"Don't Pump Gas Day" results.

[AcidicDreams 10+ year member]

So if they all build new refineries then they would be back at square one. The only way for this to work is if only one or two oil companies gets another refinery/drilling space. And if one oil company has prices that are drastically different from the others there would be more problems than it would be worth it. And again, why raise volume if they could just keep the profit margin high. Lower cost, keep volume the same, the profit margin would cover the benefit of lowering the price. My main point is why trade profit margin for volume. Seems like a fruitless effort. Unless the oil companies absolutely cannot fill the demand then more refineries would be kind of pointless.

Because businesses naturally expand to meet higher demand, look at the airlines, they follow the same cyclical pattern oil companies have. So why would airlines expand to meet the demand of the flying public only to get clobbered every 10-14 years by low demand and be wrought with over capacity? Because, businesses naturally expand to capture more of the demand. It's how a free market works.

For instance, if oil company A doesn't expand and oil company B does, B will make MORE oil, taking in more money than company A, even if it does lower the price of oil a bit.

This is assuming there is competition without collusion. If all the oil companies agree to not expand production (like OPEC does) then it is illegal, ie collusion and the government would step in and kick some ***...

If all of them collectively do nothing, without collusion nothing is illegal, but the abnormal profits will spur new entry of businesses into the industry, assuming they can come up with the capital (this is called a barrier to entry)

 

[AcidicDreams 10+ year member]

it would work, if..... they regulated as they did in 1978. reagan made a mistake by allowing big oil to own the drilling, refining and selling of petro. previously, they could only own 2 out of 3. today, they have a monopoly.

It is not a monopoly because multiple companies own all three... therefore they still compete on price, just at the pump instead of at the wholesale level...

 

[azimuth 5,000+ posts]

AGGHHHHHHHH, regulation CAUSED GAS SHORTAGES...
F*CK you if you think your right to pay less money for gas trumps my right to use as much as I want....

f*ck you if you think monopolies should be allowed. there are laws against it for a reason. gas prices are proof to that. read up. regulation didn't cause it, de-regulation did.

 

[AcidicDreams 10+ year member]

f*ck you if you think monopolies should be allowed. there are laws against it for a reason. gas prices are proof to that. read up. regulation didn't cause it, de-regulation did.

Umm I read your post wrong, regulating the PRICE of gasoline caused shortages...

I actually agree that monopolies should not be allowed.

I fixed the post to say that I don't agree that is exactly a monopoly because multiple companies own their whole production/distribution channels..

 

[wu36ca 10+ year member]

Because businesses naturally expand to meet higher demand, look at the airlines, they follow the same cyclical pattern oil companies have. So why would airlines expand to meet the demand of the flying public only to get clobbered every 10-14 years by low demand and be wrought with over capacity? Because, businesses naturally expand to capture more of the demand. It's how a free market works.
For instance, if oil company A doesn't expand and oil company B does, B will make MORE oil, taking in more money than company A, even if it does lower the price of oil a bit.

This is assuming there is competition without collusion. If all the oil companies agree to not expand production (like OPEC does) then it is illegal, ie collusion and the government would step in and kick some ***...

If all of them collectively do nothing, without collusion nothing is illegal, but the abnormal profits will spur new entry of businesses into the industry, assuming they can come up with the capital (this is called a barrier to entry)

This was kind of my point. The only reason A and B are not building refineries are because of environmental laws and not capital or demand issues. If B can build a refinery or drill somewhere then A should be allowed to also or else the government is favoring a company. Which in this situation would be extremely bad.

A small example is the cafateria at my work. When it was really cold quite a few months ago they raised the price of salads because of bad lettuce crops. They made it sound temporary because of abnormal weather. Well the price never went down even when the weather got back to normal. I know there should be a delay between the price changes, but its been a long time. So basically prices went up, but volume stayed the same. The same amount of salads were consumed so there was no reason to lower the price. Its not like people will find excuses to drive once the price of gas goes down. Its more expensive to drive a hybrid than pay the extra cost of gas so chances are hybrid owners will not decrease. Because of inelasticity of demand that supply curve can move pretty high before people actually change their habits.

In your example there are substitutes to airline travel as well as the market is not nearly as inelastic as oil. Its easier to give up one trip a year than change daily routines. We will pay the prices no matter what and the only thing that will change is we will ***** more. Businesses do expand, but do they have motivation to pass the benefits onto us when they know we will pay whatever to meet our demands. And unless one oil company expands at a different rate than the few compatitors in the business, then there is no benefit to the companies to change. I could see the prices not going up anymore, but I doubt they will ever go down.

 

[Pl8er 5,000+ posts]

Maybe this will shock some of you, but multi billion dollar corporations use teams to determine usage, problems, etc. of the industry. They are not going to be really impacted by a one day decrease in usage. It all averages out. The truth is that Americans are not driving any less because gas is more expensive. Usage is the same or higher every month. So take a few days without buying gas, they have been prepared for that for some time.

Be smart, you want to save money on gas? Do what I did, buy a motorcycle. Or carpool, get a hybrid, turn your car off when not in use for more than 30 seconds.

