# oil prices and the mismaged economy **URL:** \ **Category:** Great Debates\ **Created:** [March 7, 2008, 7:00pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483 "2008-03-07T19:00:16Z")\ **Posts on this page:** 20\ **Page:** 6
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [March 10, 2008, 10:21pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/101 "2008-03-10T22:21:20Z")
[QUOTE=Renob] Actually, McGee did a fairly thorough study of the Standard case. I’d say he’s pretty grounded in facts. [/quote] As far as I can see, his “study” consisted of handwaving away predatory pricing by re-labeling it “competitive pricing.” That’s not a fact-based argument; that’s sophistry. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 10, 2008, 10:42pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/102 "2008-03-10T22:42:23Z")
[QUOTE=Renob] I’d say the falling price of the products offered by Standard give a pretty good indication that they were offering a good product. Standard Oil gave people what they wanted at a much lower price than anyone else. Why is that a bad thing? [/QUOTE] Falling prices define good product? Microsoft just lowered the price of Vista. 'nuff said. ---
**Author:** ![Digital\_Stimulus](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@Digital\_Stimulus](https://boards.straightdope.com/u/Digital_Stimulus)\ **Post date:** [March 11, 2008, 1:58am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/103 "2008-03-11T01:58:56Z")
[QUOTE=Renob] > [@Digital Stimulus](#): > > Out of curiosity, do you consider Microsoft a monopoly (at the time it was declared such)? Nope. [/quote] Even more interesting. If you don’t mind, what are the conditions that must exist for a company to be (considered) a monopoly? I do hope you’re not going define away the issue by saying a monopoly is exactly “a corporation that is granted protections (of some sort) by the government”. Disclaimer: I think Microsoft was indeed a monopoly, so this isn’t exactly an innocent question. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 11, 2008, 2:06am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/104 "2008-03-11T02:06:27Z")
From [Wiki](http://en.wikipedia.org/wiki/Monopoly): > [@](#): > > The term monopoly (from Greek mono(μονό), alone or single + polο (πωλώ), to sell) can bear two main definitions: > > 1. In Economics, monopoly (also “Pure monopoly”) exists when a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. [1] Monopolies are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. [2] Alternatively (a modern and less common usage), it may be used as a verb or adjective to refer to the process (see Monopolism) by which a firm gains persistently greater market share than what is expected under perfect competition. The latter usage of the term is invoked in the theory of monopolistic competition. > 2. In political discourse, the term monopoly is frequently invoked as a blanket generalization in criticism of firms with large market share or lack of what’s perceived as “fair” competition. [3] > > The latter usage of the term is more predominant among non-economists than economists and while its assertions may hold true, it is not based upon the definition of “monopoly,” used by economists. > > To demonstrate the above definitions: Microsoft is frequently accused of being a monopoly (See Criticisms of Microsoft#Market power). But while this term is frequently invoked in political discourse surrounding Microsoft, it does not in fact bear the economic definition of a monopoly, as a firm in an industry with only one seller. While virtually all economists accept the definition of monopoly as a market structure by which there is “a persistent situation where there is only one provider of a product or service in a particular market”, their views on the appropriate ways of addressing the issue of anti-trust vary widely. Some attempt to address this ambiguity by specifically referring to the standard definition of monopoly as “pure monopoly.” Furthermore, the four main market structures are best understood as theoretical abstractions rather than absolutes [4], so the term does not bear any intrinsic expectation that there ever be a single firm with total control anymore than the theory of perfect competition requires competition to be perfect in order to exist. > > A monopoly should be distinguished from monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. > > A government-granted monopoly or legal monopoly is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic constituency. The government may also reserve the venture for itself, thus forming a government monopoly. [Another](http://www.investorwords.com/3112/monopoly.html) definition: > [@](#): > > monopoly > Definition > > A situation in which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without competition (for example, vast economies of scale, barriers