Ain't this chart pretty? (Gas prices)

[Gilligan]

I just cannot grasp how a some-what regulated commodity can be allowed to fluxuate so much!

say...what?? "somewhat regulated"? How is that? How does this "allowing" you seem to think exist? Who is it that does the "allowing"? Why do you think prices fluctuate, sometimes dramatically, for any commodity? Like soy beans.....wheat...metals....

Ever look at a historical plot of the DJIA?

 

[SG_Player1974]

Yes... I see your point.

 

[Gilligan]

Lets just hope that the price of oil stabilizes, for a while, at a level that is "sustainable" and not so low that it induces too many production players to withdraw from the game. Then the price of gas will be somewhat more stable too...although the speculators will always push it around. I personally can't see $45/barrel oil ever being sustainable. But $75-80 should be....

I have not ordered heating oil yet and my 500 gal tank is near empty. I'm holding out, hoping to see the price fall a bit. Really pisses me off that the price of off-road diesel is always so much lower than what I've been raped for #2 heating oil.

 

[SG_Player1974]

My question is Why wouldn't it be sustainable?

Its not like these are engine parts or flat screens! This is a product that EVERYONE needs for several reasons. IT WILL SELL and it will sell MORE at a lower price point. Its not like the public can say "I'm going to wait to fill my gas tank until the price per barrel goes down to $XX"

They are saying "I'm going to fill up my car tank, lawn mower tanks, RV tank, etc. because it is so cheap. So then... Why doesn't a lower price, which causes more consumption, provide for an equal or better profit margin?

 

[LibertyBeacon]

My question is Why wouldn't it be sustainable?

Its not like these are engine parts or flat screens! This is a product that EVERYONE needs for several reasons. IT WILL SELL and it will sell MORE at a lower price point. Its not like the public can say "I'm going to wait to fill my gas tank until the price per barrel goes down to $XX"

They are saying "I'm going to fill up my car tank, lawn mower tanks, RV tank, etc. because it is so cheap. So then... Why doesn't a lower price, which causes more consumption, provide for an equal or better profit margin?

Look at gasoline demand curves. Demand for gasoline tends to be inelastic, which does not support your assertion that people are filling all the things on falling retail prices. Generally, people don't consume less when prices rise, nor do they consume more solely because prices have fallen. There are exceptions that prove the rule and there are other factors at play, but in broad terms these are economic truisms in gasoline.

In general, prices are shifted as a result of changes in the perception of the relationship between supply and demand. Just yesterday, for example, news coming out of the KSA said production was cut, and Libya is calling for OPEC-wide cuts. Crude markets here surged on the news. Not much has actually changed to the demand curve, yet crude has surged and if it sustains a bit, retail prices might rise a bit. Or at lest stop their current slide. It is all perception, based on this news.

 

[SG_Player1974]

In general, prices are shifted as a result of changes in the perception of the relationship between supply and demand.

It is all perception, based on this news.

And this is the problem I have. Prices are not based on FACT. They are based on "perception."

Just like the old stories of the refineries in the gulf. I THINK the hurricane will damage them therefore the price will go up $.025/gallon.

The storm comes and goes.... nothing affected!

To quote Chris Rock... "If SH!T don't happen... Shouldn't I get my money back!?"

 

[Gilligan]

And this is the problem I have. Prices are not based on FACT. They are based on "perception."

Just like the old stories of the refineries in the gulf. I THINK the hurricane will damage them therefore the price will go up $.025/gallon.

The storm comes and goes.... nothing affected!

To quote Chris Rock... "If SH!T don't happen... Shouldn't I get my money back!?"

Hmm. What you describe almost sounds like....wait for it....standard commodity speculation.

 

[SG_Player1974]

And if there are no outside effects on the resource as the speculators predict... what happens to all the extra "profit" that is earned due to their incorrect predictions?

You might be happy paying the gypsies when they are wrong but... I am not! Im not saying it will probably EVER change as far too many people at the "top" make money from it but, just voicing my displeasure with it.

 

[Gilligan]

And if there are no outside effects on the resource as the speculators predict... what happens to all the extra "profit" that is earned due to their incorrect predictions?

