a gnat farts in the ME almost instantly, but when the price of crude falls it doesn't change the price at the pump for at least a week.
In that everything is impacted by fuel costs, because of transportation, true. But you can do some things to counteract that.
Grow your own veggies, and purchase meat from a local farmer/butcher (usually by the quarter cow, etc.)
Keep purchases of goods in general to a minimum shopping at consignment shops or resale shops when possible.
Purchase a hybrid car, or one that uses E85, and keep driving to an absolute minimum.
Turn up the thermostat in the summer/turn it down in the winter.
That's just a few idea. Sure, it's 'painful,' but we sure don't want government controls on oil prices.
No, I don't want government price controls. But if we are fighting a war on terror for real, then we should be funding alternative energy research and not letting the oil companies any where near any of that grant money. Thge biggest threat to our national security is that we import most of our energy from hostile, enemy nations. That has to stop, and it has to stop a long time before 2020 or whatever pie in the sky date they threw out.
Yes..I love Walter...great mind.
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