# $2.00 Gas Coming?
**URL:** https://boards.straightdope.com/t/2-00-gas-coming/370795
**Category:** Great Debates
**Created:** [August 30, 2006, 3:04pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795 "2006-08-30T15:04:21Z")
**Posts on this page:** 20
**Page:** 21
### Author:  [@John\_Mace](https://boards.straightdope.com/u/John_Mace)
#### Post date: [May 1, 2007, 9:14pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/401 "2007-05-01T21:14:21Z")
[QUOTE=lowbrass]
And Microsoft has been ROUNDLY CRITICIZED for restraint of trade! Is that really the example you want to go with?
[/QUOTE]
And did the government break up MSFT? No.
Every large, successful company is going to have anti-trust action against them.
Of course you completely ignored the main point of that post, but it doesn’t look like you’re interested in honest debate here, just railing against evil Big Oil. And you wonder why Renob has to keep saying “you missed my point”. You did!!! Sheesh. :rolleyes:
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### Author:  [@wendigo1974](https://boards.straightdope.com/u/wendigo1974)
#### Post date: [May 1, 2007, 9:56pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/402 "2007-05-01T21:56:37Z")
Why can’t you guys be happy paying $8 a gallon like us Yerp types.
Is fuel such a big hit to the pay check in the US?
Imagine paying four times as much :eek:
Although it is 95 Oc admittedly … the 98 Oc is $9
---
### Author:  [@lowbrass](https://boards.straightdope.com/u/lowbrass)
#### Post date: [May 1, 2007, 10:23pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/403 "2007-05-01T22:23:07Z")
[QUOTE=Renob]
All I was saying was that the original point of this thread was discussing the supposed manipulation of gas prices.
[/quote]
Yes, I know. So please stop saying I “missed the point”, because that is not true.
> [@](#):
>
> Except that it does. People here are complaining that gas prices are going up right now. They contend – without any evidence – that it is because evil oil companies are gouging them.
But there _is_ evidence, and I have posted it. The facts, which you have not successfully disputed are that oil companies’ profits have soared to record levels (record levels for the companies themselves) at the same time as those same companies are citing shortages and crude oil price increases as the reason for their price hikes. If it’s really costing them that much more to do business, wouldn’t their profit remain the same, rather than soar to new heights?
> [@](#):
>
> I’m pointing out that, no, the reason gas prices go up in the spring is due to government policies that mess with the oil supply.
I made no argument as to seasonal changes. The fact is that prices have soared overall, not just certain times of the year.
> [@](#):
>
> And, on top of that, if you really think that the oil companies’ “record” profits are contributing to the rise in gas prices, then you should also consider that the government takes a lot more in “profit” from a gallon of gas than does an oil company.
I don’t know why you keep saying that. I originally got into this thread because I scoffed at the idea that gas prices are determined solely by free-market forces. It’s quite obvious they are not. You have invented this strawman that I’m just “complaining about high prices”. If that’s all I were doing, then what the goverment takes would be relevant. But it’s not. I’m not “complaining about high prices”, I’m arguing that this is not a fully free-market situation. Neither is Microsoft, for that matter.
> [@](#):
>
> I don’t know if any company is saying they are increasing prices because of an increase in cost and oil shortages.
Of course they are saying that.
> [@](#):
>
> These things rise and fall due to supply, demand, and government policy. Their profits, in general, rise and fall due to supply and demand. With a high demand and restricted supply, of course they are going to have high profits.
If there were truly free competition between the oil companies, one company would be able to undercut the other’s high prices. “restricted supply” is a false exuse the companies are giving for their high prices.
> [@](#):
>
> It’s basic economics. The rise in gas prices cannot be explained by their huge profits, however. Their profits only account for somewhere between ten and twenty cents a gallon (see the Conoco cite above).
I don’t believe the rise in prices is _entirely_ unjustified - the cost of doing business _has_ gone up. But I believe they are taking _more_ profit than justified by their increased costs.
> [@](#):
>
> If you are talking about why gas prices are going up now, then you have to discuss the government policies that are making them go up. You want to blame corporations. The true culprit is the government.
I disagree. You haven’t shown the run up in prices in the last few years to be the result of government policies.
> [@](#):
>
> Again, you miss my point.
Yawn. You sound like a broken record.