It offsets the losses they take when they speculated in the wrong direction. Business econ not your favorite subject, is it.

 

[SG_Player1974]

It offsets the losses they take when they speculated in the wrong direction. Business econ not your favorite subject, is it.

And when and how often does this happen specifically regarding oil?

Also.. No.. I dont claim to know everthing about everything. That is why I propose questions on here... to gain arcane knowledge from those who DO know everything!

 

[Gilligan]

And when and how often does this happen specifically regarding oil?

All the time. Like it does with EVERY commodity ever traded anywhere.

 

[SG_Player1974]

All the time. Like it does with EVERY commodity ever traded anywhere.

So.. are you saying that the public at large should brace themselves for the impending 5 year long downfall of prices at the pump? Ya' know... to make up for the 5 years of record profits made by all involved.

Because... according to you... this happens "all the time" with "any commodity traded ever."

 

[Gilligan]

You really should go do some research in to commodity trading.

And read this....then go get mad at your government for being responsible for so much of what you pay for that gallon of gasoline...

Industry profit margins are cyclical too. But on average, between 2006 and 2010, the largest oil companies averaged a profit margin of around 6.5%. This pales in comparison to profit margins in just about every other industry. The pharmaceutical industry, for example, routinely averages a profit margin of about 16%. The soft drink market is even more lucrative.

At the gas tank integrated oil companies make about 7 cents per gallon. Meanwhile, the government extracts more than 48 cents, on average, per gallon. That’s right: Uncle Sam takes nearly seven times more out of drivers’ wallets via taxation than “Big Oil.”

http://www.forbes.com/2011/05/10/oil-company-earnings.html

 

[Gilligan]

So.. are you saying that the public at large should brace themselves for the impending 5 year long downfall of prices at the pump? "

If you had bothered to read it...I said in an earlier post that I expected we might see a period of time where prices will hold right about where they are. Short attention span?...

 

[SG_Player1974]

If you had bothered to read it...I said in an earlier post that I expected we might see a period of time where prices will hold right about where they are. Short attention span?...

No... apparently just inability of you to maintain your argument/reasoning.

There is a bit of a difference between the price at the pump increasing as it has over the last half decade AND it "holding still" at a far smaller decline in price.

Your contention is that there is an ebb and flow as with ALL commodities. Goes UP, goes DOWN, goes UP, goes DOWN. The question I posed was... When are we going to see some GOES DOWN to the tune of the same amount it has gone UP in the last 5 years?

Are we going to see it go down to 2009 prices? Further? I doubt it!

 

[Gilligan]

No... apparently just inability of you to maintain your argument/reasoning.

!

Do not confuse your inability to let go of your falsely conceived narrative with your equal inability to understand how fungible commodities are traded internationally. The next time the stock market collapses...or the housing market collapses..I'll be sure to ask you to explain why.

 

[Gilligan]

Are we going to see it go down to 2009 prices? Further? I doubt it!

I sure hope not!! To repeat that magnitude of a market anomaly would create nothing but havoc.

 

[PeoplesElbow]

No... apparently just inability of you to maintain your argument/reasoning.

There is a bit of a difference between the price at the pump increasing as it has over the last half decade AND it "holding still" at a far smaller decline in price.

Your contention is that there is an ebb and flow as with ALL commodities. Goes UP, goes DOWN, goes UP, goes DOWN. The question I posed was... When are we going to see some GOES DOWN to the tune of the same amount it has gone UP in the last 5 years?

Are we going to see it go down to 2009 prices? Further? I doubt it!

At one time Frankincense and Myrrh were very valuable and I'm sure people didn't see them being almost worthless in the future.

 

[Gilligan]

At one time Frankincense and Myrrh were very valuable and I'm sure people didn't see them being almost worthless in the future.

Inorite? I put almost my entire portfolio in to Frankincense back when it was going up.

I'm still holding out some hope for a rebound....

 

[Gilligan]

Some guessplanations in this article..worth a read.

http://www.bloomberg.com/news/2014-10-29/why-oil-prices-went-down-so-far-so-fast.html