| Topic: |
Sociology > Depression |
| User: |
"Jamal Chapultapec" |
| Date: |
18 Apr 2004 08:27:08 AM |
| Object: |
Explain to me more of these economics |
OPEC cuts back oil production in response to the (anticipated) increased
demand in the spring and summer months. Prices skyrocket.
But this is NOT supply & demand. THAT's when demand exceeds supply. THIS is
supply being purposefully cut back (at the cost of excess, unused
capacity.) I guess ... for the hell of it? It's an artificially created
supply & demand scenario. What's the sense of it? So gas prices skyrocket,
and they make more money per gallon. If the gas cost less, they'd make up
the difference in increased gallons being sold and at least then they
wouldn't be pissing off their customers, right?
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| User: "Hap Arnold" |
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| Title: Re: Explain to me more of these economics |
18 Apr 2004 02:51:17 PM |
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"Jamal Chapultapec" <your@email.com> wrote in message
news:Xns94CF602ED7F76youremailcom@68.1.17.6...
OPEC cuts back oil production in response to the (anticipated) increased
demand in the spring and summer months. Prices skyrocket.
But this is NOT supply & demand. THAT's when demand exceeds supply. THIS
is
supply being purposefully cut back (at the cost of excess, unused
capacity.) I guess ... for the hell of it? It's an artificially created
supply & demand scenario. What's the sense of it? So gas prices skyrocket,
and they make more money per gallon. If the gas cost less, they'd make up
the difference in increased gallons being sold and at least then they
wouldn't be pissing off their customers, right?
1. Worldwide demand for oil peaks in winter for heating and electric power
generation. Only local US (and maybe EU) demand peaks in summer.
2. OPEC only has x-billion barrels of crude. The more they sell each
barrel for, the better their return for an unreplenishable item.
3. Monopolies or cartels don't have to worry about pissing off their
customers. The US isn't going to buy oil from anyone else, not only is
there not anyone else, but the US already buys all it can from everybody
anyway.
--
E Sempre l'Ora
--
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| User: "Nom dePlume nomdeplume1000-at-yahoo.com" |
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| Title: Re: Explain to me more of these economics |
19 Apr 2004 10:37:09 PM |
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Another explanation might be politics, rather than economics. The OPEC
countries, especially Saudi Arabia, want to cripple the US financially
to limit our ability to disturb their part of the world, and they see
raising prices and causing a recession as a good way to do that.
Now, is this the real reason? I don't know, but it wouldn't surprise
me.
--
Nom dePlume, Ph.D
Why, yes, in fact, I am a rocket scientist.
Guide to Medications for Mental Illness:
http://www.geocities.com/nomdeplume1000
=====
"Jamal Chapultapec" <your@email.com> wrote in message
news:Xns94CF602ED7F76youremailcom@68.1.17.6...
OPEC cuts back oil production in response to the (anticipated)
increased
demand in the spring and summer months. Prices skyrocket.
But this is NOT supply & demand. THAT's when demand exceeds supply.
THIS is
supply being purposefully cut back (at the cost of excess, unused
capacity.) I guess ... for the hell of it? It's an artificially
created
supply & demand scenario. What's the sense of it? So gas prices
skyrocket,
and they make more money per gallon. If the gas cost less, they'd
make up
the difference in increased gallons being sold and at least then
they
wouldn't be pissing off their customers, right?
.
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| User: "Whiskers" |
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| Title: Re: Explain to me more of these economics |
18 Apr 2004 04:39:15 PM |
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On Sun, 18 Apr 2004 13:27:08 +0000, Jamal Chapultapec <your@email.com>
wrote:
OPEC cuts back oil production in response to the (anticipated) increased
demand in the spring and summer months. Prices skyrocket.
But this is NOT supply & demand. THAT's when demand exceeds supply. THIS
is supply being purposefully cut back (at the cost of excess, unused
capacity.) I guess ... for the hell of it? It's an artificially created
supply & demand scenario. What's the sense of it? So gas prices skyrocket,
and they make more money per gallon. If the gas cost less, they'd make up
the difference in increased gallons being sold and at least then they
wouldn't be pissing off their customers, right?
It is 'supply and demand'; they control the supply so they can demand
whatever price they can get. The supply is finite so it suits them
perfectly to make sure it lasts as long as possible. The longer it lasts,
the more money they get. Simple. It's called "a sellers' market".