> [@](#):
>
> It’s not only taxes, it is government policy that raises prices indirectly. If you don’t know about how the government’s interference in the market raises prices then you are missing a large chunk of the big picture: [Gasoline Prices: Conspiracy or Plot?](http://reason.com/news/show/119300.html)
Your libertarian blog is talking about seasonal and regional variations in price of 12% at the high end. I’m talking about over 100% increase in price nationally since 2000. Sorry, but that doesn’t cover it. Show me a cite that proves _the government_ has caused gas prices to go from $1.40 in April 2000 to $2.92 in April 2007.
[http://www.eia.doe.gov/oil\_gas/petroleum/data\_publications/wrgp/mogas\_history.html](http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_history.html)
> [@](#):
>
> I never said that taxation was responsible for the raise in prices. I said governmetn policy. Again, if you don’t know the difference then you are missing a lot in this discussion.
There’s a big difference between you not explaining your point clearly, and me “not knowing the difference”. Is it too much to ask that we just have a discussion without posturing and recriminations?
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### Author:  [@lowbrass](https://boards.straightdope.com/u/lowbrass)
#### Post date: [May 1, 2007, 10:24pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/404 "2007-05-01T22:24:47Z")
[QUOTE=John Mace]
And did the government break up MSFT? No.
Every large, successful company is going to have anti-trust action against them.
Of course you completely ignored the main point of that post, but it doesn’t look like you’re interested in honest debate here, just railing against evil Big Oil. And you wonder why Renob has to keep saying “you missed my point”. You did!!! Sheesh. :rolleyes:
[/QUOTE]
Pot? Kettle on line 1. It’s quite apparent from this post that you are only interested in posturing and putting others down. I don’t see much point in continuing with you.
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### Author:  [@Precambrianmollusc](https://boards.straightdope.com/u/Precambrianmollusc)
#### Post date: [May 2, 2007, 1:42am UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/405 "2007-05-02T01:42:40Z")
[QUOTE=lowbrass]
SNIP
I disagree. You haven’t shown the run up in prices in the last few years to be the result of government policies.
Your libertarian blog is talking about seasonal and regional variations in price of 12% at the high end. I’m talking about over 100% increase in price nationally since 2000. Sorry, but that doesn’t cover it. Show me a cite that proves _the government_ has caused gas prices to go from $1.40 in April 2000 to $2.92 in April 2007.
[http://www.eia.doe.gov/oil\_gas/petroleum/data\_publications/wrgp/mogas\_history.html](http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_history.html)
SNIP
[/QUOTE]
Well the price of crude oil has gone from 30 /bbl to 60 /bbl since 2000, so is it really surprising that a doubling of the raw product has lead to a doubling in price of the refined product?
Why does this need a theory of market manipulation to explain the increase in price of gasoline at the pump? Raw product up, refined product up, raw product down, refined product down.
There are disconnects, the correlation is not perfect and many other factors have an influence. Industry manipulation is not needed as a reason as far as I can see.
If you accept the crude price to retail price correlation, and you say the retail price is being unfairly controled by the oil companies, is it not reasonable to accept that this argument relies on the oil companies controling the price of crude?
On the subject of unjustified increases in profit
If I spend 100 M$ buying shipping refining etc etc crude and I sell it for 120M$ I make 20 M$ which is 20%
If the price of crude refining etc etc doubles to 200M$ and I sell for 240 thus my profit is 40M$ which is a 100% increase over last year. However it is still only 20% profit on what I had to invest (that 200M$)
So my profits as a function of revenue have stayed the same. This is perfectly accetable. If you are sugesting that I should restrict my profit to the same 20M$ I made last year and thus reducing my profit from 20% to 10% then I think we may have a fundamental difference of opinion on how businesses should be run.
The investors will not put money into a business that shows such a huge reduction in the capital employed.
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### Author:  [@scotandrsn](https://boards.straightdope.com/u/scotandrsn)
#### Post date: [May 2, 2007, 2:08am UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/406 "2007-05-02T02:08:44Z")
[QUOTE=John Mace]
And did the government break up MSFT? No.
[/QUOTE]
Yes they did, or at least decided to. MSFT got the decision overturned due to a technicality, not because of any problem with the findings of fact, which are a real eye-opener to anyone who takes the time to read them.
