1) Without knowing the actual numbers, you have no way of knowing what
impact the increased taxes would have on the final price.
2) The article said nothing about the government setting prices, nor was it
3) The major price swings we've seen over the past year were due more to
speculation in oil futures. The most recent drop, however, came as the
result of the success of Jack #2 well, by Chevron.
Over 50 cents of the recent price swings was based on vapor. No decrease in
supply, no threat to supply, no material change to the business at all.
Purely game playing. You would never put up with that with any other
product, if you had a choice.
Situation: You go car shopping and find the best price for the one you want:
$22,000.00. You need to wait a week for a CD to mature, so you can make the
downpayment. During that week, the manufacturer's stock price jumps from $40
to $60 for whatever reason. You go back to the car dealer with your
downpayment and you are told that the price of the car is now $27,000.00.
What would you do?
Why is it absurd? Here's something you have heard in news headlines plenty
"Oil jumped another $2 a barrel today, on concerns over increased violence
Where did the "jump" originate, and with WHOSE fears? What general category
of people had these fears?
Dense? No. I knew the answer to my questions. I wanted to make sure you knew
them, too. Why? Believe it or not, there are people in these newsgroups who
claim they were unaware of not just the effects of oil speculation, but of
the very practice itself.
Let's try this, professor: It's a generally accepted fact that terrorists
could do something in the Middle East, like successfully cripple enough
Saudi facilities, and the result would be a price so high that it would
seriously hurt our economy. Let's assume that you and I both buy into this
idea, which is an accurate one.
Most sane people believe that it would be disastrous to allow terrorists to
manipulate our economy in this way. Let's assume you also believe this.
How is this so different from commodities investors meddling in the single
most important resource we know of at the moment?
I guess we'll agree to disagree on whether it's appropriate for investors to
meddle in the price of important commodities, especially when those
investors are in no way connected with the oil industry. We're talking about
stockbrokers here. No business can completely control every factor related
to production. But, there's a short list of businesses whose prices are
artificially manipulated by gambling. Taken to the extreme, one could
imagine the ski resort industry buying and selling futures on snow. Why not?
There's a futures market in pork bellies, which is also absurd, considering
that there's almost nothing about the meat industry that cannot be
I'm not sure where you get this "our economic system" thing from. The vast
majority of businesses in this country function just fine with the existence
of futures markets related to the products in question. And, you're right -
there's nothing wrong with making a profit. But, if you invest in Intel
stock and make a killing or lose your shirt, it affects only you (and maybe
your kid's college money). But, it has no effect on the computer I buy next
week, or the 10,000 CPU chips that Dell buys for its production.
The oil speculators we're talking about are different. Their trading
reflects their opinions. That affects the price we pay. There needs to be a
disconnect between those two unrelated things.
I think grapefruit should be cheaper. It's not.
What if a third party, totally unrelated to your industry, decided to place
bets on the availability of your raw materials, and forced your prices in
arbitrary directions which affected your reputation with your customers?
Would this be an acceptable change in your business environment?
The need to hedge would also affect your cost.
The vast majority of businesses price their goods according to the actual
cost of raw materials and labor, not according to what a bunch of suits on
an exchange believe *might* happen in the future.
Where did you ever get that idea? Pricing is set by the market, period.
Economies of scale determines build costs. Market forces determine retail
pricing The cost of building the average Lexus is only a relative few
thousands more than the Camry on which it is based, yet the retail price is
many thousands more than the Camry. A Corolla is priced at various levels,
depending on which market it is being sold.
On Mon, 20 Nov 2006 19:20:26 +0000, JoeSpareBedroom wrote:
I have to believe that you know nothing about how commodities exchanges
I work for a Philippine based company that builds custom databases for
the legal industry. Part of my job is to hedge against currency
fluctuations which can affect whether a particular contract is profitable or not.
Just to simplify, imagine that we have a six month project worth USD $30M
payable upon completion. At current exchange rates that's about 50 PHP
per usd or 1.5B PHP. The exchange rate is dropping so I can sell PHP
futures against USD. If rates fall to, say, 40 PHP per USD our project
will lose 300M PHP which I'll make up, more or less, on the futures
exchange when I buy out my futures contract at what will then be market
price. The speculators who were betting that the currency would move the
other direction will be footing the bill.
On the other hand if the rate floats to 60 PHP per USD I'll make about the
same amount on the programming contract - but pay out the "extra
profit" to the lucky speculator who holds the other end of my
I don't really care because I've locked in my contract price for the job
- regardless of what the currency fluctuations do over the next six
months my profit is guaranteed. I've shifted my risk to the speculators,
those deep pocket, manipulative Capitalists, and thankful to do so. I'm
in the software business not the money business.
This would hold true with any commodity - oil or even pork bellies -
better known as bacon to you and me. The last is subject to great price
swings with seasonal variations and changes in price of corn - when hog
food is expensive pigs get slaugtered - yet demand remains steady year
round. That, my naive friend, is why there's a futures market for that
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