to entry, or governmental regulation). In such an industry structure, the producer will often produce a volume that is less than the amount which would maximize social welfare. The way I learned it was that a Monopoly is either a company or coalition of companies who so control their portion of the market that there is zero competition…and they are able to set their pricing at whatever they want (controlling as they do such a large percentage of the market) without any outside market forces. Microsoft is definitely not and never has been even close to a monopoly. Even when Novell (who probably got closer than MS ever did on the micro server side) folded and Apple was at it’s nadir MS only controlled (IIRC) something like 60% of the market on either the server or WS side. Unix was still out there, and Apple never really completely folded…and even Netware still held onto some portion of their market share. Standard Oil was probably close to the strict definition of a monopoly…and to a certain extend government colluded with them to allow them to gain as much of the market share as they did. -XT ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 11, 2008, 3:18am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/105 "2008-03-11T03:18:00Z")
> **[European regulator fines Microsoft $1.35 billion](https://www.marketwatch.com/story/european-regulator-fines-microsoft-135-billion)** > > The European Commission on Wednesday announced $1.35 billion in fines against Microsoft Corp., stemming from a years-long struggle with the software giant... Microsoft has spent millions fighting law suits against its’ monopoly practices. If only the lawyers had your ability to see through it all they could have saved so much time and money. Relearn your definition. It is not zero.It says all or nearly all. How many antitrust suits have there been? Opera sues.Netscape sued,US government sued. [United States v. Microsoft Corp. - Wikipedia](http://en.wikipedia.org/wiki/United_States_v._Microsoft) US vs Microsoft. Not close??? ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [March 11, 2008, 3:30am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/106 "2008-03-11T03:30:49Z")
[QUOTE=gonzomax] Microsoft has spent millions fighting law suits against its’ monopoly practices. If only the lawyers had your ability to see through it all they could have saved so much time and money. [/QUOTE] 😛 … Let me rephrase that. 😛 !! [QUOTE=gonzomax] Relearn your definition. It is not zero.It says all or nearly all. [/QUOTE] Why would I need to relearn MY OWN definition? You could say my definition is wrong…but then you’d have to present some, well, evidence, that it is. [QUOTE=gonzomax] How many antitrust suits have there been? Opera sues.Netscape sued,US government sued. [/QUOTE] And this proves…? -XT ---
**Author:** ![Digital\_Stimulus](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@Digital\_Stimulus](https://boards.straightdope.com/u/Digital_Stimulus)\ **Post date:** [March 11, 2008, 3:39am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/107 "2008-03-11T03:39:39Z")
[QUOTE=xtisme] The way I learned it was that a Monopoly is either a company or coalition of companies who so control their portion of the market that there is zero competition…and they are able to set their pricing at whatever they want (controlling as they do such a large percentage of the market) without any outside market forces. [/quote] But then you ignore your own first cite, notably: “_the term does not bear any intrinsic expectation that there ever be a single firm with total control anymore than the theory of perfect competition requires competition to be perfect in order to exist_”. Even though the number of hypothetical “perfectly competitive” markets is vanishingly small, I’m quite sure that you’ll still apply the concept to imperfectly competitive markets, right? If we discard the strict absolutist garbage, one question I’d ask is: what percentage of a market must be under one firm’s control to qualify as a monopoly? > [@](#): > > Microsoft is definitely not and never has been even close to a monopoly. Even when Novell (who probably got closer than MS ever did on the micro server side) folded and Apple was at it’s nadir MS only controlled (IIRC) something like 60% of the market on either the server or WS side. Unix was still out there, and Apple never really completely folded…and even Netware still held onto some portion of their market share. And this would be incorrect also, but using your second cite. Notably: “_A situation in which a single company owns all or nearly all of the market for a given type of product or service._” You seem to want to treat computing as a monolithic type. However, if you were to claim that MS is not a monopoly because of the vastly greater proportion of the computing market taken up by embedded devices, I believe most people would look