By the time of the overturn, the new Ashcroft Justice department couldn’t be bothered to rebring suit, despite the fact that the merits of the case still stood.
[QUOTE=John Mace]
Every large, successful company is going to have anti-trust action against them.
[/QUOTE]
Really? We must not have very many large successful companies then. I can think of: Standard Oil, US Steel, IBM, AT&T and Microsoft. That’s five in over a century.
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### Author:  [@ShibbOleth](https://boards.straightdope.com/u/ShibbOleth)
#### Post date: [May 2, 2007, 11:40am UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/407 "2007-05-02T11:40:38Z")
[QUOTE=wendigo1974]
Why can’t you guys be happy paying $8 a gallon like us Yerp types.
Is fuel such a big hit to the pay check in the US?
Imagine paying four times as much :eek:
Although it is 95 Oc admittedly … the 98 Oc is $9
[/QUOTE]
I’ve lived in Europe. Paid more, but also had many more transportation options (trains, boats and light rail). Plus things were built up much closer together so that if I did need to get something I could often walk or just get into the city and then get around there. Sadly, the USA has for the most part not been built this way, and most major metro areas are seriously lacking in simple ways to get around.
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### Author:  [@Renob](https://boards.straightdope.com/u/Renob)
#### Post date: [May 2, 2007, 1:29pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/408 "2007-05-02T13:29:02Z")
[QUOTE=lowbrass]
But there _is_ evidence, and I have posted it. The facts, which you have not successfully disputed are that oil companies’ profits have soared to record levels (record levels for the companies themselves) at the same time as those same companies are citing shortages and crude oil price increases as the reason for their price hikes. If it’s really costing them that much more to do business, wouldn’t their profit remain the same, rather than soar to new heights?
[/quote]
As **NaturalBlondChap** has pointed out, your analysis of how business works is flawed.
> [@](#):
>
> I don’t know why you keep saying that. I originally got into this thread because I scoffed at the idea that gas prices are determined solely by free-market forces. It’s quite obvious they are not.
True, as I have pointed out, the government influences the price a lot. Outside of that, though, the rising gas prices are generally a result of supply and demand. The demand continues to increase and crude oil costs more. It’s not hard to see why prices are going up. It’s no conspiracy like you allege. You say you have presented evidence of this, but I haven’t seen any. You simply say that profits are large and assume that’s somehow the reason prices have gone up. As I’ve pointed out, oil company profits only account for a small fraction of the price of a gallon of gas.
> [@](#):
>
> I don’t believe the rise in prices is _entirely_ unjustified - the cost of doing business _has_ gone up. But I believe they are taking _more_ profit than justified by their increased costs.
So there is a justifiable profit level now? Companies are only supposed to make a certain percentage of profit? Anything above that is evil? That’s not how a market economy works, you know.
BTW, if you don’t like the “unjustified” profit these companies are making, you can simply refuse to buy their product.
> [@](#):
>
> I disagree. You haven’t shown the run up in prices in the last few years to be the result of government policies.
I never said it was. As **NaturalBlondChap** has shown, the reason it has gone up is that crude oil prices have skyrocketed. However, the government’s policies cause gas prices to jump in the spring. That increase was the reason this thread was resurrected and that’s what I was talking about.
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### Author:  [@ralph124c](https://boards.straightdope.com/u/ralph124c)
#### Post date: [May 2, 2007, 3:14pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/409 "2007-05-02T15:14:43Z")
…in Cambridge, MA. Industry experts predit $4.00 by Memorial Day
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### Author:  [@ralph124c](https://boards.straightdope.com/u/ralph124c)
#### Post date: [May 2, 2007, 3:15pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/410 "2007-05-02T15:15:21Z")
…in Cambridge, MA. Industry experts predict $4.00 by Memorial Day :eek:
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### Author:  [@John\_Mace](https://boards.straightdope.com/u/John_Mace)
#### Post date: [May 2, 2007, 3:47pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/411 "2007-05-02T15:47:51Z")
[QUOTE=scotandrsn]
Yes they did, or at least decided to. MSFT got the decision overturned due to a technicality, not because of any problem with the findings of fact, which are a real eye-opener to anyone who takes the time to read them.
[/quote]
Eh. One man’s “technicality” is another man’s potential miscarriage of justice. And the issue at hand was the bundling of IE with other MSFT products, not whether to break up the company. Bottom line… MSFT is still MSFT.
