by The_Toecutter » Sat 08 Oct 2005, 01:37:50
$this->bbcode_second_pass_quote('', 'T')his statement demonstrates core misunderstandings of markets. People pay what they are willing to pay. When something is plentiful, some other producer can and will undercut you thus forcing prices to stay relatively low. When there is more demand than supply though, a seller can simply sit on his higher price while the lower price guy gets bought out and he knows that the higher price will still be bought simply because there is not enough supply to go around. Basic economics. Cost of production has zip to do with retail price of anything. It didn't in the past and doesn't now. This is why prices have gone up.
You can call this "gouging" but it's just the market at work. The market is telling all of us that this stuff is scarcer than it was, and thus more valuable than it was. As supplies improve, refineries come back online, and demand drops due to higher prices, we'll start to see prices drift downward some. When that starts to occur on a widespread basis then we'll know there is some surplus back in the system.
Your comment seemed to indicate a basic misunderstanding of how markets work (and have worked for centuries). I certainly do not mean to sound harsh, and if I do, I apologize for that in advance. However, I did feel compelled to address what seemed a basic misunderstanding.
Did I not mention in that post that the market is willing to pay it?
What many don't get is that the market is rigged. There isn't a choice, either pay or do without. competition has been very lacking in the industry and the big oil companies have kept prices carteled upward not because people want to pay those prices, but because they can raise them and people will pay them anyway because they have no other means of getting that oil.
Price gouging? You bet. That's how the 'market' for this particular industry is working at the moment and has been for some time! A real free market would offer choices.
In an ideal situation, there would be competition and many providers, not the few we have today. With competition, the price would be no where near as high as there would be plenty of undercutting going on, brining the price more closer to production and shipping price. Further, in this same ideal situation, alternatives to oil use for things like autos and plastics would not have been surpressed with either lobbying and smear campaigns and a refusal by the producers to offer the technology to the market(electric vehicles), or even government regulation(ie. industrial hemp). Many alternatives exist that ARE cheaper than oil, but they aren't offered by the entrenched industries because they are less profitable, and they aren't cost effective when offered by small businesses because those small businesses don't have the needed economies of scale.
There is far more to the situation than simple Economics 101. The situation is dynamic with thousands of variables at work, whether it is something as simple as industrial hemp growing not being permitted in America, monopolies in the oil industry, or supression of the electric car. The fact that America also has no viable mass transit(thanks to the auto and oil industry that bought it outy and tore it down in the 40s) also plays a big role in this. Car use is the largest area where demand destruction can occur, but alternatives to oil-dependent car use need to be given to consumers.
Without demand destruction, the prices stay high, and with the oil industry keeping control of the market and not the market keeping control of the oil industry, the market is rigged and therefore it is very logical to argue things from a price gouging standpoint. Prices are INTENTIONALLY inflated by the industry through a variety of means including eliminating the competition from the market.
As peak continues onward, this problem will only worsen, but the oil industry will continue making out like bandits, even after the REAL crisis has begun and after it really starts hurting people. Katrina isn't shit...
The unnecessary felling of a tree, perhaps the old growth of centuries, seems to me a crime little short of murder. ~Thomas Jefferson