at you oddly, if not think you were nuts. These things are different in _kind_. No, the appropriate “_type of product or service_” one would look at might be _desktop_ computing. IIRC, MS had at least 85% of the market (although I think it was higher…in fact, [Microsoft Watch](http://www.microsoft-watch.com/content/operating_systems/windows_desktop_market_share_to_shrink_to_58_percent_by_2007.html) in 2004 said over 90%). Not only that, they had (and still do, IIRC) explicit barriers to market entry – specifically, their OEM agreements that they will get paid _whether a computer is shipped with Windows installed or not_. One might even propose _office software_ or _web browsers_ as the appropriate type of service. I would think that it’s notable that, according to the wikipedia page on [Internet Explorer](http://en.wikipedia.org/wiki/Internet_Explorer#Usage_Share), it had a 95% market share in 2002-3. While I don’t think there is any way to tease apart the reasons for IE’s decline (and it _still_ has a 75% market share, according to the above link), it seems common sense to me that without Judge Jackson’s finding of fact (in 1999) that MS was a monopoly, other browsers would have been locked out permanently. At least, that is, until the MS monopoly was eventually broken by government intervention. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [March 11, 2008, 1:07pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/108 "2008-03-11T13:07:06Z")
[QUOTE=xtisme] Standard Oil was probably close to the strict definition of a monopoly… **and to a certain extend government colluded with them to allow them to gain as much of the market share as they did**. [/QUOTE] _Cite?_ Because I see no evidence of this. ---
**Author:** ![SmackFu](https://avatars.discourse-cdn.com/v4/letter/s/53a042/32.png) [@SmackFu](https://boards.straightdope.com/u/SmackFu)\ **Post date:** [March 11, 2008, 3:45pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/109 "2008-03-11T15:45:35Z")
When oil prices are moved 2-3% in a day, does that really have anything to do with underlying factors like consumption? ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 12, 2008, 12:44am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/110 "2008-03-12T00:44:43Z")
[QUOTE=SmackFu] When oil prices are moved 2-3% in a day, does that really have anything to do with underlying factors like consumption? [/QUOTE] No. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 12, 2008, 4:38am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/111 "2008-03-12T04:38:31Z")
[QUOTE=SmackFu] When oil prices are moved 2-3% in a day, does that really have anything to do with underlying factors like consumption? [/QUOTE] No. As I cited in the mortgage thread, the current spike is from speculation, in part because people think oil will go still higher, in part because it seems the best investment for the money that would have gone to mortgage instruments. ---
**Author:** ![flex727](https://avatars.discourse-cdn.com/v4/letter/f/258eb7/32.png) [@flex727](https://boards.straightdope.com/u/flex727)\ **Post date:** [March 12, 2008, 11:57am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/112 "2008-03-12T11:57:32Z")
[QUOTE=SmackFu] When oil prices are moved 2-3% in a day, does that really have anything to do with underlying factors like consumption? [/QUOTE] Sure it does. The futures market is not looking at today’s consumption, but the relationship between supply and demand over the next several months. A small piece of information revealed today can have dramatic effects over that time period and can cause large price swings that are entirely rational. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 12, 2008, 5:59pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/113 "2008-03-12T17:59:44Z")
[QUOTE=flex727] Sure it does. The futures market is not looking at today’s consumption, but the relationship between supply and demand over the next several months. A small piece of information revealed today can have dramatic effects over that time period and can cause large price swings that are entirely rational. [/QUOTE] It is speculation on making profits. It does not react to supply it guesses on future supply. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [March 12, 2008, 7:03pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/114 "2008-03-12T19:03:22Z")
[QUOTE=gonzomax] It is speculation on making profits. It does not react to supply it guesses on future supply. [/QUOTE] Making informed predictions\* about future supply is related to “underlying factors”, which is what the original question was about. So, you were wrong with your “no”, above, and **flex727** was right when he corrected you. \*you don’t make money by guessing, as you are as likely to guess wrong as to guess right. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 12, 2008, 9:37pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/115 "2008-03-12T21:37:10Z")