> [@](#):
>
> By the time of the overturn, the new Ashcroft Justice department couldn’t be bothered to rebring suit, despite the fact that the merits of the case still stood.
Well, that’s your opinion. I can just as easily say that Ashscroft decided to drop it because the case had no merit.
> [@](#):
>
> Really? We must not have very many large successful companies then. I can think of: Standard Oil, US Steel, IBM, AT&T and Microsoft. That’s five in over a century.
By “action” I just meant some sort of investigation. Most of these cases are meant to address anti-competitive business practices and can result in a fine rather than an attempt to break up companies.
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### Author:  [@scotandrsn](https://boards.straightdope.com/u/scotandrsn)
#### Post date: [May 2, 2007, 5:20pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/412 "2007-05-02T17:20:57Z")
[QUOTE=John Mace]
Eh. One man’s “technicality” is another man’s potential miscarriage of justice. And the issue at hand was the bundling of IE with other MSFT products, not whether to break up the company. Bottom line… MSFT is still MSFT.
[/QUOTE]
Hogwash. The issue at hand was whether Microsoft used its market domination to stifle healthy competition.
The judge talked to the press in a manner that violated judicial rules of conduct, but in which the appellate court found no actual bias. In their [decision](http://www.washingtonpost.com/wp-srv/business/microsoftorder.pdf) to overturn the ruling of Jackson’s court, they stated:
[QUOTE=p. 123 ff.]
The Federal Rules require that district court findings of
fact not be set aside unless they are clearly erroneous. See
FED. R. CIV. P. 52(a). Ordinarily, there is no basis for
doubting that the District Court’s factual findings are entitled
to the substantial deference the clearly erroneous standard
entails. But of course this is no ordinary case. Deference to
a district court’s factfindings presumes impartiality on the
lower court’s part. When impartiality is called into question,
how much deference is due?
The question implies that there is some middle ground, but
we believe there is none. As the rules are written, district
court factfindings receive either full deference under the
clearly erroneous standard or they must be vacated.
\
When there is fair room for argument that the District
Court’s factfindings should be vacated in toto, the court of
appeals should be especially careful in determining that the
findings are worthy of the deference Rule 52(a) prescribes. \ Thus,
although Microsoft alleged only appearance of bias, not actual
bias, we have reviewed the record with painstaking care and
have discerned no evidence of actual bias. \
In light of this conclusion, the District Judge’s factual
findings both warrant deference under the clear error standard
of review and, though exceedingly sparing in citations to
the record, permit meaningful appellate review.
\
The judgment of the District Court is affirmed in part,
reversed in part, and remanded in part. We vacate in full the
Final Judgment embodying the remedial order, and remand
the case to the District Court for reassignment to a different
trial judge for further proceedings consistent with this opinion.
[/QUOTE]
Translation:
Dear Microsoft-
None of the terrible things Judge Jackson said about your company, either in the press or in his decision, can be shown to be untrue or indicative that he had it in for you, but since he said some of them at times and places where judgely rules specifically said he’s not supposed to, we have to give you a pass on this one.
-Love, The DC Appellate court
If that’s not a technicality, then there’s no such thing.
[QUOTE=John Mace]
Well, that’s your opinion. I can just as easily say that Ashscroft decided to drop it because the case had no merit.
[/QUOTE]
Where, in the appellate decision which upheld the lower court’s findings of fact in the case, or anywhere else, is this alleged lack of merit clearly seen?
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### Author:  [@John\_Mace](https://boards.straightdope.com/u/John_Mace)
#### Post date: [May 2, 2007, 5:30pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/413 "2007-05-02T17:30:38Z")
**Scott** : If you want to debate the antitrust action against MSFT, open another thread. If you have anything relevant to the topic of oil profits, let’s hear it. There are any number of other companies I can use besides MSFT to show that the ~10% net profits the oil companies are making is nothing other than ordinary.
---
### Author:  [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)
#### Post date: [May 2, 2007, 8:45pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/414 "2007-05-02T20:45:11Z")
[QUOTE=ralph124c]
..in Cambridge, MA. Industry experts predict $4.00 by Memorial Day :eek:
[/QUOTE]
It’s around $2.95 where I live, and my area reflects the national average pretty closely.