They've got it, you want it; discuss.
--
-- ^^^^^^^^^^ Interested in Citroens?
-- Whiskers <http://www.aacit.net>
-- ~~~~~~~~~~ <news:alt.autos.citroen>
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| User: "Janithor" |
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| Title: Re: Explain to me more of these economics |
18 Apr 2004 11:27:49 PM |
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x-no-archive: yes
Jamal Chapultapec wrote:
OPEC cuts back oil production in response to the (anticipated) increased
demand in the spring and summer months. Prices skyrocket.
But this is NOT supply & demand. THAT's when demand exceeds supply. THIS is
supply being purposefully cut back (at the cost of excess, unused
capacity.) I guess ... for the hell of it? It's an artificially created
supply & demand scenario. What's the sense of it? So gas prices skyrocket,
and they make more money per gallon. If the gas cost less, they'd make up
the difference in increased gallons being sold and at least then they
wouldn't be pissing off their customers, right?
Not necessarily. Profits are maximized when marginal costs equal
marginal revenue. Simply put, if the cost of the very next barrel of
oil you extract exceeds the revenue you get from it, then you stop there.
Throughout your production possibilities, as you increase output, your
costs per unit start to rise, while at the same time, prices per unit
are falling, since you're flooding the market. So a group of nations
that control a critical amount of supply can cut back production, which
actually maximizes their profits. They don't want to sell every single
last barrel of oil. Their revenues would be a lot higher, but their net
profits would actually be lower.
That's why we have anti-trust laws, so that groups of powerful companies
don't get together and set prices, i.e. agree to production targets that
lower overall supply and raise prices, maximizing profits for all
involved. The consumer loses in this situation, due to the market power
of the oligopoly. Since OPEC is international, we have to simply sit
back and take it.
It's been 15 years since I studied this crap, but that's what I remember.
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| User: "wombn" |
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| Title: Re: Explain to me more of these economics |
19 Apr 2004 06:16:30 AM |
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On Mon, 19 Apr 2004 04:27:49 GMT, Janithor <Janithor@comcast.net>
wrote:
It's been 15 years since I studied this crap, but that's what I remember.
and here I was thinking to myself, "UGH why did I marry an
ECONOMIST???"
(sorry Nina)
--
-------------------------------------------------------------------------------------
If laughter is the best medicine,
then kittens should be covered by our health insurance. :-)
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| User: "Dr. Siddhartha Vicious" |
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| Title: Re: Explain to me more of these economics |
18 Apr 2004 03:40:03 PM |
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x-no-archive:yes
"Jamal Chapultapec" <your@email.com> wrote in message
news:Xns94CF602ED7F76youremailcom@68.1.17.6...
OPEC cuts back oil production in response to the (anticipated) increased
demand in the spring and summer months. Prices skyrocket.
But this is NOT supply & demand. THAT's when demand exceeds supply. THIS
is
supply being purposefully cut back (at the cost of excess, unused
capacity.) I guess ... for the hell of it? It's an artificially created
supply & demand scenario. What's the sense of it? So gas prices skyrocket,
and they make more money per gallon. If the gas cost less, they'd make up
the difference in increased gallons being sold and at least then they
wouldn't be pissing off their customers, right?
Some of the cutback has to do with the continuing devaluation of the US
dollar. As long as OPEC continues to trade in US dollars and the dollar
continues to decline, OPEC has to do something to keep themselves okay
financially. Cutting supply is one way to do so. Of course some OPEC nations
have advocated trading in Euros rather than dollars (Venezuela comes to
mind, as well as Iraq back when Saddam was still in charge), as the Euro
seems to be a bit more stable these days but US leaders freak out at that
possibility: the bottom could very well fall out of the dollar which would
be very messy as we're now a debtor nation. Trading in dollars hurts OPEC
but helps its most powerful customer. Trading in Euros would help OPEC but
would hurt its most powerful customer far more than holding the line on
supply. I doubt it's much of a coincidence that the two most vocal OPEC
nations to advocate switching to the Euro have also been targeted for regime
change: Iraq (successfully, depending on how one defines success), and
Venezuela. I'm sure the economists could explain the nuts and bolts a bit
better than I can, but that's the basic upshot as I understand it.
--
~ZenCrafters: Total Enlightenment in about an hour.~
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