A few hundred thousand pissed consumers will not change or bother the oil industry.

 

[AcidicDreams 10+ year member]

This was kind of my point. The only reason A and B are not building refineries are because of environmental laws and not capital or demand issues. If B can build a refinery or drill somewhere then A should be allowed to also or else the government is favoring a company. Which in this situation would be extremely bad.
A small example is the cafateria at my work. When it was really cold quite a few months ago they raised the price of salads because of bad lettuce crops. They made it sound temporary because of abnormal weather. Well the price never went down even when the weather got back to normal. I know there should be a delay between the price changes, but its been a long time. So basically prices went up, but volume stayed the same. The same amount of salads were consumed so there was no reason to lower the price. Its not like people will find excuses to drive once the price of gas goes down. Its more expensive to drive a hybrid than pay the extra cost of gas so chances are hybrid owners will not decrease. Because of inelasticity of demand that supply curve can move pretty high before people actually change their habits.

In your example there are substitutes to airline travel as well as the market is not nearly as inelastic as oil. Its easier to give up one trip a year than change daily routines. We will pay the prices no matter what and the only thing that will change is we will ***** more. Businesses do expand, but do they have motivation to pass the benefits onto us when they know we will pay whatever to meet our demands. And unless one oil company expands at a different rate than the few compatitors in the business, then there is no benefit to the companies to change. I could see the prices not going up anymore, but I doubt they will ever go down.

^^ That is true!

The inelasticity of demand is the biggest problem, since technically they could raise prices almost forever before people start making that 20-30 mile commute by foot.

Yes the airlines are somewhat of a bad example because of the substitutes but for the traveling business class people they aren't terribly inelastic and driving is not a good substitute so it holds up to a little scrutiny.

A final point is that the oil industry has shot itself in the foot several times with overcapacity so we'll have to see what happens. Remember 1998? That wasn't that long ago and I paid less than .90 a gallon in NH. Our memories are short in America and it could turn out that this is a temporary situation. It is my opionion that even more de-regulation, not of the business but of the environmental laws, would bring down gas prices. If capacity increases they do not want to hold massive inventories of refined gas. Which is my only criticism of your example because the cafeteria doesn't need to inventory anything and wouldn't think twice of dumping the salad in the garbage if it went bad and taking the .25 cent hit... but examples are examples so whatever...

Anyways, good post, I'm not sure how we ended up at odds since we are making the same argument there. I just get riled up when people start attributing things to the President (good or bad) because they don't understand something like basic micro/macro-economics.

 

[Flipx99 5,000+ posts]

I think it is the general lack of understanding of a free market that causes the informed to blame the President. They want him to do something. The solutions I proposed make the President do something, mostly to appease the American people. They don't understand that sometimes inaction is the best choice.

I usually disagree with the President (or any other government institution) meddling in the affairs of a free marketplace.

Because of available substitutes, I don't think gas could raise forever. At some point, alternative fuels become profitable. The problem is that OPEC controls supply just so they do not become profitable. Whenever people begin to invest heavily in alternative fuels, OPEC increase supply, the price drops, and the investment dollars dry up.

Although it is a form of corportate welfare, subsidizing investments in alternative fuels would lessen the ability of OPEC to participate in this (I will use the earlier reference) cat and mouse game.

The problem with breaking the back of OPEC is the destabalization of the Middle East. Because they do not have self-sustaining resources and depend on the deportation of oil, strangling OPEC would give rise to new terrorists that hate us for crumbling their oil-based economies. Sustaining OPEC by not countering it is a form of corporate welfare, in a sense. We are proping the cartel, when investments could be made to dissolve it. At a certain point, countries will break ranks. Saudi Arabia has done it before.

The last paragraph was pure speculation. I accept it will get debated/argued and I welcome any comments about it.

 

[wu36ca 10+ year member]

^^ That is true!
The inelasticity of demand is the biggest problem, since technically they could raise prices almost forever before people start making that 20-30 mile commute by foot.

Yes the airlines are somewhat of a bad example because of the substitutes but for the traveling business class people they aren't terribly inelastic and driving is not a good substitute so it holds up to a little scrutiny.

A final point is that the oil industry has shot itself in the foot several times with overcapacity so we'll have to see what happens. Remember 1998? That wasn't that long ago and I paid less than .90 a gallon in NH. Our memories are short in America and it could turn out that this is a temporary situation. It is my opionion that even more de-regulation, not of the business but of the environmental laws, would bring down gas prices. If capacity increases they do not want to hold massive inventories of refined gas. Which is my only criticism of your example because the cafeteria doesn't need to inventory anything and wouldn't think twice of dumping the salad in the garbage if it went bad and taking the .25 cent hit... but examples are examples so whatever...

Anyways, good post, I'm not sure how we ended up at odds since we are making the same argument there. I just get riled up when people start attributing things to the President (good or bad) because they don't understand something like basic micro/macro-economics.

I think its because you probably see it more as a supply issue whereas I see it as a demand issue and that is where are disagreement comes from.

 

[bryce-man 10+ year member]

all i know is that gas is still upwards of $3.55 here...

one day i filled up and it came out to $66.60

gas=666

hahaha