But I don’t believe $4 by Memorial Day, which is 3.5 weeks away. That would be an increase of what, 29¢ each week? Not gonna happen.
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### Author:  [@gonzomax](https://boards.straightdope.com/u/gonzomax)
#### Post date: [May 3, 2007, 4:46am UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/415 "2007-05-03T04:46:07Z")
[QUOTE=RTFirefly]
It’s around $2.95 where I live, and my area reflects the national average pretty closely.
But I don’t believe $4 by Memorial Day, which is 3.5 weeks away. That would be an increase of what, 29¢ each week? Not gonna happen.
[/QUOTE]
Went to $3.15 here. $4.00 Is within reach. Wow the demand must be skyrocketing again. ps the 3.15 is reg. 3.45 for the expensive stuff.
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### Author:  [@Precambrianmollusc](https://boards.straightdope.com/u/Precambrianmollusc)
#### Post date: [May 3, 2007, 12:44pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/416 "2007-05-03T12:44:20Z")
[QUOTE=gonzomax]
Went to $3.15 here. $4.00 Is within reach. Wow the demand must be skyrocketing again. ps the 3.15 is reg. 3.45 for the expensive stuff.
[/QUOTE]
Yes Gonzomax exactly, demand is up, supply is down
Demand wise prices are rising partially driven by a strong US gas market.
On the supply side seasonal refinery maintenance is at a peak along with several outages, add in the switch to summer specifications and you end up with a tight gas supply. Also crude is up due to the strong gas demand, OPEC cuts, falling stocks and tension due to Iran, tanker rates are at a high etc etc
Supply, demand and an eye on what are the factors driving the markets are all you need to explain the price variations.
---
### Author:  [@scotandrsn](https://boards.straightdope.com/u/scotandrsn)
#### Post date: [May 3, 2007, 1:44pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/417 "2007-05-03T13:44:41Z")
[QUOTE=John Mace]
**Scott** : If you want to debate the antitrust action against MSFT, open another thread.
[/QUOTE]
The debate is long over, I’m just informing you of the facts. MS engaged in anticompetitive practices, and the only reason they haven’t been punished for it is that the Bush administration decided not to bother to try. Not that that should get in the way of anyone’s fantasy version of events or anything.
[QUOTE=John Mace]
There are any number of other companies I can use besides MSFT to show that the ~10% net profits the oil companies are making is nothing other than ordinary.
[/QUOTE]
Let’s see them, then, because your initial two examples of why we should regard current record oil profit percentages as no big deal include one company that has been plainly shown to engage in anti-competitive practices designed to destroy the market in the name of its own profits and another [who will be defendant in a similar trial next year](http://techreport.com/onearticle.x/9821).
Sure, lots of big companies get sued for anti-trust. A lot of them should be.
---
### Author:  [@gonzomax](https://boards.straightdope.com/u/gonzomax)
#### Post date: [May 3, 2007, 2:49pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/418 "2007-05-03T14:49:37Z")
[QUOTE=NaturalBlondChap]
Yes Gonzomax exactly, demand is up, supply is down
Demand wise prices are rising partially driven by a strong US gas market.
On the supply side seasonal refinery maintenance is at a peak along with several outages, add in the switch to summer specifications and you end up with a tight gas supply. Also crude is up due to the strong gas demand, OPEC cuts, falling stocks and tension due to Iran, tanker rates are at a high etc etc
Supply, demand and an eye on what are the factors driving the markets are all you need to explain the price variations.
[/QUOTE]
Supply is down 50% then rediculous . BS. The law of supply and demand belongs in an economic cartoon. It is a silly mantra and is not real. The cost of gas is what the oil companies say it is. Just that easy. The oil in Iraq. Yes we are pumping it out like crazy , you think is resulting in less gas. Cmon think a little.
Howard Zinn claims that we did not go into Iraq to get oil but to control it. Sometimes we sit on it to hold prices . Sometimes lower prices to make an administrations economic policies look better. Sometimes they just get greedy. They do whatever they want. Nobody controls them.
---
### Author:  [@Renob](https://boards.straightdope.com/u/Renob)
#### Post date: [May 3, 2007, 3:11pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/419 "2007-05-03T15:11:21Z")
[QUOTE=gonzomax]
Supply is down 50% then rediculous . BS. The law of supply and demand belongs in an economic cartoon. It is a silly mantra and is not real.