[QUOTE=John Mace] \*you don’t make money by guessing, as you are as likely to guess wrong as to guess right. [/QUOTE] Which is exactly why so many “smart” investment managers do no better than the indices. Are you seriously telling me that no one puts money into a stock or commodity on the expectation that it will rise due to the market as opposed to the underlying strength of the stock or market? If that were true, the market would be a lot less volatile than it is. I’d be interested in a list of the underlying factors in the oil market that have changed so much in the past few days. The biggest one I can think of is the increased evidence of a recession, which should drive prices down, not up. (We can remove the influence of the falling dollar, which is of course a factor.) ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [March 12, 2008, 9:51pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/116 "2008-03-12T21:51:41Z")
[QUOTE=Voyager] Which is exactly why so many “smart” investment managers do no better than the indices. Are you seriously telling me that no one puts money into a stock or commodity on the expectation that it will rise due to the market as opposed to the underlying strength of the stock or market? If that were true, the market would be a lot less volatile than it is. [/QUOTE] Depends on how you look at it. Sure, people put money into stocks because they have historically risen, if you hold them long enough. Betting on short term oil futures is a lot like buying call/put options. As you probably know, most of those expire worthless. I don’t recall the exact number, but I think it’s close to 90%. Remember, buying futures can go either way-- betting the market will go up or go down. In the short term, you might as well roll the dice if you don’t have any actual information that is telling you it should go up or down. But if you do have such knowledge, then you’re not guessing. Which is what I objected to in **gonzo** ’s post. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 13, 2008, 12:46am UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/117 "2008-03-13T00:46:53Z")
[QUOTE=John Mace] Making informed predictions\* about future supply is related to “underlying factors”, which is what the original question was about. So, you were wrong with your “no”, above, and **flex727** was right when he corrected you. \*you don’t make money by guessing, as you are as likely to guess wrong as to guess right. [/QUOTE] So you think they know . Sorry Charley, they are gambling and many fortunes have been lost in the market. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [March 13, 2008, 3:21pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/118 "2008-03-13T15:21:07Z")
[QUOTE=gonzomax] So you think they know . Sorry Charley, they are gambling and many fortunes have been lost in the market. [/QUOTE] I never said they knew. Don’t mischaracterize my posts. You’re just spewing a bunch of BS in this thread, so I really have no interest in carrying this discussion any further. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 13, 2008, 6:11pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/119 "2008-03-13T18:11:59Z")
[QUOTE=John Mace] Depends on how you look at it. Sure, people put money into stocks because they have historically risen, if you hold them long enough. Betting on short term oil futures is a lot like buying call/put options. As you probably know, most of those expire worthless. I don’t recall the exact number, but I think it’s close to 90%. Remember, buying futures can go either way-- betting the market will go up or go down. In the short term, you might as well roll the dice if you don’t have any actual information that is telling you it should go up or down. But if you do have such knowledge, then you’re not guessing. Which is what I objected to in **gonzo** ’s post. [/QUOTE] I suppose gambling is a better term than guessing. And the knowledge people have may well be spurious - which is how the stock spam scam works. In any case the point is that prices can be driven by short term speculation on market swings, not production and consumption numbers. Do you agree at least that more money coming into a market drives up prices? ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 16, 2008, 11:36pm UTC](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483/120 "2008-03-16T23:36:56Z")
Why is gambling a better term. ? A toss of the dice is a better display of money management than guessing? If the knowledge Mace claims is what drives investors,if so they would all make money. Such knowledge does not exist. It is speculation.,gambling. [Previous page](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483.md?page=5) [Next page](https://boards.straightdope.com/t/oil-prices-and-the-mismaged-economy/440483.md?page=7)