[/quote]
Yes, just like the laws of gravity aren’t real, either. :smack:
You can dispute the law of supply and demand, but it’s a fact. If there is a large demand for something and a tight supply, the price will go up. It’s pretty simple.
> [@](#):
>
> The cost of gas is what the oil companies say it is. Just that easy.
If you theory is correct, then why do they ever lower prices?
> [@](#):
>
> The oil in Iraq. Yes we are pumping it out like crazy , you think is resulting in less gas. Cmon think a little.
“Think a little?” That’s rich.
> [@](#):
>
> Howard Zinn claims that we did not go into Iraq to get oil but to control it. Sometimes we sit on it to hold prices . Sometimes lower prices to make an administrations economic policies look better. Sometimes they just get greedy. They do whatever they want. Nobody controls them.
Think a little.
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### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [May 3, 2007, 3:54pm UTC](https://boards.straightdope.com/t/2-00-gas-coming/370795/420 "2007-05-03T15:54:55Z")
[QUOTE=gonzomax]
The law of supply and demand belongs in an economic cartoon. It is a silly mantra and is not real.
[/QUOTE]
:rolleyes: Too funny. So, the law of supply and demand is fantasy, huh? Big oil sets the price at whatever they want it to be without regard to anything but how big they can make their profits? Let me ask you something then guru…why isn’t the price of gas at the pump $4 already? Or $5? There is every indication the market will bear that price…the Euro’s pretty much pay that much for gas after all. If all the oil companies are in it together why don’t they raise the price of gas to the maxium limit the market will bear?
I’m sure you aren’t reachable…your statement that a fundamental concept of economics is a ‘cartoon’ and ‘a silly mantra and is not real’ shows that you really are clueless about even the basics and shouldn’t be even dipping a toe into such a debate until you learn something…however, since this IS the Straightdope I figure I’ll make the effort. Besides, there might be some folks who are just lurking who ARE still able to be reached.
[Here](http://en.wikipedia.org/wiki/Supply_and_demand) is an article on Wiki about the whole Supply and Demand ‘cartoon’. Read through it. When come back, bring at least some bare bones knowledge before attempting to discuss something you obviously have zero idea about…it will make you look less foolish if you do. Trust me. 😛
Some highlights from the article:
> [@](#):
>
> The supply and demand model describes the interaction in the market for a certain good between producers and consumers, in relation to the price and sales of the good. It is the fundamental model of microeconomics, and is used to explain a variety of microeconomic scenarios, as well as as a building block for many other economic models and theories. It was originally described by Antoine Augustin Cournot, and was popularized by Alfred Marshall.
>
> The model predicts that in a competitive free market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium.
> [@](#):
>
> Fundamental theory
>
> The model asserts that in a free market, the amount of a product supplied by the producer and the amount demanded on the consumer are dependent on the market price of the product. The law of supply states that supply is directly proportional to price; the higher the price of the product, the more the producer will supply. The law of demand states that demand is inversely proportional to price; the higher the price of the product, the less the consumer will demand. Thus, supply and demand both vary with price.
>
> The law of supply and demand states that the market price of a good is the intersection of consumer demand and producer supply. If the price for a good is at a low level where consumers demand more of the good than producers are prepared to supply, there will be a shortage of the good, and consumers will be willing to pay more for it. The producers will increase the price until it reaches the level where consumers would not buy any more if the price was increased. Conversely, if the price for a good is at a high level where the suppliers would like to produce more than the consumers will buy, the producers will be willing to lower the price. The price will fall until it reaches the level where consumers would be willing to pay more for the good.
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> This point to which prices will move towards is the point of economic equilibrium, where the quantity supplied is equal to the quantity demanded — producers are prepared to sell exactly the same quantity of goods as the consumers want to buy.
That ought to get you started. Maybe, on the off chance you read and actually absorb what its saying, you will now understand what people are talking about wrt the price of oil vs the price of gas at the pump, about limited supplies and how they effect the prices of commodities. Once you have THAT down, we can talk about how competition between companies also has an effect on what the final price will be, as companies attempt to charge the least they can (in order to increase market share…another ‘silly’ concept I’m sure 😛 ) while still attempting to maximize profits. At that point you’ll be ready to actually talk in this kind of thread again…
-XT
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